A Resilient and Sustainable Future

Crisis as Catalyst

COVID-19 has laid bare systemic problems that public and private sectors must work together to overcome, writes our Chairman and CEO Ron O’Hanley.

June 2020

Like a bolt of lightning against a night sky, COVID-19 has dramatically illuminated vulnerabilities and linkages that we as a society can no longer afford to ignore.

These are not new problems, but the pandemic has served as a catalyst to intensify and sharpen pre-existing trends.

None of these challenges will be easy to solve. But as with other great shocks in history, the pandemic-induced shutdown has created a moment of reset when choices are in our hands: we can either look away and focus on narrow self-interests while problems continue to fester, or we can come together — both public and private sectors — to build a more sustainable, inclusive and resilient future.

What we are experiencing is not just a global public health crisis or an economic crisis or a racial justice crisis. It is all three of those at once, and deep interdependencies exist among the three. We are also facing a crisis of institutions and leadership at a time of highly polarized societies. That makes constructive engagement by business and community leaders around the world all the more important.

Before the crisis struck, healthy debate was already underway about a better form of capitalism that could generate global growth in a sustainable way while also ensuring that the wealth creation associated with growth is allocated in a more equitable and inclusive way. Like so much else, the crisis has reinforced those concerns. However,  this is not a moment to tear everything down, but rather to build better versions of the institutions and policies that are central to a safe, prosperous and sustainable world. That includes more responsible versions of globalization, business models, capital allocation and multilateral cooperation.

While the pandemic has exacerbated underlying fragilities around economic resiliency, public health infrastructure, and racial and social divides, it has also acted as a positive catalyst. We have seen countless acts of selflessness and solidarity in the battle against COVID-19 as well as in the demonstrations for racial justice. Just as the Me Too movement reached an inflection point when men joined with women to say enough is enough, we have seen thousands of white protesters join Black Lives Matter demonstrations around the world to signal that bigotry and violence against one group degrade all of us. Our common humanity demands that we all own both the problems and the solutions.

But where do we go from here, and what is the role that businesses can and should play at this critical moment? First, we need to recognize that businesses cannot be expected to do everything, but that each organization can and must do something. For business leaders, the pandemic provides a stark case study of the reality of stakeholder management.  As we move through a painful economic recovery and COVID-19 remains a threat, shareholder value will increasingly rely on how well we can manage the competing concerns of all stakeholders — our employees, our customers, our supply chains and, importantly, the struggling communities in which we operate.

Recent analysis by Harvard Business School professor George Serafeim and State Street Associates demonstrates that the stock performance of companies that manage those concerns well, especially with respect to their employees and supply chains, fares better than the stocks of companies that do not. Increasingly investors are rewarding companies that act responsibly with all of their stakeholders as a signal of corporate resiliency.

I have been on a number of calls with CEOs since the crisis struck and detect a new sense of urgency to engage and go beyond mere virtue-signaling. Particularly within the financial services industry, we recognize the importance of capital allocation to address many of the deep-seated problems around economic, social and racial insecurity. As an industry, we need to ensure that the way we invest for our clients is aligned with a future that is more sustainable and inclusive. But we also have to acknowledge that, particularly in the finance industry, we have done a spectacularly poor job of recruiting and retaining Black colleagues. That needs to change.

At State Street, our Foundation has focused on providing better education opportunities to underserved communities of color for many years to improve the workforce pipeline. But we need to do more, and we need to amplify our impact by joining with other stakeholders to scale our efforts. In Boston, we have helped launch a small business initiative that brings together experts from both the private and public sectors to facilitate financing and advice to small businesses, especially those owned by people of color. That is just one example of a results-driven public-private partnership that needs to grow geometrically.

It can be overwhelming to contemplate the scale of the problems we must address: more than 20 million unemployed workers in the US alone, with the coronavirus crisis claiming more jobs in three months than were lost in two years of the Great Recession; 10 million confirmed cases of COVID-19 around the world, with poor people of color disproportionately affected; and far too many young Black men and women cut down in their prime by endemic racism.

History provides reassuring examples of our ability to manage big problems when we unite around a shared mission with shared sacrifice. This year marks the 75th anniversary of the end of World War II, perhaps one of the most important moments of global reset we have ever seen. Today we face a similar moment to think, intentionally, about the better future we all want, a future we can achieve only by working together, all of us, to reform and improve the institutions and relationships that will create a more inclusive, sustainable and resilient world.