The Post-Pandemic Firm

Even before COVID-19 struck, many were arguing that companies should generate value not only for investors, but also for employees, customers, suppliers, and society. But would such a shift necessarily require major changes in corporate purpose and governance, and in the long-dominant Western model of shareholder capitalism?

In this Big Picture, the World Economic Forum’s Klaus Schwab argues that “stakeholder capitalism” is clearly the best response to today’s social and environmental challenges. But Raghuram G. Rajan of the University of Chicago argues that companies should continue to focus on maximizing the value of their shares over the long term, and highlights the pitfalls of intervening in wider social and political debates.

Harvard University’s Rebecca Henderson takes a middle path, noting how the pursuit of shareholder value is leading many businesses to exploit immediate, profitable opportunities to address climate change. And University College London’s Mariana Mazzucato and Antonio Andreoni show how conditional government bailouts to mitigate the pandemic’s economic fallout can make corporate behavior more conducive to inclusive, sustainable growth.

But Harvard’s Dani Rodrik thinks the only viable long-term alternative to powerful corporations regulating themselves is to democratize business – by giving employees and local communities a direct say in the way private firms are governed.