In my early thirties, through a combination of happenstance and luck I found myself, a most reluctant capitalist, working in corporate America. I vaguely recall, with a fresh bloom of embarrassment, that by way of introduction during my first department meeting, I shared the ill-formed notion that I was a “socialist”. Brazen, I went on to explain that I was happy to be in the “belly of the beast” because in my role I would have an opportunity to “redistribute wealth.” What I recall most acutely was that the CEO, considered a dean of the corporate social responsibility movement, sat across from me. At that point in my life I had never actually heard the term ‘socially responsible business’ and I generally accepted the idea that business was predatory and exploitative. So I was intrigued when the CEO, Jeff Swartz, a razor sharp and energetic visionary with revolutionary ideas of his own, did not flinch. He simply looked me in the eyes, I assume now trying to gauge my intelligence and said, “Well Celina, I’m a rapacious capitalist, let’s see what we can do.”
For the six years I worked at The Timberland Company I was privileged to have colleagues in every part of the business who were committed to the ethos Jeff voiced often that “…doing well and doing good are inextricably linked”. Indeed, during some of the most difficult financial quarters we found it natural to give a little more, work a little harder, and to honor our broader commitments to the communities where we “lived, worked, and did business”. I’d proffer that I’m not alone among Timberland alumni in believing that we weren’t just cranking out the enormously popular “yellow boot”, we were also creating the proof text of a new business model that honored our labor, our communities, and our web of supply chain partnerships. I’m not suggesting that Timberland was a utopia; it had its share of daily frustrations and disappointments. However, the gap between the vision we collectively held and the reality of our daily work was never so large that it deterred us from striving to create a more responsible business.
In hindsight I believe that Jeff Swartz was no more a rapacious capitalist than I was a socialist. What I learned working in his family’s company is that business, money, and the sweat equity of good people can yield benefits to society that transcend products and services. That experience shaped a value set that remains central to my consumption habits. It’s now in my DNA to ask questions like: Who needs it? Who makes it? Who profits from it? Does it hurt or help the planet? Does it hurt or help other people?
Today when I look at the growth of the socially conscious business sector and the explosion of Certified B Corps (companies that meet rigorous standards of social and environmental performance, accountability, and transparency) across the globe, I’m proud I was part of a company that pioneered these expectations as a standard for doing business.
Recently, I thought about Timberland while reading The Clean Money Revolution, a book written by a new mentor and RSF faculty member, Joel Solomon. Not surprisingly, I get the same rush of endorphins reading Joel’s book that I used to get listening to Jeff talk about the purpose of business. I admit I’ve never stopped being drawn to people who habitually question big assumptions. In both cases the assumption they reject is that the purpose of enterprise is single-minded financial compensation to shareholders. Joel states his position this way: “Clean money is aligned with a purpose beyond self-interest. Money for the commons. Money that makes the world better. Money regenerating ecosystems and engendering a healthy balance between people and planet. Money that builds true security: long-term, safe, fair resilience.”
For several hours after I started reading Joel’s book I felt pretty optimistic about our future. Sadly that elation ebbed after I picked up the New Yorker and found myself staring at a recent article titled, “Is Socially Responsible Capitalism Losing?” by Sheelah Kohlatkar. This piece brought me back to reality like the snap of a bone.
Touching on a recently published book, The Golden Passport by journalist Duff McDonald, Kohlatkar describes the agency theory, a point of view developed in the 1980’s by Harvard Business School professor Michael Jensen. This theory, drilled into the brains of Harvard MBAs for nearly three decades, posits that the interests of managers must first and foremost be aligned with those of company investors. In this model, return on financial investment is the ultimate pursuit, to the exclusion of other measures of success such as worker satisfaction and retention, brand integrity, transparent governance, and environmental performance. It’s not just that these criteria are readily ignored in service of increasing short-term share value, it’s that they are deemed inconsequential to the long-term viability of the business.
What really crushed my mood that day was example after example cited by Kohlatkar illustrating how conscious, publically-traded companies and well-intentioned start-ups were being punished by investors for all manner of sin such as paying a living wage or offering health insurance. In this dystopian view of business, all costs must be minimized to maximize shareholder return. Pay the minimum the market will bare, cut benefits, lay off workers, and delay health and safety improvements as long as possible. It’s not just a cautionary tale; investment in companies seeking to do the right thing for the full range of stakeholders are being starved of needed capital and not surprisingly some, like the platform food delivery company Maple, are simply folding. Sure, Maple had a number of weaknesses in its model. However, according to Kohlatkar, prospective investors seemed vexed by the decision to make delivery personnel employees rather than contractors, which meant providing them with health insurance. Could the right investors, those who saw the value of fairly-compensated labor to the viability of the business, have produced a different outcome? We’ll never know — clean money never showed up.
So, I’m left to wonder who’s right? Are adherents to socially responsible business practice really endangered or is this just the inherent tension between the old and new form of capitalism? Is it simply naïve to believe that doing well and doing good are inextricably linked? Are we entering a new era of unchecked greed and exploitation where worker rights are gutted and every input is squeezed to maximize shareholder return? If so, where does that leave our body politic and our planet? If the political analysts were right and populism surged in the run-up to the 2016 U.S. election, where does that anger migrate when managers feel emboldened to care even less about workers, the broader community, and the environment? If you did not like the outcome of that election or how an angry brand of populism is now trending globally, it should serve as a call to action.
Adhering to a socially responsible value set won’t save a weak business or a failed product but neither will extreme cost cutting and single-minded greed. As investors, citizens, and consumers, we have choices to make. A clash of values is underway with potentially catastrophic consequences forcing each of us to decide which view of the world we embrace. You can go along with the Citigroup analyst quoted in the Kohlatkar piece who wrote in a note to the bank’s clients: ”This is frustrating. Labor is being paid first again. Shareholders get leftovers.” You could certainly jump on the “greed is good” bandwagon unless; you care about political stability, the health of the environment, and the equity of other human beings. If justice is a key component of the prosperity you seek, then you are obligated to ask questions like the ones I ask: Who needs it? Who makes it? Who profits from it? Does it hurt or help the planet? Does it hurt or help other people? And perhaps we need to ask yet one more; how does the way I spend, invest, give, and bank my money build or destroy the world I want?
My idealism is pragmatic; the world envisioned by the clean capitalists and socially responsible visionaries is the most prosperous and resilient path forward for the greatest number of us. I refuse to accept the reductionist view as a means to an end. Over time I have questioned my own assumptions and have come to believe that capitalism can be a force for good but only if it is compelled to evolve. I am convinced it will not evolve on its own; it requires the “force of us”. With every transaction and money decision we make we must insist our values are central. For me, the choice of what I want, what I value, and believe possible is clear. I’m sticking with the Jeffs and Joels of the world. How about you?