Workers’ welfare – are companies putting their people first?

Lesley Duncan, Deputy Head of UK Equities, Aberdeen Standard Investments

How companies are treating their workforce during the Covid-19 pandemic is under intense scrutiny. The world is watching whether firms are protecting the welfare of their staff or if they are prioritising profit over the health and wellbeing of their people.

The actions of management teams and boards during this crisis will be judged in the years ahead, much as they have been since the global financial crisis (GFC). Back in 2008, we became familiar with the shocked faces of workers leaving their offices with all their belongings in boxes after being unceremoniously fired from their roles.

At that time, big corporations were widely criticised for overly focusing on shareholder value, short-term profits over long-term sustainable returns, as well as the failure of their internal governance. There was much talk about CEOs taking too many financial risks for big payouts and bonuses – with scant regard for their employees. It raised concerns about the accountability of company boards and the lack of consideration for the welfare of workers. So how does current corporate behaviour compare to the GFC?

More mindful management

Although a different kind of crisis – a global health emergency with a very different cause – the economic impact and company distress is similar. Since the GFC though, workers’ rights and employment protection have thankfully moved up the governance agenda.

This is something that has also been echoed over the past decade or so in our annual survey. Every year, we gather the views of our ethical investors to shape and inform our ethical investment strategies. Since the GFC, corporate governance has become increasingly important to our investors, who have asked us to actively engage with investee companies on employment practices and labour relations.

Some of the results of better governance standards and business practices over the years are now playing out and we are seeing companies reacting differently this time. For example, job preservation over mass unemployment is a focus for many companies, who want to keep roles open for their staff after lockdown. Many UK and global firms are taking advantage of government furloughing schemes to do this. The UK’s ‘Coronavirus Job Retention Scheme’ has been rolled out to pay up to 80% of furloughed staff’s wages. And some companies, those with good employment practises, are making up the 20% shortfall in their workers’ pay.

Additionally, when speaking to companies, we are encouraged by the efforts of some management teams to reach out and regularly engage with staff during lockdown, and to check on their wellbeing. We are also seeing greater accountability and humility at the top levels; qualities that are valued in a crisis.

Excessive executive pay was another governance issue on which the GFC shone a spotlight. This time round, some senior execs are taking significant pay cuts and no salary increases or bonuses as a show of solidarity with their wider workforces. Other UK firms, like one of the housebuilders we hold in our ethical funds, have gone a step further and set up Covid-19 sustainability funds to help the most affected in our society. Furthermore, some UK firms are offering discounts and other benefits or enhanced services to NHS staff and keyworkers.

This type of reaction is important. If the coronavirus pandemic has taught us anything, it is that the most essential workers in our society are often the lowest paid.

Why does good governance matter?

At ASI, we have long recognised that a company’s approach to governance, including employment rights and labour relations, can be a strong indicator of its underlying health and its future success. It is the ‘G’ in the triumvirate of ESG considerations (environment, social and governance) that we embed in our investment process. We believe companies that behave responsibly and look after the ESG aspects of their operations are more likely to deliver sustainable investment returns and better outcomes for all.

Additionally, in our UK ethical funds, we positively screen stocks for strong principles of business behaviour and ethics, sound employment practices, human rights policies and whether a company supports local communities.

This crisis is certainly the litmus test for good corporate governance, and thanks to our positive screens, we already hold many of the strongest-managed and best-governed UK companies in our funds. These are the types of companies that tend to show their mettle when times are tough. As expected, we are seeing many of our holdings reacting positively and behaving well in the current environment.

The way companies behaved will be judged by their customers, employees and the wider public for years to come.

Final thoughts…

When we look back on the coronavirus crisis, the way companies behaved will be judged by their customers, employees and the wider public for years to come. We will likely remember the worst offenders that treated staff poorly, or the extremely profitable firms that exploited government furloughing schemes. When a reputation is tarnished in this way, trust may never be restored.

On the flipside, we expect those with the highest governance standards to show greater resilience, suffer less and recover faster than their less diligent peers. Companies that have supported staff and wider society during the pandemic are likely to enhance their reputations and grow their value.


The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested.

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