A Crossroads for the Conscious Capitalists

Ida Girma
Ida Girma
May 20, 2020 · 5 min read

“They approved it, honey.”

On May 5, I woke up to this text message from my father. A knot in the pit of my stomach — anxiety’s lair — disappeared. We were getting a Paycheck Protection Program loan.

My family owns a small convenience store in Richmond, Virginia. Think newspapers, lottery tickets, packaged snacks. My mother and aunt work as the store clerks, splitting 18-hour shifts. As the coronavirus pandemic ruthlessly expanded, customers stayed home and we watched the business sink. How could we stay afloat and employed?

Cue the $2 trillion CARES Act, signed into law on March 27 at breakneck bipartisan speed. With fewer than five employees on payroll and net income well under the specified cap, the store seemed eminently eligible for a forgivable loan under the $349 billion PPP.

We applied right away. But the program went bankrupt before we got approved.

Between April 16 (when the first batch of funding ran out), April 24 (when the government replenished the program with an additional $320 billion), and May 5 (when our application was finally approved), I felt a simmering mixture of cynicism, helplessness, and fatigue — an unpleasant brew obscured by reflexive pep and deflections. The eventual relief was merciful.

Last week, 150 MBA2s and MSxers enrolled in the beloved course Managing Growing Enterprises were tasked with rewriting Shake Shack’s statement on returning its $10 million PPP loan. We’d been learning about corporate apologies — how to make them resonate with our desired stakeholders — and this was a chance to practice. But I struggled with the assignment. Rather than wordsmith my response (which I usually enjoy), I felt eager to discuss, candidly, how my peers and I would have handled the original choice of whether to apply for emergency funding.

The long list of publicly traded and large, privately held companies that received PPP loans, including Shake Shack, may not have broken any laws. But I do believe many of these companies understood that Small Business Administration funding would be finite and that it was not their only meaningful source of credit or cash to enable “ongoing operations” — the “good faith” premise of PPP eligibility. What was the difference between the leaders who chose to apply, and those who refrained?

Before Stanford, I invested in and advised social enterprises: for-profit, fast-growing businesses that could garner financial success and have real social impact (beyond the tautological metric of employing people). At the same time, I’d witnessed even the most traditional businesses, some of which became my clients, increasingly commit to considerations of social good.

But this cataclysmic downturn — rife with tragic human and economic casualties — has thrown into sharper relief the ways in which profit and purpose are not always in tandem. Much like it’s easier to be a friend in fair weather, it appears that it’s easier to be a conscious capitalist in a bull market.

Gone, at least for the moment, is our habit of taking for granted sky-high valuations, ease of financing, low unemployment, entrepreneurial optimism, and bold corporate philanthropy. Now that we’ve reached this cycle’s bitter end, as business leaders, we will need to make tougher ethical trade-offs.

Whether to apply for PPP is simply one example of the countless challenging decisions each of us will face after we graduate from the GSB. We are at a crossroads, precipitated by a brutal economy. We must ask, in the face of uncertainty and ambiguity, how will we make decisions that bolster our businesses and do not have a negative effect on society (you know, “change lives, change organizations, change the world”)?

Myriad attempts have been made to answer this question, largely in the decade of growth bookended by the financial crisis and Covid-19. These include concepts of shared value, the redefined purpose of a corporation espoused by the Business Roundtable or in the Davos Manifesto, and the standards of benefit corporations and B Corps, amongst others. These ideas are valuable, but they may require systemic changes to ways of doing business and longer-term cultivation of the buy-in necessary to scale those changes.

Meanwhile, I want to offer a simpler exercise that I hope is relevant and immediately actionable for those of us in even the most traditional corporations or cash-strapped growing firms. When you are making a tough decision, take a few minutes to ask, 1) who is not in the room (or Zoom meeting) but could be affected, 2) what benefits or harms does your choice cause for them, and 3) what level of impact will the results have? If it helps, you can quickly draw a 4-column table:

In the case of Shake Shack, you might identify an eligible small business owner whose PPP application was denied or delayed, like my father. The level of impact may be high, as the harm could require individuals to lose their employment and income. Or for a company reducing benefits, you might think of a frontline employee. The level of impact may be medium, depending on their wages and family situation. Think of an actual, specific human being. If you’re unsure what benefits, harms, or level of impact would ensue, try to actually speak with that person for five minutes. Ask for their story. Listen well (or, as we learned in Touchy Feely, listen empathically). Listen to learn. Share what you find with your colleagues. See if you can find a better solution that takes into account what everyone stands to gain or lose.

Whether you prefer Friedman to Fink, or want to seize this moment to rethink capitalism, humanizing your business decisions is a way to make more informed choices. Informed choices are a rare and precious commodity amid coronavirus. You can do the thought exercise on day one of your next job, no matter the industry or role. If nothing else, this thinking will prevent you from feeling confused or sheepish if you strike ire with harmed stakeholders. But I’d be thrilled if it helped you find ways to secure wins for both your company and society, during this pandemic and beyond.


An online magazine written by and for the Stanford GSB.