Themes 2021

Equity & Fairness

A statement from Jeffrey M. Solomon, Cowen Chair & CEO

Equity. In the investment universe, that word is synonymous with stocks. Every day, we spend the majority of our waking hours watching and analyzing the equity markets. We pore over the operating performance of public companies as we assess the value of their equity. As investors and executives, we compare our performance to equity indices and selected baskets of equities. In short, we obsess about equity.

Or do we?

A closer look at the definition of the word suggests that we open the aperture when it comes to our focus on “equity.” According to Merriam-Webster, the first definition of equity is “justice according to fairness.” In contrast, “the common stock of a corporation” ranks much lower on the list of definitions.

The events of 2020 have demonstrated that, as a society, we have a long way to go to achieve equity and fairness. While Covid-19 has affected all of us in one way or another, it has a disproportionate impact on communities of color. That is not equitable. The murders of George Floyd, Breonna Taylor, Ahmaud Arbery, Rayshard Brooks, among many others, have highlighted inequities in the way that Black communities are policed. This reality forces us all to consider our roles in perpetuating racial bias and our responsibilities to bring about positive change in racial equity in our communities and at work.

Over the last few years, other underrepresented groups have also voiced their concerns about a lack of fair treatment. The #MeToo movement speaks to the continued challenges in achieving gender equity and respect in the workplace and beyond. In addition, the disaffection expressed vocally by those who live in both rural communities and inner cities has given rise to populism on the right and the left, speaking to a lack of fairness when it comes to opportunity and economic access.

We need to ask ourselves: Is it fair that equity markets have made all-time highs in 2020 while many small businesses and their employees continue to struggle to make ends meet? Is it fair that bigger corporations, with access to the capital markets and other capital sources, are more likely to survive the current economic downturn? Is it fair that Covid-19 has left so many municipalities and local governments unable to provide vital social services? How will these inequities be addressed? What is our role in helping to repair the fabric of our society when it seems so frayed?

As we head into 2021, we will have a new President and Vice President who campaigned on the idea that we can be and should be a more fair and more inclusive society, especially in terms of economic opportunity and social mobility. They championed the notion that advancement should be more merit-based and less about race, ethnicity, gender, or sexual orientation.

That everyone should have a fair chance to achieve the American Dream is not a new idea, but the ideal of what the American Dream embodies may be changing. Recent surveys suggest that more people, particularly millennials, believe that the current form of capitalism needs to be rethought if it is to survive.

Some will read that last statement through a political lens. I urge you not to. Fairness doesn’t know politics. Neither the left nor the right has a trademark on the concept. Instead, consider fairness to be a fundamental human desire. Said another way, who doesn’t want to be treated fairly? Who doesn’t want the chance to better themselves socioeconomically?

As business leaders and investors, we must continue to use our privileged positions not only to advocate for fairness, but to demand it. We are the ones who can rethink how to engage in a form of participatory capitalism that is more equitable, more inclusive. The history of social change often begins with economic pressure brought to bear on corporations to act more fairly and with greater responsibility for enacting positive social change. But it doesn’t have to be that way. Business leaders and shareholders can recognize that their economic incentives are aligned with, and often improved by, the concepts of inclusion, diversity, and basic fairness. In our business strategies, if we apply the primary definition of equity, then individually and collectively, we can evolve our form of capitalism into one that does a better job of closing the wealth and income gaps. We can enable economic growth that is more inclusionary, particularly as we emerge from the current virus-induced downturn.

At Cowen, we are on our own journey to be fairer and more inclusive. We are more intentional in our actions so that they match our words and our values. As we conduct our business, we do so through the lens of Empathy, one of our core values, by considering the impact we make on our colleagues, clients, and communities. Those constituents include our own equity holders. Our effort isn’t new, but it has taken on increased urgency as we exit 2020.

As you read through our Investment Themes for 2021, I encourage you to consider focusing your efforts on companies and industries that place a premium on fairness. Support businesses that drive not only financial returns on equity, but also provide equity on those returns as well. Equity in the sense of inclusion. Equity in the sense of opportunity. Equity in the sense of fairness.

What we’re watching:

  • Gender and Racial Board diversity for publicly listed companies
  • Social Justice and Inclusion focus in the Cannabis industry
Cowen Research Themes 2021

View the Handbook
4.7 x

Rate of COVID-19 hospitalizations of black or African American, non-Hispanic vs. White, non-Hispanic persons — CDC

73% vs. 27%

Percent of venture capital dollars concentrated in CA, NY and MA vs. the rest of the U.S. — 2020 NVCA Yearbook

+.3% vs. -19%

Change in employment vs. pre-COVID-19 levels for high wage vs. low wage earners — Opportunity Insights, as of October, 2020

1 in 2

Number of small businesses that could survive 3 months or less without cashflow — Womply