After Coronavirus.

• Author: Shaw, David
• Position: EDITOR'S NOTE

Last year, Directors & Boards devoted its attention to the rising focus on environmental, social and governance issues (ESG) from institutional investors and others, culminating in our Character of the Corporation event last November. While much of the discussion surrounding ESG was illuminating and perhaps game-changing, I worried that there was a certain "faddishness" in thinking about stakeholders in addition to shareholders. I worried that in the next (inevitable) economic downturn, ESG principles would fly out the door.

But that was the time Before Coronavirus (B.C.).

Once we reach the time After Coronavirus (A.C.), there will still be much for boards to consider as they look at the shareholder/ stakeholder debate, the most important of which may be to evaluate whether a balanced and more nuanced view might be appropriate. It's not one or the other. But if the stakeholders are going to be on the hook for rescuing the economy with their future tax dollars, with being the "insurer of last resort," they need to be accommodated.

Let's look at stock buybacks. Airlines have squeezed every last cent (and inch) from their passengers. Market Watch calculated that the five airlines in the S&P 500, plus JetBlue, generated $49,175 billion in free cash flow over the past decade, and spent $47.28 billion on common stock buybacks during the same period. That's wonderful for shareholders, I guess, and good for executives compensated on earnings per share. But since they can't ask those shareholders (and executives) to reinvest in a time of crisis, to put their money back into their companies, the airlines are looking for a bailout from stakeholders. They didn't put rainy day funds together, even though they had experience with a global shock that ground their business to a halt just 19 years previously. It doesn't look good, and it doesn't smell good.

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