Done with the old normal: Transforming business beyond COVID-19

By Sachin Bhattiprolu

For government organizations and businesses, it is absolutely critical both respond to the coronavirus pandemic in the immediate term, focusing on an equitable recovery — one that ensures the long-term effects from the virus do not worsen inequality. This is a once in a generation opportunity to address staggering inequalities in the United States and rebuild in innovative and systems-changing ways towards an equitable future.

Earlier this year, the Center for Equity, Gender, and Leadership (EGAL) launched a comprehensive strategy playbook for business leaders to integrate equity and inclusion in COVID-19 recovery and discuss what it takes to truly enable an equity fluent recovery.

The event began with EGAL’s Associate Director, Genevieve Smith, sharing background on the playbook, and how COVID-19 is negatively impacting women and communities of color, and is exposing the staggering inequality that exists in the US and globally. Genevieve further shared statistics on how COVID-19 continues to deeply and severely impact people in our communities, the business world, and society — with disproportionate impacts on Black and brown communities and women. People of color and women are more likely to: be in contact with COVID-infected individuals, suffer job losses, own businesses that will close, and are less likely to be making a living wage and to have access to healthcare and job benefits.

As part of the playbook’s launch, EGAL hosted a fireside chat between Berkeley Haas Dean, Ann Harrison, and the Esteemed Lieutenant Governor of California, Eleni Kounalakis, who is also an alumnus of the Haas School of Business. Here are a few key takeaways from the conversation:

On capitalism being a vehicle to advance inclusion

• Income inequality has been on the rise over the past few decades. Enormous wealth has been concentrated at the top in the US, especially with the fourth industrial revolution and COVID-19. The top 1% are doing really well while the middle class is struggling, especially women and people of color.
• Right now capitalism is funding the ability to help those who are at the bottom, and in 2020 California had a $15 billion budget surplus, thanks to the stock market being at historic high and the fact that there have been a record number of IPOs in Silicon Valley. The taxes that these companies and individuals have paid are being directed by the government to help families in need, in terms of stimulus checks and budget allocations.
• But this is not a sustainable solution. What we need in a healthy democracy is an empowered middle class and a path towards economic security.

On the co-existence of innovation and inclusion

• When Eleni worked for Secretary of State Hilary Clinton, she used to talk about the three legged democracy. The three legs being: capitalism fueling innovation, government making sure capitalism doesn’t exploit workers, and civil society that includes an educated population that is active.
• Business people often think that the government is a necessary evil and something you need to work around. But in a democracy, the government is the people. Leaders need to recognize that they have a stake in the system and the government functioning well. But for the system to function well, people also need to be paid a living wage, a universal basic income, and we need to also make sure that affordable healthcare is available.
• Lastly, education. Half of the state of California’s general fund goes to education. There’s a 450% ROI on education spending in California. We cannot underestimate what our system of public higher education has done for the state of California both in propelling us to becoming the fifth largest economy in the world but also being the incubator of innovation. Of the 20 highest ranking universities in terms of social mobility, 14 of them are in the California state university system. 40% of the enrolled students at UC are first generation college students.

On the undervaluing of certain positions and jobs often filled by people of color

• People work in back-breaking and low-paying jobs, especially migrant workers and farm workers, only because they want to see their kids have a better life. People are rational, and when a better life doesn’t exist for low wage workers or their children, they are not going to come to California in search of the American dream, and the California dream.
• Corporate leaders need to pay attention to the massive pay disparities that exist between those at the top and those at the bottom. Corporate leaders cannot turn a blind eye to this any longer because they need to recognize that they are benefiting immensely from the architecture of the American system that educates workers.

On promoting more inclusive leadership

• It is worth noting that two members of the UC Berkeley community, Janet Yellen and Jennifer Granholm, are on their way to be in the cabinet of President Biden and VP Kamala Harris. And then of course Isabel Guzman, our Small Business Administrator from California. We are also the home state of the first woman VP in Kamala Harris and then speaker Nancy Pelosi.
• Something else that needs to be mentioned is the SB-826 bill which mandates that the boards of public businesses in California have at least two women on their boards by 2021. 180 of 650 companies had no women in 2019 and now there are only 15 that don’t have women on their boards. That is a massive improvement, and Professor McElhaney’s research proves the connection between having women on boards and seeing companies meet their ESG goals.

Eleni ended the chat with a message to the Haas community, both students and faculty, saying that this system and this democracy belongs to everyone, and it is important to understand how the decisions future business leaders make in the C-Suite rooms affect our system on the whole.

The fireside chat was followed by a panel discussion featuring the Director Emeritus of McKinsey & Company, and former Chief Economic and Business Advisor to Governor Gavin Newsom, Lenny Mendonca; and Global VP of Integrated Social Sustainability at Unilever, Marcela Manubens. The panel discussion was moderated by Guadalupe Manriquez, Berkeley Haas MBA 2021, and member of the EGAL Student Advisory Board.

The speakers shared their perspectives on capitalism, inclusion, and equitable recovery post COVID-19.

Key takeaways from the panel discussion

• Lenny shared Eleni’s optimism about the potential of the California system and the recovery from COVID-19. “Capitalism has been the driver of the largest decrease in human suffering, but it is not good at dealing with externalities” such as inequality across race and gender, and climate change, as well as funding public goods like education and healthcare. COVID-19 has only exacerbated issues that already existed, as the playbook outlined. Capitalism is great at innovation, productivity, and growth opportunity for new products and services, but it only achieves those through all the mechanisms we have, including political systems that force companies to address these externalities.
• Marcela talked about how the CEO of Unilever believes in building a company that represents a new form of capitalism that services and contributes to society rather than taking from society. She also mentioned the three pillars at Unilever — human rights and fair value distribution, opportunity and skills for women, and inclusive business .
• Both speakers addressed the massive disparities that exist between CEO pay and worker pay. ​​Lenny talked about how it is in the best interests of long-term shareholders that the pay gap between executives and employees is addressed. Firstly, a large component of the shareholder base of US companies are index funds and and long-term pension funds that are dependent on long-term returns and ensuring that they’re not subject to unknown risks that alter the the performance of a company and so they are pushing for this aggressively. Secondly, there is a certain pressure that comes from an employee base, especially for companies based in the talent markets, to credibly demonstrate that the company is aligned with those sorts of issues.
• Marcela talked about how Unilever, for example, stopped announcing quarterly reports and is only doing annual reporting to avoid giving in to market speculation. “We wanted investors who believe in us and who believe in the long-term principles of sustainability and inclusion and innovation that Dean Harrison talked about.” She also highlighted that companies should link their sustainability targets to individual employee performance, and how Unilever has done it successfully by creating the right company culture.

Transforming Business Beyond COVID-19: An Equity Fluent Leadership Playbook

The Center for Equity, Gender, and Leadership (EGAL) has tracked multiple sources of data, and developed a strategy playbook for business leaders to successfully integrate equity and inclusion in COVID-19 recovery and lead in an equity fluent way. Here are a few takeaways from the playbook:

I. THE NEED FOR EQUITY FLUENT RECOVERY:

We begin the playbook by grounding the conversation in the most immediate and business relevant impacts that communities of color and women are facing during the pandemic. It also seeks to create a framework for defining what effective equitable recovery is in order to assess what businesses are leading, and which are lagging today. We call this framework, equity fluent recovery.

II. THE COMPANIES LEADING AND LAGGING IN RECOVERY

An evaluation of the COVID-19 response and recovery actions implemented by Fortune 100 companies to date. In this section, we present how these actions stack up against our vision for an equity fluent recovery and highlight gaps that need to be addressed in order to achieve it.

III. AN ANALYSIS OF HISTORICAL RECOVERY RESPONSES

Five key lessons that EGAL has taken away from a review of historical recovery trends. While not exhaustive, these lessons focus on how past responses from the private sector to economic crises have exacerbated or reduced racial and gender inequities to inform COVID-19 recovery priorities.

IV. THE EQUITY FLUENT RECOVERY PLAYS NEEDED

Taking what we have learned about the impact COVID-19 is having on workers of color and female workers, how companies are responding, and the history of recovery efforts, EGAL has developed 12 transformative plays for recovery. These plays are high-level actions that can have lasting changes in the workforce both during and beyond the pandemic.

If you’re interested in the playbook, you can download it here.