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.”

 

Bipartisan Support for Benefit Corp Law in Arizona

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The Arizona legislature is currently considering a bill that would block any Presidential executive order it deems unconstitutional. A few years ago, they passed a law allowing police to question anyone suspected of being an illegal immigrant. The Republican Party has controlled the governor’s office and both legislative chambers since 2009, and conspiracy theories are popular discussion topics in the State Capitol.

Yet in 2015, the Arizona Legislature also enacted a law allowing companies to organize as benefit corporations, which are required to pursue a social benefit and be good environmental stewards while they also make a profit. The laws passed with bipartisan support, according to Stuart Goodman, the lobbyist who led the campaign.

GoodmanR_0Seed Spot, a business incubator in Phoenix, hired Goodman to push a bill that was sponsored by a moderate Republican. “We had two messages,” he says. “One was that this law allows the private sector to provide services ordinarily provided by the public sector. Let’s say that a company wanted to provide meals to the elderly as its social benefit. That will reduce the burden on government.

“Our second argument was freedom of choice. This law protects entrepreneurs who want to pursue social and environmental benefits from shareholders who might sue them for not maximizing short-term profits.”

Support for the law was “a mixed bag,” says Goodman. “The most conservative and the most liberal legislators both opposed it.” Republican Carl Seel was against the bill because he thought it would attract liberals to Arizona, says Goodman. Democrat Debbie McCune Davis voted no because she thought it would be an excuse to further cut social services, and also because she thought corporations didn’t deserve any more legal protections than they already had.

Despite these objections, says Goodman, “A majority came together that was pragmatic and pro-business, and the governor agreed.”

The law has been in effect since January 2015. Five benefit corporations are currently active in Arizona, along with ten Certified B Corps, and more are on the way. “I just talked to a former customer who is considering changing his status,” says Adam Goodman, CEO of Goodmans Interior Structures (and Stuart’s cousin), a benefit corporation based in Phoenix. “People talk to me about it all the time.”