Sean Brown: How would you advise corporate leaders to determine which aspects of their companies’ social impact to prioritize?

Bruce Simpson: Companies need to know their vulnerabilities and strengths in the ESG space. They can look at themselves from the outside and calibrate: What is my environmental footprint? What is my social footprint? What is my governance footprint? Then consider what your vulnerabilities are within those brackets, as well as your strengths. Where can you step up and really make a difference? If you don’t know your vulnerability, the critics will point it out as soon as you start speaking about ESG or purpose externally and criticize you for it, so you had better get there first.

Now, 85 percent of companies have a purpose statement that does not mean anything to anybody. It’s a fluffy statement, often created by an ad agency, that does not anchor any specific business initiatives. Developing a purpose and an ESG focus is a business exercise requiring specificity. PayPal has a clear purpose statement, which cascades down into an understanding of the company’s vulnerabilities—cybersecurity, for example, and protecting users’ financial data—and its strengths: they have good data, for example, on working-capital challenges in their communities, and that is a strength they can develop. They also have clear platforms: employees, social innovation, environmental sustainability, and responsible business practices, with clear commitments that are measurable and for which people are accountable.

Sean Brown: Franz, can you take us through the process of how PayPal engaged the organization in developing its corporate purpose and identifying the strengths and vulnerabilities?

Franz Paasche: This was a five-year journey for us. We had the opportunity to essentially re-found PayPal after eBay spun it out in 2015. The first task we took on was to articulate a new mission with a strong central purpose and values that would reinforce that mission. We also defined a strategy that was built in combination with and would reinforce the mission and values, and our employees have become a huge force for the mission and hold us accountable to live our values.

We articulate our central purpose as democratizing financial services and e-commerce. We help underserved communities connect to the financial system and have the benefits of the global economy, and we strive to improve the financial health of customers and communities who needed affordable, easy, safe ways to connect to the global economy. We had some difficult moments of learning what it means to live your values both internally and externally.

Sean Brown: One of those moments was probably seeing the results of the financial-security audit you did of your workers to understand whether they have enough income to live on. Can you tell us about that?

Franz Paasche: This goes back to 2018 but it prepared us for how our employees would experience the pandemic period. At the time, we were building products such as PayPal Working Capital, which enables small businesses that don’t have access to banking services or can’t afford the fees to get capital online, and as we studied the data, we started to think about our own employees. We have a broad range: some employees work in call and operation centers; others are lawyers, PhDs, and engineers. We also have an employee emergency fund to help employees during personal crises, and we started to see some requests for seemingly small crises that one would not think would derail a person’s finances. So we did a survey and found that about a third of our employees were struggling paycheck to paycheck. That was a surprise to us because we pay at market or well above market rates. Clearly, capitalism wasn’t working for this portion of the economy.

We worked with nonprofits and academic experts and developed a concept we call “net disposable income.” We asked, “What do our employees have after they have paid their essential living expenses and taxes?” What we found was that many of the employees in that third of the company that were struggling financially had 4 to 6 percent net disposable income. We set 20 percent as our goal and took immediate action. We looked at this from a stakeholder perspective—our employees are our most important constituency and it was unacceptable, given who we were and what we stood for, that we would have employees who were concerned about making ends meet.

We then put in place a four-part program. We reduced the cost of healthcare benefits, in most cases by as much as 60 percent, which made a big difference, certainly in the United States, where healthcare can be a regressive tax that hits lower earners to a higher degree. We gave everybody stock—not options, but restricted stock—so every single person was an owner, and we made them eligible to receive stock in the future. We adjusted wages to meet the standards of a livable wage. Lastly, we created an education program so employees could start to think about their financial security.

Bruce Simpson: There are striking statistics from JUST Capital [which ranks companies based on their actions on issues Americans care about] that show, for example, that 50 percent of workers at Russell 1000 companies are not making enough to support a family of three even with their partners working part time. At the same time, I understand that the average net worth of a White family is ten times higher than a Black family’s. We see a staggering difference between Main Street and Wall Street, and I can imagine senior executives saying, “That’s a big challenge. It is important, therefore, to pay the minimum wage and increase benefits and investments in training.” Is that simply a cost, though, or have you also seen benefits and a return on investment, Franz?

Franz Paasche: We saw benefits almost right away, and they are accruing. Now there is no one at PayPal in the US whose estimated net disposable income is below 18 percent, and we are heading toward 20 percent this year. We have seen impact in the amount of healthcare benefits people access and increases in 401(k) plan enrollments and our employee stock purchase program. Our data show employees reporting less stress in making ends meet, and we are seeing higher retention. We also have incredibly high engagement scores, and they were higher during the pandemic than before, which I think connects in part to the fact that our employee community feels financially secure.

You mentioned JUST Capital—we have entered into a partnership with them, along with the Financial Health Network and the Good Jobs Institute, to share our data and what we are learning with other companies and are working to build a coalition. Imagine if a huge number of the great employers around the world started to focus on the full financial security and health of their employees. That would affect every community and the way our economies work.

Vivian Hunt: This notion, Franz, of starting with one stakeholder is interesting. UPS, for example, started by focusing on anyone who touched a package—from the business that sent it to the employee who delivered it—and that resulted in great retention. My point is that going deep with one stakeholder is an important lesson in your story.

The second important lesson is that these days, there is no absence of data but there can be an absence of insights about your data. The analytic, tailored approach to the S in ESG will deliver different answers for PayPal than for its competitors and companies in other industries, so sharing the methodology and getting the rest of us up the curve faster really benefits the system.

Franz Paasche: We do take a multistakeholder approach. We have five stakeholders we focus on: employees, customers, shareholders, governments and regulators, and society at large in the communities. We put employees first and we have been very clear about that. We think that creates value across the spectrum of our stakeholders, because if you have secure, committed, and inspired employees, they are more passionate about their work and serving customers. We are regulated in 67 countries and we need our employees to pay attention to compliance and risk management. Also, our employees volunteer and engage in the communities.