Layoffs and ESG hope is on the way

I was going through my email this morning and saw two articles that grabbed my attention.

The first was a report on how we can expect large financial institutions to make deep cuts in personnel in 2021. The article in Crain’s noted that despite this past year’s fewer layoffs and more hires after prior years of consistent talent reduction, this coming year could bring big changes. Crain’s says that once the post-pandemic recovery appears on the horizon, Wall Street will plainly see that they can do more with less and will return to stricter financial metrics that trump maintaining the status quo during these COVID-induced times. The article included this sobering quote from Columbia Business School professor Shiva Rajgopal. “A lot of this talk about employee anxiety is virtue-signaling. Ultimately, stock returns and accounting profits are what drives decisions from the management because they are paid on that.”

In contrast to this downbeat article that job security was soon to be long gone in 2021’s financial sector future, this survey popped up on how global institutional investors are increasingly evaluating companies based on their ESG (environmental, social, corporate governance factors) investment strategies. Good to hear that these social and environmental factors can matter to the bottom line. The survey found that investors solidly agree that companies with strong ESG performance deserve a premium valuation to share price – 92% in the US said so and the numbers are comparably high around the globe. And what pleased me to see in the survey results was that 79% of institutional investors say their firm is temporarily deprioritizing ESG as an investment criteria but a large majority expect that to change when the recovery is under way. This is good news for those of us who worry about corporate reputations losing their way and a high five to stakeholder capitalism, not just shareholder capitalism, in the weeks and months ahead.