Marjory Kelly, the panel host, is author of Owning Our Future, a fellow at the Tellus Institute in Boston, co-founder of Corporation 20/20 and founder of Business Ethics Magazine that she ran for 20 years. She believes that a large ownership shift is necessary if we are going to developing an economy that can solve the world’s pressing problems. Kelly pointed out that ownership structures embody a particular world view. Up to this point there has been a sort of a monoculture mentality that has dominated our economy that is extractive in nature. The new ownership emerging is based in generativity, i.e. it is ‘life serving.’
Marjory described five important elements of the ownership of business: what determines membership in the ownership structure, how governance is determined, finance, and the fundamental networks that the company supports itself with. No company is a stand-alone entity. The old paradigm is made up of networks of mutual interest, whereas the new paradigm is a network with a set of ethical and moral standards, and often a very different vision. She described micro-finance loan programs where ethics were not built into the structure, and ruthless elements were able to step in and instigate cutthroat tactics.
Kenneth Merritt is a lawyer from Burlington who has worked to pass legislation in Vermont allowing for more benign corporate structures. He talked about corporate models that are mission led and how to develop them when starting a company. When Merritt works with a company he starts by asking them ‘Where do you want to end up? What do you want to become, or achieve?’
L3C stands for ‘low-profit limited liability’ corporation. L3C’s are available in all 50 states and have the objective of making it easier for companies to make mission, program related or aligned investments. In Vermont, the VT Sustainable Jobs Fund’s Flexible Capital Fund is an L3C as well as a number of other slow money enterprises.
B corps can now be chartered in seven or eight states. This is primarily a certification process developed by B Lab, http://www.bcorporation.net/, a 501(c)(3) non-profit based in Philadelphia that has developed a rating system for companies that have as their mission to solve society’s problems. B corps meet social and environmental standards as well as consider stakeholders in the company’s structure. Patagonia is a B corporation, as well as Seventh Generation, King Arthur and Pura Vida. It is a rating system, not a corporate structure.
Benefit Corporations are a new class of corporation that: 1) creates a positive impact on society and the environment; 2) require consideration of non-financial interests when making decisions; and 3) reports on its overall social and environmental performance using recognized third party standards. This new structure is meant to counter the corporate mantra of having the sole purpose of maximizing profit for shareholders. In Vermont Benefit, corporations have in their structure the position of ‘Benefit Director,’ a person who does an annual evaluation of the company that tracks the social and environmental benefits.
Paul Millman is CEO of Chroma Technology, an employee-owned company in Bellows Falls, VT, and President of the VT Employment Ownership Center. He talked about the ‘Third Wave’ of employee owned businesses, i.e. ones that function like a cooperative but are owned like a conventional business.
“Being part of an employee-owned company is better than anything else. It can also be one of the most painful experiences,” said Millman He thinks that employee ownership at this time in history may be the savior of capitalism.
Daniel Fireside is capital coordinator for Equal Exchange, a worker coop. They were the first Fair Trade company in the United States when they started in 1986. The primary goal of Fair Trade is to pay farmers above market value for their, initially for coffee but now including tea, cocoa, almonds and even olive oil. The company was initially financed by people and institutions who shared their values. This turned out to be very important as the company grew because banks have tried to get them to increase profits before loans would be given. When they have needed more capital they make sure to get it from like-minded entities. Their employees nominate and vote for board members, and they are on track to do $50 million in sales in 2012. They have issued roughly $11 million in class B stock, require that purchasers hold it for 5 years, and give 5% interest. They also have roughly $1 million in loans from Calvert Fund that gives them a social audit periodically. Daniel spoke glowingly of having to go through this audit process. Equal Exchange has recently developed a CD program for people to invest in them, and have borrowed over $1 million so far this way.
The founders of Equal Exchange thought long and hard about how to prevent the company from ever being sold out to a larger entity. They did this by adding a clause in their bylaws that states that in this eventuality of a sale of the company all loans would have to be paid back with no additional revenue going to the lender, and all assets would be donated to other Fair Trade companies or organizations. The founders believed that the value of the company belonged to all stakeholders – past, present and future, and should never be sold to make some small group of people rich, i.e. those who happen to hold ownership at one particular point in time. Recently EE has been working with cooperative banana producers, going up against monster companies like Del Monte, Chiquita and Dole. This project is not in any way profitable, but they are deeply inspired by the transformations that they have seen among small banana producers in places like Peru and Ecuador.
Alison Pyott, of Veris Wealth Partners, heads the firm’s sustainability commission. Veris is a B corp and feel that their role is to change the game regarding our impact on the world. They work to help high net worth individuals to invest in a way that is in alignment with the investor’s values.
Another benefit of being a B corp is a very high level of transparency. She spent 12 hours filling out their B Corp application and said that it led them to having to make a number of decisions and evaluate what they could be doing better or differently. She highly recommended the book Locavesting: The Revolution in Local Investing and How to Profit From It by Amy Cortese for describing the different types of benign corporate structures.