The coronavirus pandemic has created a moral crisis, in which we face profound dilemmas and painful tradeoffs—even the ultimate tradeoff between saving lives and returning to normalcy. Only one kind of leadership can successfully respond to a moral crisis: moral leadership. It’s especially in times of crisis that people naturally look to authority for truthful answers, wise guidance, courageous action, and hope.
This crisis has made clear that very few people can quickly and profoundly affect very many, very far away. Powerful technological, social, environmental, economic, and, especially now, biological forces have dramatically reshaped the world in such a way that we rise and fall together.
The pandemic is also accelerating a fusing of spheres of society, the economy, and our personal lives that were once viewed and maintained as separate, even if misguidedly so. Given the central and permeating role business plays in all spheres, the imperative for moral leadership here is especially great. Social, religious, political, geopolitical, environmental, human, ethical, and even existential issues that were once considered tangential to doing business are now inescapably central on its agenda.
In this fused world, the business of business can no longer just be business. Everything is now personal; the business of business is therefore society. Mission and margin, profit and principle, success and significance are now inextricably linked. In the fused world, how we behave, how we operate, how we govern, and how we relate to people and communities matters more than ever. Going forward, businesses are going to compete on trust, on responsibility, and on creating and maintaining deep relationships with their stakeholders rooted in shared truths and values.
If this sounds very unlike business as usual, it is. The pandemic has brought to the surface an emerging contest between two animating ideologies of business and capitalism itself. This contest is between the heretofore prevailing ideology of shareholder primacy—where the obligation of a business is primarily to create value for its shareholders—and the ideology of stakeholder capitalism—where the community at large, employees, customers, suppliers, and shareholders are valued as essential and coequal constituents of the corporation.
Even the more enlightened version of shareholder primacy, which allows for responsible corporate citizenship and longer-term approaches to value creation, still sees good behavior only as a means toward shareholder ends. Whereas in stakeholder capitalism, nobody is a means to anybody’s ends. Stakeholder capitalism was the official theme of Davos 2020. Last year, the Business Roundtable officially changed its purpose statement to stakeholder over shareholder primacy—and managed to get 181 CEOs from some of the world’s largest corporations to commit to this profound shift.
But let’s call stakeholder primacy by its proper name: moral capitalism, most faithful to the original vision of capitalism expounded by the moral philosopher Adam Smith when he wrote The Wealth of Nations in 1776. In moral capitalism, you can’t create shared value without shared values. The focus is not about doing the next thing right, but rather doing the next right thing.
The COVID-19 pandemic is the first great test of the embrace of stakeholder capitalism by the business community—and whether their actions will live up to their leaders’ proclamations. What’s certain is that there’s going to be an accounting both during and after the crisis as to who took the right actions, who sacrificed, and who truly put people ahead of profits.
JUST Capital is tracking the coronavirus responses of America’s largest 100 corporations. Some leaders will fail the test outright. They are putting profits ahead of people, even though it might mean being called out swiftly and publicly. Others will sincerely do the right thing, but not necessarily for the right reasons. While their efforts are valuable and appreciated, ultimately they won’t gain sustainable traction in the fused world because they continue to apply the conventional thinking of shareholder primacy, instead of going all-in with the organizational transformation required to meet the higher standards and reap the enduring rewards of moral leadership.
Moral leadership is not about moralizing or being an activist (even though this could be an aspect of it for some). More simply, moral leadership means putting people at the center of major decisions, seeing them in their full humanity with their own aspirations and concerns. In the past I’ve written in Fortune about the four pillars of moral leadership, and they apply even more urgently to our present crisis: Be driven by purpose; inspire and elevate others; be animated by values and principles such as courage and patience; and keep building moral muscle by wrestling with questions of right and wrong, fairness and justice, what serves others and what doesn’t.
Leaders who pass the great test will use the pandemic not just for admirable humanitarian assistance, but to strengthen or transform their organizations as fully human endeavors. Given the tragic nature of today’s crisis and its aftermath, moral leaders will embrace both a grave duty to respond and an unprecedented opportunity to transform.
To start, these leaders will engage in the hallmark of moral leadership: pausing. But instead of the forced pause so much of the world is in, moral leaders see the pause as a beginning. They’ll use this opportunity to reflect deeply on the implications of the reshaped world and on what their business stands for and aspires to going forward, to reconnect with their deepest values and beliefs, to rethink how they’ve operated and made money, and to reimagine a better and more sustainable path ahead.
What started as a meaningful pause will then become a pivot, with one foot grounded in one’s beliefs, convictions, and values, and the other pointing in a new direction that adapts to our reshaped world. Combining moral imagination with what business does best—innovating at scale—means the eventual aftermath of this terrible crisis could be genuine human progress and prosperity.
Dov Seidman is author of the book How and founder and chairman of both LRN and the HOW Institute for Society.
More opinion in Fortune:
—To fight tomorrow’s pandemic, we need to think like the military today
—Prescription drug costs are spiraling, but price controls are the wrong solution
—The Fed may have fundamentally altered the nature of risk in the stock market
—Why the U.S. needs a new corporate bailout structure—one that doesn’t rely on loans
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: CEO of Canada’s biggest bank on the keys to leading through the coronavirus
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