Airbnb During the Pandemic: Stakeholder Capitalism Faces a Critical Test

Abstract

As the covid pandemic spread in early 2020, global travel ground to a halt. For Airbnb, the San Francisco-based company providing accommodation rentals, the impact was both swift and severe as revenues plummeted by more than 70% year-over-year. Responding to the dramatic downturn was a challenge for CEO Brian Chesky and his leadership team because the firm had a adopted a stakeholder model with five key constituents: guests (renters), hosts (landlords), employees, communities and shareholders. While all five groups could benefit in the long-term if the firm succeeded, it was less clear how they should balance the potentially conflicting demands in the short-term particularly given the mounting losses. For example, in the face of travel restrictions, Airbnb could support guests by requiring hosts to refund deposits or could support hosts by allowing them to keep deposits. Similarly, should Airbnb use existing cash to maintain employment levels or downsize to protect capital providers? In the highly uncertain environment that existed in April 2020, Chesky and his team had to make many critical decisions with little precedent and limited information to guide them. As one of the first Silicon Valley "unicorns" to have adopted a stakeholder business model, the world would be watching to see what they did, how they did it, and why.

This case has two pedagogical objectives. First, it explores one firm’s attempt to create and implement a stakeholder business model. As part of this effort, Airbnb created new board committees, new compensation schemes, and new operating principles, and promised to host a “Stakeholder Day (akin to the traditional investor or analyst days) to report on the status of its efforts. Were these steps sufficient or was more needed? Second, the case analyzes decision making during a crisis. Would the stakeholder model hinder operations at a critical time or would it provide an advantage that increased the probability of survival? Would the threat of failure force trade-offs between key stakeholders or was it possible (and advisable) to share the economic pain more equally? And if stakeholders had to suffer, as appeared inevitable, would how the company acted offset what it had to do to survive?

Keywords: stakeholder capitalism, stakeholders, corporate governance, shareholders, leadership, crisis management, two-sided platforms, mission, purpose, value creation, objectives pandemic

JEL Classification: L21, G3, M14, H12