Davis: There are still companies today who will tell you “I don’t have a role in dealing with the broad context in which I operate. There’s a set of rules that are enshrined in legislation in the country in which I operate. And it’s only my job to play within those rules. And it’s my job to meet consumers’ needs within those rules.”

It’s bullshit. 

Not only do you have responsibility to influence the laws in the environment in which you operate for the public good. You also have a responsibility to change the way that your consumers think about things because you have an enormous amount of power. And I think that companies need to use that power increasingly to do that. 

Gulley: It’s your host Dana Gulley, and I gotta say: we are on the precipice. As we just heard from Lorna Davis, former CEO of the $6 billion company Danone North America, companies have an obligation to serve society. Thanks to the work of Lorna and others, there’s beginning to be widespread understanding that American-style corporations must transform to become a force for good – leading efforts to tackle climate change and inequity, rather than serving as the primary driver of those and other problems across society. 

In response, companies are increasingly “embedding purpose” into their operations and strategies, by working to create long-term value for all of their stakeholders (employees, suppliers, communities and the environment) rather than adhering to shareholder primacy, the belief that a company’s only responsibility is to its shareholders. 

But for this momentum to make a difference, for the private sector to become a true partner in tackling society’s biggest challenges, two critical things must happen:

First, we must change the rules that govern Wall Street, namely that quarterly financial reporting drives share price and that share price is in turn the best measure of a company’s contribution to society.

These socially constructed obsessions have pushed companies in the S&P 500 over the past decade to spend over $4 trillion dollars (averaging 52% of their total net income) buying back their own shares in open market repurchases.

When companies do this, they prioritize an inflated share price–and increased compensation for shareholders and executives in the short-term–over the good they could otherwise do, like investing in innovation or renewable energy, or increasing pay for employees (who suffer directly as a result of stock buybacks as income and wealth inequality grow ever-wider).  

Next, companies must direct their resources to advocate for policies that drive the business environment of tomorrow, rather than working only to maintain the status quo. This means supporting legislation to increase the minimum wage and combat climate change. But it also means supporting policies that transform our financial infrastructure to move us towards long-term value creation for all stakeholders. 

Not only do companies have the power and the tools to drive progress in the policy arena, but the idea that private companies have a responsibility to serve the public good is not some new, radical idea–it’s how it used to be.

3:14

Gulley: Welcome back to Decade of Courage, a podcast to unite business leaders, thought leaders and activists to co-create a new vision for our economy and the way we do business. A quick note to stick around for the credits of this episode because we’ve got some important news to share. Again, I’m your host Dana Gulley, and today, we’re getting strategic. 

Between the pandemic and Black Lives Matter uprisings, the climate crisis and the crisis of our democracy, we have a window like no other to turn the page and write a new chapter on the role of business in society.  

Here in the sustainable business world, many of us (myself included), are quick to cite milestones, like the vote that took place in August 2019 by the Business Roundtable to formally change the purpose of business to creating long-term value for all of a company’s stakeholders.

Or Larry Fink, CEO of BlackRock, the largest investment management firm in the world, with over $7 trillion of assets under management, who’s been using his annual letters to shareholders and portfolio companies, as an opportunity to demand action on climate change, or else.

These wins — and others — feel good. They give us hope. And yet the central question still remains:

How do all these words translate into a transformed private sector? 

If the purpose of business is to make decisions in the best interest of the environment, of employees, of communities — and to look beyond short-term share price — then we need to reconstruct the way Wall Street functions.  

We talk to Stu Hart, co-founder of the University of Vermont’s “Sustainable Innovation MBA,” who blows the rationale for modern finance capitalism wide open, creating space for new financial norms that incentivize companies to become good corporate citizens. 

Then, Lorna Davis, who you heard from at the top, shows us what’s possible when a company works to embed purpose, as Danone North America did when it became the largest B Corp in the world in 2017 under her leadership.

Finally, MaryAnne Howland, Founder & CEO of the Global Diversity Leadership Exchange & Ibis Communications, helps us understand how companies must serve society by advocating for public policies, apart from only focusing on those that facilitate their own success.    

MaryAnne gets us started by grounding us in her vision for the world.   

5:29

Howland: My vision is a compassionate economy, a system that works for all.

This nation was birthed with a sociopathy for dehumanization, and that’s where we have to reverse.

And that’s going to take compassion. That’s going to take a personal values assessment. That’s going to take, you know, learning history, relearning history and that is your way to healing. 

Gulley: We’ll hear a lot more from MaryAnne later in the episode. For now, I’m hearing her, that strategic plans & thought leadership alone won’t get us to a compassionate economy. It’s going to take personal work and a process of rehumanization by reckoning with our racist past. If you listened to our second episode, this might sound similar to what Dr. Andre Perry of the Brookings Institution was explaining when he said we need to understand human value in a whole new way.   

With the north star of a compassionate economy in mind, and equipped with the awareness that the toxic business practice of managing for short-term results and share price has led our private sector to sacrifice the many for the few, I want to understand where this practice came from, so we might be able to identify a way to change it.

To do so, we first have to understand that eras of capitalism come in waves, often as a reaction to the era before them. For corporations, which are owned by shareholders (in some cases millions of them) but managed by an executive leadership team, like a Chief Executive Officer and a Chief Financial Officer, the tension between ownership and control has been at the very heart of what has led to the tightening and loosening of regulations on businesses over time. Short-termism and the practice of stock buybacks at the expense of investments in employees and the public good, it turns out, is a manifestation of this tension of ownership and control in the most recent era of capitalism. But before any of that can make sense, we need some history.

Stu Hart has spent the past 35 years finding the leverage points that orient the private sector towards a sustainable and inclusive economy as an MBA director, professor and founder of a non-profit, Enterprise for a Sustainable World. He has taught thousands of students in hundreds of classrooms throughout his career. And I have been fortunate enough to be one of them. 

Hart: The state of the world at this point sort of dictates that we don’t really have a long on-ramp left. And the only way that we’re going to make really substantial headway is really to alter the system constraints and the infrastructure that shape what the capitalist pursuit looks like.

Gulley: While this ever-shortening on-ramp has me anxious to move forward, solutions in hand, and quick, I’m keeping Dr. Perry and MaryAnne Howland’s voices in my mind and trusting that we must first go back, we must re-learn our histories in order to move forward. To understand how we got to today’s short-term-driven capitalism that distracts many companies from their obligations to serve the public good, we must go back to pre-Revolutionary War times.

Hart: Capitalism has shifted many times over the last, several centuries in its form and function. The problem is we have the separation of ownership and control. The issue of ownership and control was an issue for the trading companies.

You know, the Dutch and English trading companies in the 1500s and 1600s.

Adam Smith was the first anti-corporate activist, his theory of the market-based economy was in direct opposition to these large crown corporations 

I mean, that’s what the American Revolution was fought over. 

Gulley: You’ve maybe heard of Adam Smith, the 18th century economist, who we often credit or discredit,  as the inventor of free market capitalism. You wouldn’t be wrong to be skeptical about the magical self-regulating power of the economy that Smith envisioned. But, what we must also understand is that his theories were actually in opposition to the huge corporations of the time that yielded unchecked power, much like today. The British East India Company, the world’s first commercial corporation, not only had a total monopoly on trade, but it became a colonizing force, ruling at one point a fifth of the world’s population, with a private army of a quarter of a million people. Smith believed — and convinced others — that this kind of power needed to be checked. And so is a pattern, we swung the other way, and regulated companies.

10:05

Hart: The American revolution produced a set of limits on corporations that you had to be chartered for a social purpose.

Gulley: The corporate charter was a company’s license to operate and it made companies accountable to the public. The legislative branch could revoke a charter if a company caused public harm or operated beyond the scope of its purpose. And perhaps most importantly, corporations were not allowed to spend any money influencing law-making. This is in stark contrast to the billions of dollars that companies today spend each year lobbying and making campaign contributions.

Stu explains that by the 1800s, many of the limits that had been placed on corporations after the American Revolution were removed through court decisions, and a new form of corporation was developed with the rise of railroads and oil and steel companies in the 19th century, swinging things back to closer to the unchecked power of those early trading companies.

In our first episode, we talked about the era of neoliberalism that emerged in the 1970s. For those who haven’t listened or need a refresher, neoliberalism is the economic theory that rules our economy today and is premised on individuals as selfish and competitive and promotes the deregulation of capital markets. We learned that in the 1970s business was feeling “beat up,” in part, due to the counter-culture of the 1960s.

I’ll admit that it was hard for me to picture the private sector feeling beat up. But it occurs to me now that as a millenial, I’ve only known this most recent chapter of big business with its nearly unchecked power, and it hardly garners much sympathy. 

But if we’re going to understand more about how neoliberalism found its opening, and thus how we became focused on short-termism — the key social construct that we must replace in order to unlock the power of business as a partner in solving climate change and driving equity —  we must understand the era of capitalism immediately pre-dating it: welfare capitalism.

Hart: The U.S. had come out of World War II and the form of capitalism that existed was really sort of relationship-based, welfare capitalism, whereby there was sort of a social contract that large corporations, because they were dominant in the world after the Second World War, you know, the auto industry and so forth, they had no competitors because Europe and Japan had been destroyed, were able to cut a real great deal, right, for stakeholders, for employees, for communities, because they had lots and lots of profits. And so you had during, you know, the 50s and 60s, the halcyon days of welfare capitalism, whereby corporations really were corporate citizens, you know, really were institutions.

12:52

Gulley: Stu notes, and I second this, that these companies were in no way perfect institutions. They had serious and systemic blindspots when it came to civil rights, women’s rights, and the environment. And yet, we have to understand that there is a contrast between how we might characterize business today and what that era of welfare capitalism looked like after World War II. Companies at the time were doing a number of really positive things to promote the welfare of their workers, such as collective bargaining agreements and pensions. In fact, the legacy of employment-based healthcare – a system that has become a huge MESS today – actually came out of this era, and at the time, it was seen as a good thing. 

Hart: Harry Truman was pushing the idea of a single payer healthcare system in the late 1940s. But the unions actually rose up, at that point in time, because they had a lot of power at that stage of the game. And especially the automobile industry, but other industries too, were flush.

The UAW held out for healthcare and pensions, the car companies should agree to provide healthcare and pensions. And it was known as the Treaty of Detroit. 

Because once that happened, then most other industries that were unionized went that route and then it became the national norm.

Gulley: In 1950, the United Auto Workers union (or UAW)  successfully negotiated a five year contract with GM, which included health, unemployment and pension benefits. Shortly thereafter, Ford and Chrysler followed suit. And as Stu said, it then became the national norm for healthcare and pensions to be built into labor contracts. 

Today, of course, the issue of health insurance has become deeply politicized and downright dysfunctional. So it’s ironic that it was unions who originally pushed for an employment-based system. But it makes sense why they did. Companies at the time were functioning more like institutions and there was therefore an expectation for them to take care of their employees. This well intentioned strategy for healthcare has far outlived the era of capitalism from which it came. 

15:02

Hart: So it’s not as though they were perfect, but at least there was a social contract where they voluntarily saw that it was in everyone’s interest that the workings of those companies should benefit all the stakeholders and it should lift employees.

And that was when the country built the middle class. When inequality diminished to its perhaps lowest point around 1970, when the U.S. was the most equal that it’s ever been. And then starting in the seventies that began to change.

Gulley: It’s hard to reconcile that, in some ways, our society is less equal today than it was in 1970. But of course 1970 is before neoliberalism ushered in decades of greed, not to mention a side by side “War on Drugs,” which was cover for a systematic campaign to incarcerate Black men, filling the pockets of a burgeoning private prison system. 

So, while it is an odd phenomena to look backwards for answers, when we know progress must march onward, there’s something empowering about the fact that there was once an expectation that the private sector would be a partner in building a flourishing middle class and solutions to challenges like retirement & healthcare. 

But not all saw welfare capitalism in a positive light. Where it was successfully serving up pensions and healthcare, it was falling short on profits and returns. 

Hart: So stock price began to lag, you know, the seventies was known as the lost decade from a stock market point of view. 

Gulley: So it was amid a period of stagflation, a term to describe an economy that is experiencing inflation alongside stalled economic output, and massive increases in oil prices due to the Arab oil embargo that neoliberalism — and its many promises to the dominant, ruling class — easily found the foothold that would ultimately lead Wall Street to function in service of quarterly earnings.

16:58

Gulley: But shareholders and economists couldn’t just snap their fingers and increase returns. For shareholder primacy to take hold, it needed a remedy for that pesky challenge of balancing ownership and control because, if indeed everyone is always acting in their own self interests, then how could you incentivize a CEO to prioritize decisions that maximized returns for shareholders above all else? 

Enter the Efficient Market Hypothesis, which stated that share price contains all information, and captures the true value of a firm — including the value of its contributions to society, and that quarterly earnings were the best metric for this. 

And then enter Agency Theory, established in 1973, which tied executive compensation to share price by compensating CEOs and other executives with stock options, to incentivize this quarterly drive for ever higher share prices.

Hart: And there was a certain attraction to the agency-theory-based-solution because it was clean. There was a rationality to it, and you could show it with math.

There was a patina of scientific rigor in all of this. And there was a certain compelling logic to it. The efficient market hypothesis. That stock price contains all information. Therefore, you know stock price captures societal value. You know it’s complete information, which we now know is completely false, right? 

18:29 

Gulley: Stu goes on to explain, and you may remember this if you listened to our first episode, that perfect competition doesn’t exist, perfect information doesn’t exist, people are not all rational actors. So, the very underpinnings of these theories just don’t hold up. 

But with this new logic in hand, the Treaty of Detroit, the agreement that corporations should be institutions, the social contract, all of these things withered away. Pensions were eliminated, and the 401K was born, a retirement system that may or may not include a match from your employer, and mostly depended on you. 

But what was the mechanism by which neoliberalism spread itself to Wall Street, and so quickly? 

Hart: Then those trained that way, we’re able to just literally take business schools over, you know, cause the logic of shareholder primacy, because it was so clean to study, cause you only have one dependent variable; stock price. 

And as a result, it infected the MBA programs themselves.

Gulley: The same way business education was the vector of this most recent era of business, so too can it be the natal grounds of a new generation of business leaders who want to transform business yet again – this time as a force for good.

I know this is possible because I am, in part, the product of one such MBA program aiming to do precisely that.

After spending my twenties working for an environmental nonprofit that sued companies for polluting when there was not the political will or resources to otherwise do so, the work of some divine intervention took the shape of a very fortuitous miscommunication with my mother.

I explained to her that I was looking into applying to MPA – you know, Public Administration – programs and she thought I said I was looking at MBA programs, and I thought to myself: God no. But then in the weird way that things sometimes work, I actually googled MBA programs that night and learned that there were a few that were speaking my language. Instead of teaching shareholder primacy and other manifestations of neoliberalism (terms I didn’t yet know), there were programs calling out business for being a driver of climate change and inequity and asking instead: how can business be a partner?

Stu Hart’s program, the Sustainable Innovation MBA (or SIMBA) at my alma mater, the University of Vermont, was a standout, and my time in the program set my entire life off in a new direction. I met my now spouse, Anya, while I was a SIMBA student and I launched my own consulting practice, which allowed me to do meaningful work and relocate out west.

And it turns out SIMBA, the third year running number one Green MBA according to the Princeton Review, really takes its mission to heart, meaning it isn’t afraid to give away the keys to its success to encourage other business schools to transform their programs like it did. As a way to push for this change, it’s a key member of the Globally Responsible Leadership Initiative (GRLI), a consortium of business schools and educational institutions around the world calling for systemic change. 

The growing momentum towards transforming business schools, and the hundreds, if not thousands, of students who are graduating from business programs each year with a new mindset and toolkit to apply to the private sector — these are reasons to be hopeful.

21:55

Gulley: So, thanks to Stu, we now understand that capitalism comes in eras, and we understand the way the most recent era of capitalism was able to take hold by tying share price to quarterly earnings, and tying CEO compensation to share price.

But what we have yet to understand is what becomes possible if these social constructions weren’t in our way.

First, we have to understand that beginning in the 1920s, when the public equities market became more widespread, with greater and greater numbers of shareholders participating, it truly became a secondary market. 

This means, the stock market is largely a place where people with wealth go to extract value from companies, not add value to them. 

You see, it’s only when a company first goes public, through an Initial Public Offering or IPO, that new, direct investments are injected into companies. And IPOs in the United States averaged only about $6 billion over the past two years, in a market valued at about $40 trillion – meaning, direct investments are just a drop in the bucket. The vast majority of the time, shareholders are not responsible for injecting cash resources into companies. That’s the first point.  

Secondly, as I mentioned at the beginning, companies are increasingly spending massive amounts of money, an average of 68% of their net income in 2018 alone, buying back their own shares, to drive up their own share price, calling into question how much value a company is actually getting from shareholders, rather than giving to shareholders.

Hart: Share price in the secondary market, since it’s a purely secondary market, there’s no new capital being invested, can be driven by anything that we say it should be driven by. There’s absolutely nothing written in stone that says quarterly earnings should drive share-price.

Gulley: I remember sitting in my grad school finance classes and really learning about the stock market for the first time. I found it so wrong that this whole tool of wealth creation, more than anything else, is a way to keep wealthy people rich. I found this especially wrong because of what is sacrificed to do so – benefits and livable wages for employees, investment in communities, investment in protecting our planet, partnership in combating climate change and the list goes on. 

That’s what makes Stu’s history lesson so empowering. Newly equipped with what I now understand to be social constructions, there is room to explore new financial norms that will create more space for companies to voluntarily and necessarily care about their long-term impact to all stakeholders.

Hart: So why couldn’t share-price be driven by reinvestment rate by the company, right? Rather than share buy back, the rate at which they reinvest in growing and creating new products and developing new strategies.

You know, so why couldn’t share-price be driven by the extent to which they pay their employees a living wage? Why couldn’t it be driven by the shrinkage of their carbon footprint or ecological footprint? Why couldn’t it be driven by their payment of income taxes?

The answer is it could be. 

24:52

Gulley: Dare to imagine with me for a moment, that it’s the annual shareholder’s meeting for XYZ giant, multinational corporation. There’s more of us participating as shareholders than ever, because a lot of work has been done to democratize investments even beyond what we have today (a topic for another episode), and we are all anxiously awaiting the CEO’s report. Financial performance on the quarter is down a bit, because of the decision to put solar panels on each of the company’s 1,000 factory roofs. And no one bats an eye. Then, the part we’ve all been waiting for: the big reveal… what is the percentage of XYZ’s wage workers who are being paid a livable wage, as part of a new long-term company initiative to increase employee retention and demonstrate leadership within their industry. Is XYZ truly serving as a corporate citizen, because if so, the patriotism, the staying power. Indeed! XYZ has exceeded its own goal — the stock price soars!

Hart: So if we say, rather than the existing logic of, well you know, before you can change the world, you have to satisfy the shareholders, which means deliver short term returns. If you flipped it, right? And, the logic was well, you have to change the world in order to satisfy the investors and deliver higher returns, then that would be an accelerant like we couldn’t imagine.  The time has come now. And I think there’s sufficient momentum in the business world and maybe even in some of the financial infrastructure, to cause that to happen. 

26:25

Gulley: Stu’s currently working on a new book, The Next Capitalist Reformation. And in it he explores three big leverage points that will usher in a new era of business: the first, we’ve talked about: transforming business education to not only develop the new norms and social constructions for our financial infrastructure, but to teach this and other elements of our economic history. The next leverage point Stu argues for is more big companies embedding purpose.

Enter Lorna Davis, the former CEO, speaker and coach. Lorna serves on many boards, including that of Seventh Generation (which is a leading member of the American Sustainable Business Council) and B Lab, the non-profit behind the B Corp movement. These two spaces alone – ASBC and B Lab – are two of the big reasons there is so much momentum towards purpose in the business world. 

She was explaining in our opening that businesses must do more than just operate inside the boundaries of the letter of the law – that they have an obligation to serve the social good.

Davis: So if you take, for example, Seventh Generation, they took out a full page ad in major newspapers the day before the presidential debate saying, why is climate not on the agenda for the presidential debates?

And that’s a company that’s owned by Unilever. So the question is where are you going to use your power?

Gulley:  It’s not a coincidence that Seventh Generation (a B Corp), owned by Unilever (a multinational that has been partnering with B Lab to work towards B Corp certification itself), is using its power to try to influence the policy agenda on climate change. That’s the kind of activity you can justify when you’ve done the work to embed purpose into your company. 

In the sustainable business space, if you ask about the two biggest companies that are furthest ahead on their purpose journeys, the small handful of answers almost always include Unilever (which in addition to Seventh Generation also owns another popular Vermont company, Ben & Jerry’s) and Danone, or Dannon, as it’s known in the United States. 

Davis: I came back to the U.S. to become the CEO of the North American Danone business which was about a $6 billion business. And in that job, we created that business as a public benefit corporation and became a B Corp. And it’s now the biggest B Corp in the world.

Gulley: This refers to an incredibly rigorous certification process, administered by the non-profit B Lab. You have probably seen products with the little B logo on them, which is a visual cue that the company that produces that product is a certified B Corp. Seventh Generation, Ben and Jerry’s, Patagonia, these are all well known examples. But they’re not alone. There are currently over 3,500 certified B Corps in over 70 countries around the world.  

Davis: B Corp is an organization that has reached the highest standards of environmental and social performance as measured by a not-for-profit called B Lab. They have a thorough list of questions and you have to get more than 80 points out of 200 points to pass the certification hurdle.

You also have to write a disclosure statement, which is basically a net that describes everything that didn’t get asked in the questions, because we’re looking for as much transparency as possible. You also have to change the legal framework of your organization so that it clearly explicitly states the broader set of stakeholders that you serve, rather than just your financial shareholders.

Gulley: This means that, where possible, a company needs to incorporate as a benefit corporation, as opposed to a different legal structure like an LLC or a C corp. The benefit corporation structure first became available in Maryland in 2010, and it’s currently an option in 37 states across the U.S..

Davis: It’s also a movement in the sense that once you join that organization or once you become a B Corp, you’re kind of part of a new tribe.

30:34

Gulley: And this part is not to be taken lightly. Lorna explains that part of the power of B Corp is that it helps a company create a community where they can shift their frame of reference away from the one where all their competitors are created equal — to a different frame: one where they are surrounded by the companies they admire, the ones they are aspiring to become more like. Even the ‘frienemies’ in their industry with whom they can collaborate to increase their positive impact. 

I assumed that because Danone has an incredibly visionary leader, Emmanuel Faber, that the process of certification was made easier. But Lorna set me straight. 

Davis: I think one of the big myths is that as long as you’ve got a visionary CEO, all’s good. That’s not true for a bunch of reasons. 

Gulley: Lorna explains that it’s an old fashioned, military model to think that business can and should be so top down. That instead, in the real world, many things have to go bottom up, because there’s resistance below the CEO. 

Davis: They’re often incredibly frustrated with the CEO, because they say stuff like “Oh, it’s fine for him or her to be so visionary. But if it wasn’t for me delivering the numbers, you know he or she wouldn’t be able to, you know, prance around in the United Nations.” So this level is never gonna deliver a plan downwards, but there’s another really good reason for that. The solutions to these problems are not known. They have to be worked out, and they have to be worked out from the bottom up.

So reorganizing your entire supply chain to make it organic or to make it carbon neutral or to save water, you have to rethink everything. You don’t just deploy a bloody plan, which is kind of the old way of kind of delivering things.

Gulley: I’m grateful for Lorna’s real life, CEO experience, helping us to understand how change gets made in business. And I’m seeing an opening. Yes, you will ultimately need CEO support, but if you work for a company (of any size, it does not need to be a big company like the ones we’re discussing today), at any level, your support will ultimately be needed to help your company transform into a B Corp. So why not step in and step up to lead that charge, even if it’s not currently up for discussion? Just some food for thought.  

Anyway, it’s no small feat that Danone North America, under Lorna’s leadership, became a B Corp. As I mentioned, B Lab prides itself on a rigorous process that touches each and every element of a company’s practices, making the goal of certification daunting for any company. For big companies specifically? Trying for it is downright bold. But if you’re a big company and you dare to be this bold, chances are there is a lot of improvement and good you can make in the world by working to get certified.

Davis: When we first started the certification, one of the questions is, “what percentage of your workers are paid at or above the living wage?”. I’d never heard of the living wage before. I didn’t know what it was.

And we certainly weren’t measuring it because we didn’t know what it was. And I think this comes back to the whole question of like, what are you measuring, right? Do you measure, I mean, most companies don’t even know how many people work for them. I mean it’s very difficult to measure who’s a worker because you’ve got people rolling on, rolling off, you’ve got temporary workers as well.

It took us months to get the data, months. But then we discovered that there were like 186 people who were below the living wage. So not only did we know how many people, but of course we knew who they were. So we could address that. So I think, you know, that’s a tangible example of asking a different set of questions and then also turning your people from numbers into actual humans, like with real histories. Cause in fact, a lot of the numbers collection in businesses allows you to dehumanize. Because like, they’re just like a, I think it’s called FTE these days, you know, a full-time equivalent. I mean, good God. Did you know that you were full-time equivalent Dana? That’s a terrible title.

You know, so I think there’s a lot of humanization that comes into this set of metrics that’s important. 

34:51

Gulley: Woah. Does this sound familiar? Setting a livable wage goal — this very act humanized Danone’s employees, moving them from FTEs to people with histories. This gets right to MaryAnne’s vision for a humanized world. And I’ll be honest, when I first heard MaryAnne talk about the need for humanization, in the business world, I both thought she was spot on and I wondered how such a thing would or could be possible.

But right here, in this example that Lorna chose to share, in her own words, she’s talking about how the process of getting certified forced her $6 billion company to treat its stakeholders as humans. And in doing so, the company itself became a bit better equipped to move us towards that compassionate economy. 

So, with Stu’s words in my mind that more big companies embedding purpose is important, and that there are limitations in our financial infrastructure – like shareholder primacy – that can make it hard for them to do so, I asked Lorna about the barriers she saw in her own experience that keep more big companies from becoming certified B Corps.

Davis:  Big organizations are designed to be opaque.They’re designed to be secretive and there’s some good reasons for that. And there’s some not good reasons for that.

Gulley: Lorna explained that this is a cultural disconnect because B Corp demands transparency right from the outset. So right there, companies pursuing certification have to develop new social norms to become more transparent.

But, according to Lorna there are other social constructs that make it hard for big companies to embed purpose… it turns out Stu is not alone in honing in on quarterly reporting. 

Davis: So simplistically put, I think capitalism is broken, but it’s probably the best base we have to work from.

Then when you come to the subject of changing the system, I think it needs to change, frankly. We need to change the rules. 

One is quarterly reporting. I genuinely think that quarterly reporting is crazy. Not only practically, but I just don’t think that the world operates as fast as that. And I think it encourages all sorts of bad behavior. 

Gulley: OK, I need to give you some context as to why I find this so very significant. Not only is Lorna a former CEO herself, advocating for an end to how companies are evaluated (and thus how CEOs are compensated), but she represents the creme de la creme of the more mainstream “business with a purpose movement.” A movement that has been able to gain a lot of momentum, in part, because it’s built to exist within the parameters of the existing system. Yes, a lot of good can happen within the system itself, and yes, companies that pursue certification are pushing on the boundaries of the system. But still, within the system the B Corp movement lives.

And here she is having made a similar evolution as Stu Hart, saying this work is good, it’s important, we must still get more companies to become B Corps, but if we are going to embed purpose in companies in a way that’s truly meaningful, we need to change the (socially constructed, mind you) rules of the game. 

She goes further.

Davis: I think that where I’m now moving, I’m starting to see that that’s probably not enough. That, that is sort of an extractive economy, just slightly more held to account and slightly less broken than the one today. As I sort of really snoop around in the world of regeneration, I think we need to question our entire relationship with the planet and with the people on it.

38:31

Gulley: So having heard from Lorna about the opportunities and limitations of how companies can transform themselves within their four walls, we have one more important leverage point to explore that Stu argues for in his upcoming book: the role government must play, not as a villain, but as a co-creator of sustainable prosperity. 

As Lorna mentioned, we need to change the rules. A piece of legislation, the Accountable Capitalism Act, introduced by Senator Elizabeth Warren would do just that. The bill requires large corporations to obtain… get ready for it… a corporate charter requiring the company to serve the interests of all of its stakeholders, playing off the benefit corporation legal structure. The bill also restricts the sale of company shares by directors or officers, in order to disincentivize the way that executive compensation drives management for short-term share price. And that’s just the beginning: employees would have the right to select at least 40% of a company’s board members, re-tethering the prosperity of a company with the prosperity of their employees. And if a company were engaging in egregious or illegal conduct, its corporate charter could be revoked.

Does this sound familiar?   

This bill is a framework for the kinds of rule changes we must move towards to bring the private sector into balance – and to re-incentivize companies to be partners in tackling the challenges we face. 

But there are other policies that companies should be pushing for — the kinds of policies we need to get us to a more compassionate economy. MaryAnne Howland, who shared her vision with us early in the episode, serves as the chair of the Race and Equity Working Group for the American Sustainable Business Council, a policy and advocacy organization that represents 250,000 businesses. 

She shares what policies she believes companies must champion in order to better serve society.

40:15

Howland: Well, now you’re hitting my real red sweet spot. Cause you know, I’m a policy girl. 

We hear about the big wealth gap, you know, where the average net worth is around $170,000 and for Black people was $17,000.

It’s disgraceful and it’s unthinkable. And yet, the reasons for that have been really the barriers to access, to opportunity, to education. All of those things that are endemic in the system that oppresses people and people of color and separates them from where the opportunity stream flows.

And here’s a perfect example: increasing the minimum wage so people who work 40 hours a week are earning enough to live, dammit. 

You know what I mean? It’s just, it’s ridiculous that a hard working individual, on the current minimum wage also has to rely on social services and public assistance and probably work another job. Which means they also can’t take care of their family, which also means that they can’t afford to take a day off if somebody gets sick. It’s not living. That’s dehumanization. 

Gulley: Listening to MaryAnne, I’m not thinking the way I used to. Loving what she’s saying on one hand and feeling strained in my heart on the other, that well, this is just how it is. How it’s always been. Changing it will take a miracle.

No! This isn’t just how it is. This isn’t just how it’s supposed to be. Changing it will take strategy. It will take us uniting, empowered with our history, aware of the social constructs, and equipped with new, better ideas! 

MaryAnne is equipped with this history. And she’s equipped with these better ideas. I want to keep listening.

Howland: And when you consider that the minimum wage, which started in like the early 1940s or something, and it was, I think it was originally 25 cents an hour, today it would be $24 an hour.

But here we are fighting for States to sign up for $15 an hour. So we know that we’re already starting behind. 

Gulley: Woah, this really changes my frame of reference – to understand just how far off track we are from where we were when Roosevelt created the minimum wage in 1938 as a way to ensure that employment would lead to a decent quality of life.

The $24/hour figure that MaryAnne is referencing is the amount that minimum wage would be if it had kept up with productivity, meaning, if we had continued to compensate hourly workers for the amount that they produce per hour, instead of decoupling productivity from wages in the mid-70s.

The federal minimum wage today is just $7.25. Not only is this less than a third of the productivity standard, it’s just 2/3rds of what it should be if it had even just kept up with inflation, a lesser standard.  

But under neoliberalism, the value of the minimum wage began to really erode in the 1980s, when not only had it already decoupled from productivity, but it also decoupled from being adjusted for inflation.

I can hear our guest from Episode 2, Dr. Andre Perry, in my head again. These policies disproportionately impact Black and Brown communities, but we built them — so we can also build new ones. As I am thinking about our need to reckon with our racist past if we are ever to move forward towards a more compassionate economy, MaryAnne exclaims:

Howland: I would also say supporting reparations to transform the legacy of slavery that has created our current system of racist business practices into an era of awakening or movement from dehumanization into re-humanization. 

Gulley: MaryAnne is not alone in calling for the private sector to step up and support reparations. 

Michael McAfee, President and CEO and Founder Angela Glover, both of PolicyLink, a research and action institute looking to advance racial and economic equity, made the argument in a NY Times opinion piece in June of 2020  that companies, beginning with the financial industry, should–in the absence of a federal policy for reparations–cancel consumer debt, eliminate banking fees, and provide interest-free loans for Black customers.

After all, we know that the oppression, exploitation and exclusion of Black Americans has been underwritten by banks for centuries, and that they have profited off of these practices. 

To give just one historical snapshot they cite, not to mention all of the many modern day examples, “banks financed the slave trade, and in some cases “repossessed” humans in bondage.”   

The CEO Blueprint for Racial Equity produced in part by PolicyLink is a great tool for identifying additional policies that companies can support to step into their role as good corporate citizens. 

45:00

Howland: So I think that those are the things that businesses need to step into, and it only makes really common sense if you think about it, because if you create an environment where more people are included in the workforce and are able to get a decent job, get a decent education and get a decent job, then they become tax paying citizens. They become consumers that can add to your bottom line. There’s just a million good reasons where it makes practical sense that you would want to provide better work opportunity for more people, so that they can pull themselves up and become part of a thriving economy and can be able to contribute. It blows my mind every time, it’s just, it’s too easy. 

So, what that tells me is that there’s a certain pull, that racism is more of a priority because the logical solution for where we’re at is somehow not seen as the better choice. 

So that’s why I go back to the human value — that there needs to be this work that’s done at a deeper level to begin to kind of get at “what is making you make that decision that you can not see that, or not participate in that?”. 

Gulley: MaryAnne is not letting us escape the individual work that we need to be doing, the values assessment to interrogate our own racism and more intentionally build anti-racism into ourselves and our work. I agree that this work is essential as we come together to co-create the next chapter of sustainable business. 

I want to understand, since MaryAnne has her finger on the pulse of the sustainable business movement and the movement for equity, is there hope for progress?

Howland: Yeah, well, there’s work being done. Of course there’s a lot of work to do, but there are several companies who are leaning into this work. Right now my hero is Ben and Jerry’s founded by Ben Cohen and Jerry Greenfield. Those two, those my brothers, my brothers in the movement. But you know, but their business was founded to change the way cows were treated.

So they, you know, so they already kind of understand how to catalyze a movement. But today more importantly, they’re working to change the way humans are treated. They were the first to stand up for Black Lives Matter.

And as a result of the murder of George Floyd by Derrick Chauvin a white police officer who pressed his knee into the neck of a human being for nearly nine minutes until he died while the world watched. They immediately came out with a manifesto that said “We must end white supremacy.” Now that was bold, but they are walking the talk as an ally, a co-conspirator in that movement. And I so applaud them for that, because that just needed to be said: white supremacy has to end, and we have to call it out

We can see that what we have today in a racist economy is not sustainable.

Gulley: Ben and Jerry’s is a company that has embedded purpose from the very beginning, and so it’s no surprise that they are better setup to speak up, speak out and take a stand on issues in our country that matter. In addition to calling for an end to white supremacy — important words, but still just words at the end of the day — they specifically cite support for H.R. 40, legislation to study the impacts of slavery and recommend remedies.

As consumers, we need to understand the past eras of capitalism so that we can better understand the role that business should be playing in ensuring the wellbeing of its employees, and the role that business should be playing in helping us in combating climate change and achieving a fair, just and equitable society.  

Our job as consumers is not just to make purchases that serve society, it’s to hold companies to account, to be part of the effort to force their hand to be partners in creating the world we want to see.

Howland: I think that we are in this moment where there’s a convergence of people who are allies in this work beginning to understand the importance of collaboration to mobilize, and I’m excited by it and feel that the momentum is there. 

I think there were probably similar conversations in the civil rights movement. The difference now is policy work. We have to embed in the rule of law within corporations and within government, what this change needs to be to level the playing field for fairness, equity and freedom. 

If you asked me if I could snap my fingers two times, you know, what would I want? The first would be equity, fairness and just a shot. The second would be that I could afford to live without fear for me and my son, my family and friends, and to live the freedom I imagine. Free to choose among life’s best choices, instead of my only choices.

50:37

Gulley: To close us out, we turn back to Lorna. I’ll admit, Lorna has been skeptical of the name of this project, Decade of Courage, since the first time I shared it with her. But in her own effort to tell me why the word “courage” doesn’t quite make sense to her, she ended up making an argument for precisely the kind of courage we believe is needed.

Davis: When you and I learned to walk, we didn’t learn to walk because we were trying to be brave and we didn’t learn to walk because we were trying to gain a skill that we could put on our resume one day. Why did we learn to walk?

We were trying to get something, and walking was what needed to happen to get that thing. And so, that kind of looks like courage. You know, wow man, that kid risked the coffee table and the rug and the corner. And eventually she got the cookie! Hell no. Well, I mean, okay, yes. At some level that’s true.

At another level, it’s just what humans do. And so I think it’s actually, it’s not about like standing up and being courageous. It’s actually about sinking back into the natural courage: that’s just part of bloody being a human. I mean, this being a human business, it’s a full contact sport. Right?

And so I think it’s about kind of getting back in touch with that thing that moves us. And then courage is kind of an obvious consequence of moving in the direction of cookie or cuddle or whatever it is. So, can I see a case for that in the next 10 years? Hell yeah.

There’s never been a time where we have been more called upon to dig down into the resources of ourselves as humans as right now. All of the blah, blah, bullshit that we try to pretend about how controlled the world was and how predictable the world was and how we could kind of live in our own little bubble.

It’s all been swept away. So all we got left is this magnificent thing called being human. And it’s all we need.

53:01

Gulley: Being human is, as it turns out, a full contact sport. Some of us have felt this our whole lives. Some of us maybe hadn’t experienced this so much – until now. 

This is a moment, a truly collective moment, where we’re all pushing up against the limitations of being human. Across the globe, we are plagued by a pandemic, and we can’t just strategic plan and thought leadership our ways out of dealing with isolation, loss, and grief on such a monumental scale. For many, the pandemic has brought acute illness, unemployment, hunger. 

The same is true in the growing movement for Black Lives. More and more, people recognize that pretending racism doesn’t exist will not make it go away. Neither will only donating to causes or only posting woke things on social media. You should do those things, but dismantling white supremacy will require us each to connect first with our own humanity–to perform that values assessment as MaryAnne says–and then to see the humanity in others.

And yet, it’s here, in this moment, where these and other crises intersect, that there is opportunity. But to grasp it, we must reconnect with ourselves and one another with compassion. 

Lorna, MaryAnne and Stu all believe that we can and must bring humanity–and the public good–back into business. 

I’m beginning to believe we can, too.

Tell me, what will you do to cultivate compassion? To connect to our shared humanity? To hold business to account to do the same?

For us, we’re going to keep risking the coffee table, the rug and the corner. We’re going to do everything humanly possible to get that cookie — because that cookie is shared prosperity for all of us. 

We can’t get there without you.

CREDITS:

Thank you to our extraordinary guests Stu Hart from Enterprise for a Sustainable World and the Sustainable Innovation MBA, thank you to Lorna Davis, Ambassador for B Lab, and thank you to MaryAnne Howland from the Global Diversity Leadership Exchange and Ibis Communications.

Thank you to our whole team for making these first three episodes of Decade of Courage possible! 

We courageously stepped into this space to tell these stories because we’ve been moved to do so, and because the moment, it felt to us, really demanded it. 

And now, we need your help. 

To keep Decade of Courage going–to produce the many stories of the business leaders, thought leaders, and activists who are doing this work, and to move the needle on the agenda for sustainable business this decade–we need companies to step up and help us fund this project. 

We’ve created these first episodes as a proof of concept of sorts, to give you the flavor of our values and beliefs, and to set the table for the next chapter. 

If you or someone you know is part of a company that you believe would stand with us, and our vision and mission, please let us know by sending an e-mail to dana@decadeofcourage.com 

Also, if you want to learn more from our amazing guests, Hunter Lovins from Natural Capitalism Solutions, Amanda Janno from the Wellbeing Economy Alliance, Randy Strickland from Cornerstone Capital, and both Stu Hart and MaryAnne Howland from our episode today. Join us for a Pod Club Panel Discussion on Thursday, December 10th from 4pm to 5:30pm Eastern. (Editorial note: event has now passed, but a recording to this event can be found here.)

As always, thank you to our Editorial Committee, Amy Hall and Julie Keck. To our Community and Design Lead Diane Abruzzini who gives us so much, and our Community Development Manager, Siena Spitzer. 

We are so proud of our music, composed, edited and mixed by Brian Crimmins, AKA MMINS, just for Decade of Courage, and performed by an amazing group of musicians Phil Collier on Keyboard and Percussion, Miles Tucker on Saxophone, Wayne Tucker on Trumpet, RJ Williams on Drums and Percussion, Eric AKA “Slim” Miller on Electric Guitar and MMINS on Bass, Guitar and Percussion. Justin Murrell was our Associate Music Producer and Danielle Walker AKA INEZ was the Assistant Engineer. 

Thanks to Vista Produce, LLC for believing in this project and providing us with support to help us launch.

This episode was edited and mixed by Neato Sound and written and produced by me, Dana Gulley.