This week I have been considering the role of a Chief Compliance Officer (CCO) in navigating the coronavirus crisis. One area a CCO needs to provide counseling on to his senior management and the Board of Directors is how the company treats it workers and those who constitute the human capital of an organization. From the compliance perspective, institutional justice is a key indicia of both accountability and corporate culture. As a CCO, you need to work to not simply embed these values during times of high stress and pressure like we have now but also to help protect the company’s reputation in this crisis.

The reason for the latter is that a company’s reputation can literally be shattered beyond repair if they mistreat their workers or even worse, but them at jeopardy during this crisis. With the ongoing and about to get much worse economic crisis trailing just behind the health crisis, companies will need every tool in their arsenal to weather the economy when people can get back out and head to the office.

What should be your bottom line? In Markets Insider Mark Cuban, the billionaire entrepreneur, Shark Tank investor and owner of the Dallas Mavericks, provided clear message for Chief Executive Officers (CEOs) of the Business Roundtable amid the coronavirus crisis for the following, “prioritize employees and their families over shareholders right now.” He went on to say, “Shareholders come last. You guys have so much impact on the world that you need to take care of your employees and their families first.” He continued: “If you’re a great company, your shareholders will understand and will expand their P/E out of respect, because they’re all dealing with the same circumstances.””

Why is Cuban so passionate about this point? It is a simple equation. He said, “The reality is by doing the right thing with your employees, you do more to help stabilize the economy. And from there, we have a better chance of getting back to business as usual. If you just try to nickel and dime everything to try to optimize your earnings per share and keep shareholders happy, and at the same time your employees suffer and struggle, you’re going to get hit.”

The reason is simple, “Companies that don’t do the right thing will face consequences in the future, especially because younger consumers such as Millennials and Gen Z are watching crisis responses. But Cuban thinks amid the coronavirus outbreak, CEOs should go a step further and consider how their actions will be viewed by consumers in the long term.”

Alyson Van Hooser, expert on leadership for Millennials and Gen Z, echoed this sentiment in her blog post Quarantine Effects on Gen Z Workforce. Van Hooser wrote, “Gen Zs are seeing right now which companies are sustainable in hard times and which are not.” This not the first time Gen Z has seen an economic downturn but it is the first time of social isolation and even quarantine. Van Hooser’s direct question to companies is what are you doing in relation to Gen Zs seeing this for the first time? Are you treating your employees fairly or are you simply putting them on furlough, or worse putting them at risk by forcing them to return to work during this health crisis? Her conclusion, “Here’s the deal, whether intentionally or not, Gen Z is making little deposits of information that will affect how they search for an employer in the future. I can definitely see where they will be searching for a company that is more stable vs. risky, a company that is widely known for taking care of their employees, and possibly even entrepreneurial opportunities in an industry that is essential to daily human life.”

Or is your company going to be one which simply furloughs its workforce, continuing to slavishly devote its assets to shareholders and keep senior managers at full pay? Chris Tomlinson, writing in a Houston Chronicle piece aptly titled “Corporate CEOs should go without pay until employees’ jobs are secure”, said, “Plunging revenues give CEOs a choice of either spending strategic reserves to keep employees on the payroll or scale back and lay them off. If a CEO is making 221 times the average employee at the company, that’s a clear opportunity to save jobs.” He went on to write about hometown employer Halliburton, which summarily “furloughing 3,500 workers without pay for 60 days. But no word from the company spokeswoman on whether Chairman and CEO Jeffrey Miller will cut his $1.4 million salary. He collected $16.9 million in compensation in 2018. If Miller were to waive his compensation, he could save 290 jobs. Frankly, he and other CEOs owe us.”

Contrast that with the largest oilfield service provider, Schlumberger which had layoffs and furloughs but the senior executives and management all took pay cuts. Which company looks like it cares more about its human capital? Some companies are taking it a step further. As reported by Deadline.com, Disney Corp. “incoming CEO Bob Chapek this morning announced a salary reduction of 30% for EVPs and above, 25% for SVPs and 20% for VPs “until we foresee a substantive recovery in our business.”” Chapek himself is taking a 50% pay cut, while executive chairman Bob Iger will forego 100% of his salary.

Cuban had it right. It is employees who will get you through this convergence of health crisis and economic downturn. But if you mistreat them by summarily furloughing them or laying them off and do nothing as leaders to impact it one iota, where do you think they will go when the economy bounces back? More so, as Van Hooser said, Gen Z is watching. They are watching to see not only how companies treat their employees but also are those companies socially responsible. Are they “work here or else—even though your state is under an isolation order?” Or are they taking every step they can to protect worker safety?

Employees, the marketplace and all other stakeholders are watching and how you react as a CCO now may well go a long way towards your company’s future down the road.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2020

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