The private sector has an important role to play in creating a more equitable, just, and sustainable planet. Many government leaders, researchers, and nonprofits have made claims like this, but there is a different level of urgency and buy-in when it comes from a globally-recognized CEO. At last month’s Responsible Business Summit, PayPal CEO Dan Schulman argued in his keynote presentation that not only is responsible leadership a moral imperative, but it also makes good business sense. His comments echo those of former Unilever CEO, Paul Polman, who called achieving the Sustainable Development Goals the biggest business opportunity of humankind.
In his presentation, Dan Schulman explains why the private sector is critical to affecting systemic change, navigating politics by staying true to your values, and how PayPal has stepped up to take care of its customers, employees, and communities during this crisis.
[Editor’s Note: For full disclosure, PayPal is a MovingWorlds client. However, this post has been written independently and was not funded in any way by PayPal.]
The private sector’s role in reimaging a more sustainable economy
Our existing economic system isn’t working. The shareholder primacy model has been worsening inequality for some time, and COVID-19 has served to further accelerate this trend. As Dan pointed out, ⅔ of Americans struggled to make ends meet at the end of the month even before the pandemic, and only about 25% of Americans believe that capitalism is working in its current state. On the global level, COVID has pushed 100 million people into extreme poverty in the last 6 months alone. To address these issues, we have to step out of our individual perspectives and appreciate how interconnected our futures are. As Dan shared, “Democracy means standing up for more than just yourself. It’s thinking about the whole, not just the individual.”
So, what can companies do to help address these issues and shift towards a model that takes into account multiple stakeholders? According to Dan, step one is for leaders in the private sector to recognize that sitting on the sidelines waiting for governments or nonprofits to solve the problem is not an option. Instead, he argued that “we need to stand up and partner with governments, academia, nonprofits, and other actors to take moral responsibility for thinking about multiple stakeholders. Being responsible as a corporate leader means thinking about not just maximizing profits next quarter, but about employees, the communities we live and operate in, our customers, and our environment – not just our shareholders.”
As Dan has found at PayPal, being a values-driven company is not at odds with generating high financial returns. “I really do think that the two go hand in hand. We as companies can do so much internally for our employees, customers, and communities we live in, and it is incumbent upon us to do so,” he shared.
Navigating politics by staying true to your values
As Anna Irrera, Chief Fintech Correspondent for Reuters and moderator of the presentation, pointed out, some fintech companies have taken the approach of declaring themselves “apolitical” when it comes to social justice issues. But Dan’s take on that is that if you’re a major consumer brand, there is no way to fully stay out of the cultural wars or politics.
Dan shared, “I think as a business leader, the way you should think about it is not ‘how am I going to take a political stand one way or the other’ but rather ‘how am I going to be true to the values of my company.’ Every company should have a mission – ours is to democratize financial services and ensure no one is left behind in the digital economy – and that is a very inclusive mission. So within PayPal, the number one value is inclusion and diversity, and we need to stand up for that when we see it being challenged.”
For example, when the controversial ‘bathroom bill’ was passed in North Carolina, PayPal made the decision to withdraw its plan to do a major operations center in the state because the discriminatory nature of the bill was in direct opposition to PayPal’s value of inclusivity. Under Dan’s leadership, PayPal has also taken stands about the Immigration Act, Black Lives Matter, and backed their words with action by committing $530 million USD to fight for racial equality and help close the racial wealth gap. From Dan’s perspective, “these are not political activities, but rather values-based activities. People sometimes conflate values and politics, but I try very hard not to frame things as either a ‘red’ or ‘blue’ issue, but as a values issue. If something violates our core values, then we have to stand up for them – values can’t be something up on a wall that you don’t actually act on. If that’s the case, it’s just propaganda.”
Dan has found that taking stands based on PayPal’s values has helped the company maintain a competitive advantage. “I think the single biggest competitive advantage we have is the strength and the talent of our employees. Having values and acting on them is one of the ways we attract and maintain the best talent,” Dan shared.
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Repost from @dan_schulman – Our employees’ voices have been so critical to advancing our internal dialogue and action in recent weeks. Along with conversations I’ve had with Black leaders across the country and inside our company, meeting with members of Amplify—PayPal’s diversity and inclusion community for Black employees—and hearing their perspectives was particularly crucial to shaping our company’s response to racial injustice. With that in mind, I wanted to take a moment to spotlight Vonda Page, one of our @paypal team members based in Oregon. Vonda has been involved in Amplify since it first launched, and she’s played a key role in shaping PayPal’s commitments to racial justice, as well as leading Amplify’s efforts to celebrate and honor Juneteenth this week at PayPal. Thanks to her work, there have been various virtual events taking place to educate our global workforce on what Amplify is, guest speakers who’ve shared the history and meaning of Juneteenth, and a panel discussing how we can all do our part to create a more inclusive workplace. I’m inspired by Vonda’s leadership and want to express my gratitude for all of her hard work and contributions.
Responsible business means putting customers, communities, and employees first
One of the things that makes PayPal’s approach to social responsibility so effective is its integration into every aspect of the core business. “When we spun off from eBay years ago, we decided that instead of setting up ESG as a separate group, like a Foundation, we wanted to integrate our mission and values into our products and services. So our whole company is progressive and thinks about all of its stakeholders in the way we do business,” Dan shared.
A great example of this is PayPal’s working capital program. Dan explained that PayPal is actually one of the top 5 lenders of working capital to small businesses in the US, and that 70% of its working capital loans are given to businesses in neighborhoods where 10 or more banks have closed their branches. Dan elaborated that, “Banks close their branches in neighborhoods where the median income is below the national average, which tend to be more multiracial, so at PayPal we lend disproportionately into those neighborhoods. When we do, their average sales go up by 22% (compared to the control group that only goes up by 1%). This is a matter of small businesses just really needing access to capital, and when they get it, they can grow sales, hire more people, and have more financial health. I think this is a great example of using our data and our algorithms to lend into areas where traditional banks do not today and making a real difference with our products.”
Another thing PayPal did as part of its $530 million commitment to strengthen minority communities and fight economic inequality is give out $10 million worth of grants to black-owned businesses hit hard by the pandemic. Dan shared that, “Black-owned businesses were hit twice as hard as white-owned businesses, and with no access to loans from traditional banks, we’ve stepped in to give over 1,000 grants to help these businesses stay afloat. I think it’s a combination of adapting our products and services using the power of data and also making sure we’re lending responsibly by offering loan forgiveness programs and focusing our investment in the communities we live and work in.”
In addition to taking care of customers, another piece of responsible leadership is taking care of your employees. Dan reflected, “When I think about multi-stakeholder capitalism, and the responsibility I have to multiple constituents, the most important one to me is my employees. Our workforce is the biggest single competitive advantage we have, and I think there are two things that attract employees to a company: one is your mission and values, and the second is the ability to feel financially healthy and secure.”
In response to learning that ⅔ of the country struggled to make ends meet even before the pandemic, Dan decided to look deeper at how his own employees were faring. “I did a survey inside PayPal in all of our call centers entry-level positions to find out how people were doing from a financial health perspective. We pay at or above market in every single location we employ people, and I went into this thinking I’d get positive feedback that I could tout at an all-employee meeting. But what came back was actually very disturbing in that our employees were struggling just as much as the rest of the country,” Dan shared. But instead of shrinking from this challenge, PayPal followed up with action.
From the pay equity analysis, Dan realized that capitalism isn’t working for this segment of the population, and that if PayPal is going to be a company that is really living its mission of democratizing financial services and driving financial health, it needed to start inside the company. Dan shared that, as a result of the survey, “we took real action and came up with a measurement for net disposable income (NDI), which is basically what is left over after taxes and all essential living expenses. What we found was for many of our employees, their NDI was 4 – 6%. That doesn’t leave very much left over! We decided that for people to feel financially healthy, they had to have an NDI of at least 20%. We’re currently at 16% now across our company, so we lowered healthcare costs by 60%, increased salaries where needed, gave every single employee stock so that everyone is a shareholder, and wrapped it all into a financial education program so employees could learn what to do with their stock and how to save/invest. By the end of next year, we will reach our 20% target NDI.”
In addition to supporting its employees financial health, PayPal has stepped up to support their mental health. For instance, “One thing we did is opted to not rate anybody this year. Typically we rate people on a performance curve, but this year we’re not doing that because we understand that many of our employees are juggling family, life, kids, and other obligations at home. We also have provided a lot more counseling and mental health services for those who need it, given more vacation days, and tried all sorts of things from online yoga classes to karaoke sessions. Ultimately we’re just trying to check in and make sure that people have what they need, and if they have crisis leave or health issues, we want to make sure we’re taking care of them… and this idea of caring for your employees and the best practices around that will continue post-pandemic as well.”
You get what you give
According to Dan, these changes have marked a defining moment for PayPal. Yes, doing the responsible thing can cost money, but as PayPal’s example shows, investing in your employees is something that will continue to drive value for the company for years to come. After enacting the changes, employee engagement skyrocketed, productivity went up, and attrition dropped by over ⅔.
This is the virtuous cycle of responsible leadership: if you invest in your employees, they are more productive, engaged, and able to serve customers better than anyone else, and the success that follows means that shareholders are served well, too. To close out, Dan left us with this thought: “The thing is, we’re all in this together. The idea that we don’t all live in the same communities is being replaced by this realization that this is all one thing, and I think we are going to be much better off as communities, as companies, as a country, and in our global economy if we all step up to address these issues in a responsible way. You can suboptimize and get away with it for a short amount of time, but not over the medium and long term. This is where companies have a moral responsibility to stand up and make a difference.”
Dan’s responsible leadership at PayPal is proof that doing right by your stakeholders is ultimately in the best interest of the business. Inspired by Dan’s lessons? Check out our complete guide to making your company more socially responsible for additional tips.