Finextra is at Davos this year, covering global insights into the impact fintech has on wider issues such as responding to Covid-19, restoring economic growth and advancing a new social contract.
PayPal CEO Dan Schulman highlights that CEOs must support the global economy reset post Covid-19 with a consideration for progress, people, and the planet. “This idea that profit and purpose are at odds with each other inside a business is ridiculous. In fact, I would argue that the two go hand in hand.”
Schulman says that senior leaders within companies have a responsibility to broader communities. “The pandemic just brought into stark relief issues and trends that have been with us for quite some time and may just not have been as visible.
“You've got several billion people throughout the world who live outside of the financial system. In the United States, you have basically two thirds of adults who struggle to make ends meet every single month,” Schulman continues.
In light of recent political, societal and social unrest, Schulman asks: “How can we expect somebody to embrace democracy when they don’t think that the system is working well for them? And they think that others are doing well, but they’re not doing well. [..] I mean, where do the best employees want to work? They want to work for companies that are making a difference in the world.”
Joined by World Economic Forum’s Klaus Schwab, TIME’s Edward Felsenthal, University College London’s Mariana Mazzucato, UNICEF Ambassador Angelique Kidjo and the Prime Minister of Belgium Alexander De Croo, Schulman explores the concept of stakeholder capitalism and how society can avoid the pitfalls posed by advances in technology and global trade, while at the same time, harnessing their strengths.
Opening the session, Schwab states that society is moving beyond “short term shareholder profit maximisation to a role which is characterised much more by stakeholder responsibility.” Further, the impact of the coronavirus has meant that thoseorganisations that have not adapted or “invested in the long-term vitality of the company” will falter.
Schwab adds that it is a question of ‘walking the talk’ and a comprehensive framework of metrics that show how a company is performing according to ESG-aligned criteria must be established, considering the wellbeing of employees, and uplifting small-to-medium sized businesses when they require support.
Framing the conversation, Mazzucato states that while the pandemic has “highlighted how we can do things differently, we need to start normalising it. It can’t just be during a crisis.” She says that conditional requirements that were placed on bailouts for businesses in struggling industries, whether its reduction in carbon emissions or not using the money to buy back shares, could be a long-term solution and a “win-win” for all.
However, Kidjo explicates that stakeholder capitalism cannot work on a continent such as Africa where the “leaders are shareholders of all those big companies we are talking about, they do not care about their own population or to create jobs.”
She adds that education is the first step in ensuring that citizen can obtain jobs, open bank accounts, and participate in the economy – this cannot be achieved without resolving the objectives outlined in the 17 UN SDGs.
Prime Minister of Belgium Alexander De Croo agrees with Schulman and states that “profitability is not a bad thing,” and Schulman references a 2018 internal PayPal study that revealed that 50% of PayPal employees were periodically running out of money between paydays. PayPal then calculated how much employees needed to earn to enable financial security, with an index called Net Disposable Income, or NDI.
PayPal decided that entry-level employees should have a target NDI of at least 20% to ensure they have enough to do more than just cover the essentials. To drive an increase from 4%, the payments giant reduced health care costs, granted stock awards to all employees regardless of level, raised wages where appropriate and provided access to personal financial education. Average NDI stands at 16% currently.
Earlier last year, PayPal also pledged $530 million to support BIPOC businesses in the United States and foster diversity.