The Coronavirus Crisis and Business

The Corona virus Crisis and Leadership in Business Area

The corona virus crisis and its economic effects coincides with the 50th anniversary of Milton Friedman's influential assertion that the social responsibility of business was only to increase its profits, within the law. This mantra has gained a strong hold on much of business practice, with a fierce focus on the short term. It is in this context that business leaders will be responding to the effects of the corona virus crisis.

Even before it struck, self-interest had been increasingly at the fore of organizational behavior. And what are the consequences? Employment has been casualized to a previously unimaginable extent. 2.8 million people in the UK held gig economy jobs in 2017. One in four of such workers earned less than £7.50 an hour. It is these workers who are most vulnerable to the economic fallout from the corona virus crisis.

Mainstream leadership theorizing predominantly takes the rights of business leaders to pursue whatever purpose they have in mind entirely for granted. The job of leadership research is to develop theories that help them to do this in the most effective and efficient way possible. I don't think this approach ever had much to commend it, but it has even less going for it now.

It is undeniable that hard choices lie ahead. But when these choices are guided primarily by the short-term interests of a few then the disenchantment that already exists with business leaders will intensify. Feelings of relative deprivation will grow, with destabilizing consequences for all of society. The resultant cynicism is not reduced when billionaires such as Richard Branson respond to the crisis by asking for state support. In response, many are asking what forms of leadership should businesses now adopt?

In my view, this is the wrong question. It suggests that those who inhabit organizations are invariably committed to an overarching common purpose and are bonded by the same set of unitarist interests. Of course, organizational actors share some interests and sense of purpose. If they didn't, organization would be impossible. But these exist alongside tensions between the immediate short-term interest of shareholder value and the long-term welfare of those that organizations employ and the customers that they serve. It is pointless to pretend otherwise. The actions of leaders will surely depend on how businesses are organised, how power within them is distributed, and on the views that exist about the primary importance of shareholder value – what can be called the underlying theory of the business.