Arizona CEO: Benefit Corp “A Big Competitive Advantage”

7 (1)Adam (l) and Murray Goodman. Image provided.

“I don’t think our customers really care that we’re a benefit corporation,” says Adam Goodman, the third-generation owner of Goodmans Interior Structures, a furniture and design firm for large commercial clients in the Southwest with annual sales of more than $60 million. “They’re mostly looking at the price and our service, not our legal status. Customer service drives our business, because commercial design deals are hugely complex transactions.”

The company re-wrote its charter in January 2015, the month Arizona’s benefit corporation law took effect. Its mission statement begins with “we will change our community” and goes on for several paragraphs that are full of lofty sentiment. The statement is painted on the wall of the firm’s home office in Phoenix, and employees are encouraged to volunteer at not-for-profit organizations on company time. But you won’t find the mission statement on the company’s website.

“Becoming a benefit corporation was a way of validating that we were doing the right things for the right reasons,” says Goodman. “Our values come mostly from my family.”

Goodman’s grandparents opened their store in Phoenix in 1954. Murray Goodman, Adam’s father, ran the business before Adam took over around 2003. Adam says that his dad built the business by cultivating trust and long-term relationships with customers.

Adam cites three events that helped him chart his own course as CEO. “I was talking to a potential customer who said that he was always going to go with the cheapest price. That really riled me up,” he says. “I saw that the only way for me to compete was to attract and retain the very best people.

“Around that time, one of our competitors was exposed in the sleaziest kind of scandal you can imagine. It made me wonder how that might reflect on us. And then, at a dealer’s meeting, I got into a casual conversation with the CEO of Herman Miller. He said that the most important thing a CEO can do is provide a sense of purpose for employees, so they feel that they are part of something bigger than themselves. That struck a chord.”

Herman Miller, a global company with sales of more than $2 billion, manufactures about three-quarters of the furniture Goodmans sells. The company has received dozens of awards for being a good environmental steward and treating its employees well, but Adam says that its policies often don’t work for a company his size. He had to find his own way.

Adam announced the company’s new mission statement at the end of 2005 and told his employees that their future prosperity would come from making a deep commitment to the welfare of their communities. He made significant contributions to local not-for-profits and emphasized team-building activities, like occasional happy hours, inside the office.

Not everyone was thrilled with the change.  “A lot of people were like, ‘Can’t we just sell furniture?’ One guy said that he wished he’d worn his boots to the office because the bullshit was so deep,” he says. “I faced a lot of cynicism.” But the company’s leadership team supported the move, so he pushed ahead.

Then the Great Recession forced Goodmans to make significant layoffs. “All the people who made it through the layoffs — our best people — were also on board with the mission,” Adam says. “I think it’s because purpose-driven employees give our customers a better experience.”

Carrying the banner for community-oriented capitalism in Arizona isn’t as lonely as it used to be, he continues. His cousin, Stuart Goodman, led the lobbying effort that convinced the conservative Arizona legislature to pass a strong benefit corporation law in 2014.   “Now I talk to people all the time who are interested in going this route,” he says. “They see the business case for it.

“We regularly get calls from highly qualified job applicants who have heard about us and want to work for us. They don’t even know if we’re hiring. They just want to be part of what we’re doing. That gives us a big competitive advantage.”

 

Living Wage Movement Is Now Amazingly Normal

Image 2_Colin with FinalistsJM Family President & CEO Colin Brown (l) with finalists in the company’s first ever Pinewood Derby Car Championship, benefiting United Way.

The living wage movement went mainstream in 2015. Just ask the Floridian Of The Year.

Last year started with Wal-Mart, responding to nationwide protests, announcing that it was immediately raising its minimum wage to $9 an hour, with $10 planned for February 2016. Big deal, said the movement’s activists. They had already shifted their focus to local and state governments. They demanded that the minimum wage be raised to a “living wage” of $15 an hour—with a union.

As the year wore on, the Fight for $15 movement took off faster than even its organizers had hoped. By the end of the year, activists were busy in 270 cities. All three Democratic presidential candidates voiced their support. Fourteen city, county, and state governments approved $15 minimum wage laws, with notable victories in New York, Massachusetts, New York City, Los Angeles, Pittsburgh, Chicago, San Francisco, Rochester, Buffalo, Seattle, Milwaukee, and Santa Fe, according to a tally kept by the National Employment Law Project (NEPL).

While $15 makes an easy-to-understand political goal, the actual wage needed to lead a dignified life depends on where you live and who lives with you. FIguring all that out is the goal of the Living Wage Calculator, which is maintained by Amy K. Glasmeier at the Massachusetts Institute of Technology. Glasmeier’s team scored a big victory in late 2014, when IKEA announced it would use the MIT site to gradually adjust its starting wages up to a living wage, with an initial hike to $12 an hour. A year later, IKEA reported that the decision had been good for the company, and expanded it to include operations in the United Kingdom.

But the movement’s biggest win might have come in December, when the mainstream business magazine Florida Trend named its “Floridian of the Year.” Colin Brown, CEO of JM Family Enterprises, got the honor for quietly implementing a $16 hourly minimum wage for his company’s 4,100 employees.

The amazing thing was how normal it all seemed. Brown, a 66-year-old lawyer educated at a military academy and Duke University, runs a franchised Toyota distributorship in southeast Florida. He is on the board of directors for his local United Way, a business roundtable, and a statewide good government association. He loves the Pinewood Derby.

Brown is about as mainstream as it gets. But he “has a very definite moral compass,” says a colleague in the Florida Trend article. “He’s going to decide what’s right, not what makes the most money.”

The Fight for $15 has 16 more legislative or ballot proposals pending in another 15 jurisdictions this year, according to the NEPL. And with friends like Colin Brown, the sky’s the limit.

Is B Corp Star New Belgium For Sale? Does It Matter?

New-Belgium-Bottle-Caps-deege@fermentariumDOTcom-Flickr-630x4721New Belgium Brewing might be in play.

On Friday, a report citing unnamed sources said the craft brewer, best known for its Fat Tire Ale, was working with the advisory firm Lazard Middle Market on a possible sale.

It’s a significant moment for the Certified B Corp movement, since New Belgium is one of the largest B Corps on a rapidly growing list of more then 1,500 firms. Reuters reported that New Belgium, which is owned by its employees, is looking for a buyer who would pay more than $1 billion for the company.

The report comes during a wave of acquisitions in the craft beer industry. Several small brewers that are well known for socially responsible practices were sold in 2015—but so far, the new owners aren’t backing off from policies the original owners made.

In March, Full Sail Brewing, which also was owned by its employees, sold to a private equity firm. Many employees got five or six-figure buyout checks and also got to keep their jobs. In 2014, Triple Pundit named Full Sail one of the top ten sustainable US breweries. Nine months after the sale, Full Sail’s website still prominently features a video that describes its efforts at water conservation.

In October, Lagunitas Brewing Company announced that it had sold a 50 percent stake to Heinekin, one of the largest brewers in the world. Lagunitas has generous donation, sponsorship, and environmental programs that are integral to the brand. But its new owner, which is based in the Netherlands, also places a high value on sustainability. Heinekin is making aggressive efforts to limit water use and also supports human rights in the countries where it does business.

Neither Full Sail nor Lagunitas was a B Corp, however. And New Belgium has been an enthusiastic supporter of B Lab, the non-profit group that performs voluntary audits of environmental, personnel, and community practices to certify that subscribing businesses are “a force for good in the world.”

In response to the Reuters report, New Belgium co-founder and board chairwoman Kim Jordan said that “New Belgium Brewing’s board of directors has an obligation to have ongoing dialogue with the capital markets with the goal of making sure that we remain strong as leaders in the craft brewing industry. There is no deal pending at this time.”

The prospect of a sale raises difficult issues for Jordan and other New Belgium board members. The company’s identity is tied to employee ownership and progressive stances on climate change, the living wage movement, bicycle advocacy, and other issues. Its B Corp certification, which it gained in 2013, burnishes that reputation.

To an old-fashioned investor, B Corp certification might look like an unnecessary drag on the bottom line. An unethical buyer might make promises to get New Belgium’s employee shareholders to approve a sale, without intending to keep them.

The Full Sail and Lagunitas stories, although unfinished, fuel hope that a new kind of investor might recognize that walking the talk on sustainability is what makes the brand worth buying in the first place. We’ll keep watching.

reSET to Benefit Corporations: If You’re Serious, Come To Connecticut

kateKate Emery believes that social entrepreneurs must control their desire for profits. “The folks we work with have different values than mainstream business people do,” she says. “People often suggest that we push to give social enterprises some kind of tax advantage. But saving money on taxes is the wrong reason for doing this.”

Emery is the CEO of the Social Enterprise Trust (reSET), a Connecticut not-for-profit that works with entrepreneurs, and also the sole owner of The Walker Group, a technology consulting firm based in Farmington, Connecticut. She went to great lengths to protect her own social enterprise.

The Walker Group was growing rapidly in 2007, and Emery wanted to ensure that its profits would be divided equally between its owner, employees, and social mission. But Connecticut laws did not allow benefit corporations in 2007, so there was nothing to prevent a new owner from switching the firm to business as usual. Building a company with a social mission was her life’s work, and she wanted it to be her legacy.

Emery started The Social Enterprise Trust and gave it a “golden share” that has voting rights to prevent The Walker Group from changing its structure. Then she used one-third of Walker’s profits to grow the Trust into a statewide organization for social entrepreneurs. Lobbying the state legislature for a benefit corporation as one of its main goals.

A year ago, Connecticut became the 25th state to adopt a law allowing benefit corporations. Now 31 states have such laws, and five more are working on them. But Emery is proud to say that Connecticut’s law is the most comprehensive.

Benefit corporations write their social missions into their charters, so investors, employees, and customers know what they’re getting into. State laws differ, but they all require the company to pursue a dual mission and release annual reports on both financial and social performance.

Connecticut’s benefit corporation law is the only one with a “legacy preservation provision.” This clause allows Connecticut benefit corporations to protect their status in perpetuity after they have been chartered for two years. If a benefit corporation dissolves after adopting the legacy provision, its assets must be distributed to a not-for-profit organization or to another benefit corporation that also has a legacy clause.

Not everybody thinks the legacy provision is a good idea. “Ninety-nine out of 100 lawyers would advise against taking this step,” says Emery, “because it ties the hands of future boards.” But social entrepreneurs have what Emery calls “intentionality.” They are like donors to a land trust who voluntarily give up the development rights to their land in order to preserve its natural integrity forever.

Emery was surprised at another opponent of the legacy clause: B Labs, the national not-for-profit that runs a rigorous social auditing program and promotes the idea of benefit corporations internationally. “They wanted all the state laws to be the same,” she says. “But we wanted to be the leader.”

Emery doesn’t know many Connecticut benefit corporations will make their status permanent when the law allows it in October 2016. “It might not be too many,” she says. “But I want Connecticut to be the social enterprise state. This gives us an opportunity to tell social entrepreneurs that if this is your intention, this is what you need to do. Come to Connecticut and flip the switch.”

Certified B Corps Are Only Halfway Done

steve-piersanti-started-berrett-koehlerSteven Piersanti founded Berrett Koehler Publishers 24 years ago, shortly after he was fired. Piersanti, an executive at Jossey Bass, refused an order from the company’s new owner, billionaire investor Robert Maxwell, to lay off eight valued employees. He was fired for insubordination.

After the news got around, Piersanti was deluged with offers of support from authors, suppliers, and investors who were also dismayed by Maxwell’s emphasis on maximizing short-term profits at the expense of everything else. Piersanti started Berrett Koehler (BK) to represent the interests of all stakeholders in the publishing process. Today the company has a large catalog of books (including one of mine) on progressive business practices and work/life issues.

Four years ago, BK hired B Labs to audit over 280 of its social, environmental, and employment practices. BK wanted to demonstrate that it met a high standard for corporate citizenship and was creating social benefits as well as profits. When it passed the audit, BK became one of over 1,450 “certified B Corps” which are audited every two years. But that wasn’t enough for Piersanti.

On October 21, BK also changed its California corporate charter to become a benefit corporation. BK’s articles of incorporation now require directors to balance the interests of employees, customers, and other stakeholders with those of shareholders in all company decisions. BK and other benefit corporations must produce a public benefit as well as profits, and they must also report to the public on exactly how those benefits are being produced.

“The audit and the chartering need to work hand in hand,” says Piersanti. “Neither one is sufficient if you’re really committed to running a business that also pursues social goals.

“The B Labs audit is rigorous, but it is also voluntary. You could pass the audit in October, elect new leadership in November, and abandon all the policies that made you a certified B Corp in December. On the other hand, becoming a chartered benefit corporation creates legal obligations that are far more likely to survive hard times or changes in leadership. But those obligations are vague, and there’s no penalty if you don’t meet them.

“If you’re a chartered benefit corporation but you don’t undergo the audit, you could say in your papers that handing out free guns to everyone is your public benefit. If you take the audit, you can’t get away with that. The audit is the state of the art, and the charter means you’re not going back, but you have to do them both or it won’t really work.”

Piersanti, who is 62, says he had an eye on his own legacy when he took BK through the two-part process. “Succession planning is important to any business,” he says. “But if your business has a mission, you need to be concerned with more than finding the right people for the right positions. You also need to pay attention to the institution and how it’s structured, or else the mission won’t survive you.”