The annual publication of the Forbes rich list has become a much-followed media ritual, however, in 2022, the unveiling of the list served as a stark reminder – for those who cared to see it – of the asymmetrical impact of the pandemic. The world’s 10 richest men more than doubled their fortunes during the first two years of the Covid-19 outbreak¹. Meanwhile, according to charity Oxfam, the income of 99% of humanity fell during the same period²; in the US alone an estimated 2.5 million women were forced to leave the workforce³.
From the outset of the pandemic, it was clear that key workers in retail, healthcare, logistics and other people-facing roles were significantly worse off than their white-collar, and largely higher earning, counterparts who had the option to work from home. Gig and contract workers – often unprotected by benefits such as sick pay – were particularly hard hit, even as demand for their labour increased. Millions of workers without sick pay provisions were forced to choose between losing their income or going to work while unwell, increasing the risk of passing on the infection to others.
While inequalities such as these were not caused by the pandemic, Covid-19 – like a retreating tide – has washed up many uncomfortable truths that were previously much easier to ignore. Social inequalities have revealed themselves to be a key trigger for a vicious cycle that ultimately works its way through every inch of an economy and negatively impacts investors.
At Federated Hermes, we believe that addressing the social inequalities exposed by the pandemic is essential to ensuring economies are better prepared for the inevitable next global crisis – whatever that may be. We believe that the businesses that pay the closest attention to their stakeholders, while supporting the efforts of governments and wider society, will emerge from these crises the strongest.
We believe that companies with a stronger focus on their stakeholders will be better positioned to grow in a post-Covid world. By encouraging this approach in our engagement with companies, we believe we are helping to promote the return of well-functioning financial markets.
Leading with engagement
In response to the challenges of the last two years, our engagement has centred on company management of the most material human capital issues as we believe that increased productivity and business sustainability is achieved through investment in the workforce. Our engagement expectations are:
- Safe treatment of workers: The safe and equitable treatment of employees and contract workers is vital. Companies have a responsibility and an obligation to provide a safe working environment, while sick pay provisions help to mitigate the continued spread of Covid-19.
- Gig and contract workers: For gig and contract workers, we have specific expectations. Companies should ensure that there are measures in place to compensate workers for lost pay if they are unable to work for health-related reasons; consider hazard pay for those working in frontline positions and/or exposed to communicable diseases; have measures in place to ensure that the appropriate type and amount of personal protective equipment is readily available at no net cost to workers; and ensure that health & safety policies and processes are clearly communicated to workers.
- Gender equality: The disruption caused by the pandemic offers a chance to reset working habits, and companies should be prepared to consider how their work practices can become more inclusive and effective. We systematically asked engagement companies about the impact of Covid-19 on the women in their workforces. Responses from companies varied, but we found that regardless of sector, those companies that offered flexibility, childcare support and other expanded benefits, like mental health and wellness, were able to retain more of their staff.
- Racial and ethnic representation: Companies should consider racial and ethnic representation within their workforce. Companies with higher diversity among frontline workers versus more senior office-based roles need to be mindful of, and work to address, the disproportionate racial and ethnic safety implications that arise. In engagement, we ask how a company is building a diverse and inclusive workplace at all levels from job creation and hiring to retention and promotion.
Looking beyond the pandemic
As countries plan for a post-pandemic recovery, we are engaging with companies, policymakers and society to reflect on the factors behind the crisis. This may mean reassessing business models to address the social issues upon which the pandemic has shed light.
Overall, companies should be prepared for some governments to regulate to insulate society from future pandemics. Actions that could impact companies include enhancements to employment law, and health & safety regulations.
Economic activity has bounced back over the course of the last year, revealing a labour shortage for many sectors; this has and will continue to force companies to re-evaluate their employee value proposition in order to retain staff.
Download our Stewardship Report 2021 to find out more about how we use active stewardship to address humanity’s most pressing issues while helping our clients to sustainably grow their wealth.
3 US Bureau of Labor Statistics data cited by US Vice President Kamala Harris, New York Times (nytimes.com)