Goodbye Gekko: leaving behind greed is good’
Businesses will put greater emphasis on employees and social responsibility and focus less on profit in a world changed by the Covid-19 pandemic.
That was one of the takes from a webinar hosted by the Bermuda Chamber of Commerce and KPMG on how companies should adapt to the “new normal”.
Stephen Beatty, global chairman, infrastructure, at KPMG, said: “Finally we are coming out of ‘greed is good’ and into something different. This is a generational change as well as a technologically driven change.
“The nature of work has changed by 20 years over the last ten weeks. The change is massive and I think the scale and durability of the change will depend on the length of time before we have a treatment protocol or a vaccine.”
Mr Beatty said the balance between labour and capital would tilt towards the employee, while social responsibility would rise up the corporate agenda.
“I think companies looking to attract and retain high-quality individuals will increasingly have to think in whole-life terms,” Mr Beatty said. The contract between companies, individuals and society was being rewritten, he said.
Other matters discussed in the 75-minute webinar were Bermuda’s potential attraction for international remote workers and how an infrastructure repair and maintenance programme could boost the economy.
Mr Beatty, who is based in Canada, said the work-from-home surge during the crisis would cause some businesses to rethink how they operated in the longer term, especially with regard to offices and travel.
“It’s not inconceivable to me that I could move to Bermuda and spend the rest of my career telecommuting around the world,” he said.
“I think that has profound implications for tax authorities and social services, among other things.”
Lori Rockhead, a director at KPMG in Bermuda and the webinar moderator, suggested that the island, as an attractive place to live with a strong telecommunications infrastructure, could appeal to remote workers, which could in turn help to counter population decline.
Dennis Fagundo, the president of the Bermuda Chamber of Commerce, agreed the idea could be pursued.
He added: “We already have a fairly significant population of people who work remotely, particularly through New York, so it would be an expansion of that.”
Mr Fagundo said the island’s location and travel links with the US East Coast and Britain would be valuable for when in-person travel was needed, and added to the idea’s potential appeal.
However, Mr Fagundo expected the appeal of working from home locally to wear off as people craved social interaction and collaboration, which played an important role in many businesses and was difficult to optimise remotely.
“We’re already seeing Zoom fatigue after six or eight weeks and, frankly, I’m hoping that people will value that social interaction and that we proceed to a form of normal,” Mr Fagundo said.
He added that the presence of international business workers was an important driver of other businesses in Hamilton.
IB was also playing a vital economic role in the absence of tourism as “the only thing that’s still bringing cash on to the island”, Mr Fagundo said.
Sophie Heading, global geopolitics lead, global clients and markets, KPMG International, said she saw a threat looming for Bermuda’s IB sector.
“Low-tax jurisdictions were under attack before coronavirus, by the European Commission, but also by the general public, because it’s believed they divert profits from other countries,” Ms Heading said.
“I think that scrutiny is going to grow as countries look to pay for their stimulus packages.
“That said, Bermuda’s really well placed, compared to some of the other jurisdictions, because they have high standards in terms of exchange of tax information with other countries and anti money-laundering measures, for example.”
However, there was more work to be done internationally to improve the perception of Bermuda’s role in the global economy, she added.
Ms Heading said the world was seeing an acceleration of trends that were under way before the pandemic started. These included automation and technological displacement and a shift to nativist or “protection of your own” policies.
Also, she anticipated a “redefinition of the purpose of the company”, based on an expectation that businesses will play an increasing role in social wellbeing.
On the topic of stimulating Bermuda’s economy, Mr Beatty warned against the temptation to make massive investments in capital projects. “Prudence will pay in the long term,” he said.
“In the hurly-burly of politics, people always want to announce the next $100 million project — please don’t,” Mr Beatty said.
“Focus on things like the repair and maintenance backlog, things you can do now. We are seeing people able to keep those five and ten-person businesses alive by having fast procurements, getting money in the hands of people.”
A small contractor would have to wait months to receive a first cheque for work done, even if Covid-19 disappeared tomorrow, Mr Beatty said.
“One of the things Bermuda could do is to prepay 25 per cent of all new contracts to do repair and maintenance activities. That would supply liquidity to some of the smallest companies and allow them to feed their people right away.”
Mr Fagundo said the declining population was an underlying issue for the economy.
“One of the things we have to be careful about with inward investment is that we already have an abundance of supply with the fall in population numbers over the last ten years,” Mr Fagundo said.
“We have a lot of retailers and restaurants, things that rely on population to drive them.”
The population denominator was also an essential consideration for government budgeting and debt levels, as well as infrastructure such as electrical generation, he added.
The focus should be on trying to build demand for supply already there, rather than seeking investment to build more supply, he suggested.
Rohitesh Dhawan, managing director, energy, climate and resources at global consultancy Eurasia Group, had some bold suggestions.
He cited the strong growth in electrification of transport, which required intensive mining to extract minerals needed for batteries from the ground.
“In your neighbourhood, in the North Atlantic Ocean, there is now significant activity going on to get those minerals from the ocean, rather than extract them from the ground, which has deep environmental impacts,” Mr Dhawan said.
“So could Bermuda become a centre of ocean mining for minerals? I don’t see any reason why not.” He added that there was one other jurisdiction similar to Bermuda that is considering repurposing some of its cruise ship terminals to take in large container ships of recycled waste, to sort it and ship it out to places where it can be used.
Experts on the webinar noted a dramatic shift towards ESG (environmental, social and governance) investment during the crisis.
“I think we’re seeing the beginning of new era of corporate morality,” Mr Beatty said.
“For example, conventional wisdom would tell you that with falling oil prices, sustainable energy investing would go down, but it’s gone up considerably.
“People and corporations are really understanding that they can’t defile the environment for ever with impunity. I think it’s a good thing and I hope it sticks.”
Mr Dhawan said: “In 2019, when ESG was all the rage, about $8 billion was invested in ESG funds. In the first quarter of this year, we’ve had $8.5 billion committed to ESG funds and that in the worst economic quarter we’ve had in nearly a century.”
Green energy investment was one way Bermuda could benefit from this macro trend, he suggested, with the island’s high electricity prices a driver of change.
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