Back when Bob and I started CitySquares, we did so based on some very important founding principals. We felt very strongly about serving the needs of local communities, local businesses, local artists, among others. Oftentimes we even contemplated the idea of establishing the business as a not-for-profit. We felt very strongly about serving the community, first and foremost. To the customers, to us, to the users, and to the organizations we partnered with, that’s what the brand was about, it was our brand promise. As we raised money from investors, as we felt the pressures of our preferred stockholders, and most notably when Lehman went under and the global economic crisis started, those values were tested, time and again. Our focus changed, our priorities changed, and like so many of the stories told in Bo Burlingham’s Small Giants (see my Sure Shot blog post on Small Giants), we learned some tough lessons. Even now, more than three years later, I clearly remember heated board meetings and arguments about what we “needed to do” and for whom we needed to do it.
Here I am now, starting Influential, a new business with an emphasis on the public good, with a focus on community, on people, on civics. While I have the benefit of history and its lessons, isn’t this the definition of insane? Alas! There’s a shift happening in society. Whether it’s because of Lehman, and the other institutions deemed Too Big to Fail, or because of the Occupy Wall Street movement, there’s a backlash against corporations that don’t serve the interests of the people, of community, and of the public in general. There’s a backlash against prioritizing shareholder value over the public good. And now there’s a model for corporations who want to legally commit to putting the public good ahead of shareholder value. Thanks to the good people at the 501(c)3 B Lab, there’s the Benefit Corporation.
So what is a Benefit Corporation? While I highly encourage you to learn more on your own, I’ll quote the Benefit Corporation website,
Benefit Corporations are a new breed of corporation that are required to create a positive material impact on society and the environment and to meet higher standards of accountability and transparency.
At the time of this blog post, 19 states have passed benefit corporation legislation, allowing for the creation of benefit corporations, with several more pending.
And with that, I’m happy to say that Influential has incorporated itself as a benefit corporation. We are officially Influential, PBC. This, in and of itself, is not a terribly big deal, but what is exciting is that my co-founders and I agreed that we want to commit to these ideals, to the principles we feel so strongly about, and to lock-it-in, if you will, and literally make it part of our corporate charter and bylaws, to hold ourselves accountable and to enforce transparency. We’ve fully embrace the implications therein. We’re not done though. It’s not as simple as just deciding and incorporating as a benefit corporation, there are requirements, there are policies and practices that need to be implemented. And surely we’ll screw up. Old behaviors don’t change easily, but we will learn and we’ll get it right over time.
Last night, on the heals of reviewing the incorporation filings, I sat down to catch up on some reading, specifically this article from The Washington Post, titled “Maximizing shareholder value: The goal that changed corporate America.” The timing was perfect, it only validated our thinking, our decision, and our commitment to restore, in some small way, the ideals of the corporation. The following quotes really leapt off the page,
Across the United States, as companies continue posting record profits, workers face high unemployment and stagnant wages.
… a deep-seated belief that took hold in corporate America a few decades ago and has come to define today’s economy — that a company’s primary purpose is to maximize shareholder value. The belief that shareholders come first is not codified by statute. Rather, it was introduced by a handful of free-market academics in the 1970s and then picked up by business leaders and the media until it became an oft-repeated mantra in the corporate world.
“We don’t build companies to serve Wall Street,” said Margaret Blair, a professor at Vanderbilt Law School. “We build corporations to provide goods and services to a society and jobs for people.”
and cited from an article by Daedalus – American Academy of Arts and Sciences,
“Corporations have a responsibility, first of all, to make available to the public quality goods and services at fair prices, thereby earning a profit that attracts investment to continue and enhance the enterprise, provide jobs, and build the economy,”
“The long-term viability of the corporation depends upon its responsibility to the society of which it is a part. And the well-being of society depends upon profitable and responsible business enterprises.”
The mantra that executives and corporate board members have a duty to maximize shareholder value has become so ingrained that many people assume it must be codified somewhere. But legal experts say there is no statute in state or federal law requiring corporations and executives to maximize shareholder value.
“Let me be clear that this pressure comes from the media, from shareholder advocates and financial institutions in whose direct interest it is for the company to get its share price to go up,” Blair said in testimony before a House hearing in 2008, “and from the self-imposed pressure created by compensation packages that provide enormous potential rewards for directors and managers if stock prices go up.”
I could go on. And on. It’s a long article but very much worth the read for anyone interested in such topics. But there you have it, them’s the facts.
Anytime I’ve made a career decision because of money, I’ve regretted it. I’m not on this earth to make money. I’m not sure what I’m on this earth for, frankly, but it’s certainly not to make money. The time I have here is finite, and if I can work with purpose (let alone live with purpose), I will. And I’m thrilled about doing so through Influential, PBC. I’m especially thrilled about the moral commitment that I, and my co-founders, have made to stay true to ourselves, to our founding values, and I’m excited about tackling some huge problems, building a responsible company, building a company culture based on these values, and ultimately taking our time to do it right.
With this ideological commitment and framework underway, there’s another one I’m excited about – a management methodology called holacracy. But I’ll save that for a future blog post.