Tag Archives: benevolent corporate paternalism

Labor Day, 2013: Will Big Mining Do Better This Time Around?

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On Labor Day, I’ll be in New York City, so I won’t be able to see the television broadcast premiere of 1913 Massacre on Twin Cities Public Television. How many will tune in? How will the broadcast cut of the film look and play on TV? Above all, I wonder, what connections will the Labor Day TV audience draw between 1913 and 2013? My comments here run this holiday weekend on MinnPost.

Many people Ken and I met in mining towns around Lake Superior while filming 1913 Massacre urged us to see the positive contributions the mining companies had made to the region. Some insisted that the Woody Guthrie song that had introduced me to the story of the Italian Hall disaster and brought me to Calumet and the Upper Peninsula in the first place had gotten it all wrong. The greedy bosses, company thugs and violent social strife that Woody sang about in “1913 Massacre” did not fit the story they knew. “We all got along just fine,” they protested.

When the mines were running, the towns thrived. The big department stores downtown were open. The churches (and the bars) were packed to capacity. Everybody worked hard and the work was sometimes dangerous, but on Saturday nights, the streets were jammed and the atmosphere festive. The company put a roof over your head then sold you the house at terms you could manage. The copper bosses built libraries, sidewalks and schools, gave land grants for churches, and even furnished luxuries like bathhouses and public swimming pools. The men who ran the mines weren’t just robber barons from Boston; they were public benefactors.

But there were limits to their benevolence. The mining captains regarded the immigrant workers – Finns, Slavs, Italians — as charges placed in their paternal care. They knew what was best for these new arrivals. They discouraged organizing. Faced with strikes on the Iron Range in 1907 or on the Keweenaw in 1913, they adamantly refused to negotiate, brought in scabs to do the work and Waddell and Pinkerton men to deal (often brutally) with the strikers. Even after the tragic events of 1913, Calumet and Hecla Mining Company would not recognize the union for decades.

The Keweenaw miners were on strike again in 1968 when C & H made a calculated business decision to pull out. No more jobs, pensions cut short; the good times were over. They left the waters poisoned and the landscape littered with industrial wreckage and toxic mine tailings.

The companies driving the new mining boom around Lake Superior these days promise to do better. They are dedicated to corporate social responsibility. They practice “sustainable” mining, tout their environmental stewardship and declare their respect for human rights. They have community outreach programs and promise to make substantial, long-term investments in the economic development of the regions where they come to mine. They work closely – some would say too closely – with regulators to create environmental impact statements and plan for responsible closure of their mines. They are eager to gain social license.

For the most part, these big multinationals operate with the support of organized labor and politicians who want to create jobs — and what politician doesn’t want to do that? But the high-paying, highly-technical mining jobs are unlikely to go to local residents; and the new mining is likely to have detrimental effects on local economies, as the economist Thomas M. Power has shown in studies of Michigan and Minnesota. Mining may provide some short-term jobs, but it can also drive away creative professionals and knowledge workers, destroy entrepreneurial culture, diminish quality of life and damage long-term economic vitality.

So promises of good times and plentiful jobs need to be treated with circumspection. Polymet has repeatedly scaled back its job predictions for its huge, open-pit sulfide mining project near Hoyt Lakes, Minnesota, and the company’s own figures suggest that only 90 of the promised 360 jobs – just 25% — will go to local communities. Local is, moreover, a relative term. Mine workers today tend not to live in mining towns; they will commute an hour or more to work. And hiring will always be subject to swings in metals prices, which are now dependent on two new factors: continued Chinese growth (and urbanization) and the entry of big financial firms into metals warehousing and trading.

There are limits to big mining’s benevolence as well. The last time I flew into Marquette airport, a glossy Rio Tinto poster advertised the company’s commitment to “build, operate and close Eagle Mine responsibly.” Nobody had bothered to take the sign down after Rio Tinto had done an about-face and sold Eagle, a few months earlier, to Vancouver-based Lundin Mining for dimes on the dollar. Rio Tinto’s commitments lasted only until it was time to flip their property. Overnight, Eagle Mine had become a “non-core asset” and the surrounding community none of Rio Tinto’s responsibility.

In Wisconsin, Gogebic Taconite has drawn the line between company and community much more starkly, with help from a paramilitary firm called Bulletproof Securities. Black-masked guards, dressed in camouflage and armed with semi-automatic weapons, protect the mining company’s property from trespassers and environmental protesters. Imagine what they might do in the event of a strike.

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Bulletproof Securities patrols Gogebic Taconite’s property in northern Wisconsin.

The Whole Foods Language Police: Keystone Cops or Company Thugs?

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Whole Foods now denies that Lupe Gonzales and Bryan Baldizan were suspended for speaking Spanish on the job. While the company does, in fact, have a written policy requiring employees to speak English while “on the clock” — in order to maintain what one Whole Foods manager calls “a uniform form of communication” — the employees, Whole Foods now says, were fired for being “disrespectful.”

The proof? A letter Gonzales and Baldizan wrote, asking why workers in the Albuquerque, New Mexico store could be dressed in Mexican bandito costumes (“sarapes and sombreros with fake mustaches”) on Cinco de Mayo, but are “forbidden” to speak Spanish on the job.

Nothing says respect like grotesque parodies of Mexican culture. As for the actual, living culture of New Mexico (where, by the way, not just Spanish but Ladino is spoken) — just keep it off the clock and preferably outside the store.

Ralph Arellanes, New Mexico director with the League of United Latin American Citizens, said he “almost fell off [his] chair” when he first got wind of this; now the League is threatening a nationwide boycott if Whole Foods does not drop the policy. The company says the English-only policy is necessary for “safety” and — incredible though it may seem — inclusion: if workers speak Spanish, “team leaders” and customers may feel “excluded.” How is a leader expected to lead, or customer able to shop, or feel that they belong at Whole Foods, or in Albuquerque, New Mexico, for goodness sake, with all that Spanish being spoken around them?

It’s tempting to write this off as yet another example of the folly of top-down corporate policy-making: policies imposed from above usually hit the floor with a thud; hilarity or disaster ensues. There’s also a cautionary tale here about policing language, which hasn’t worked since the days of Babel. The language police usually turn out to be Keystone cops.

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Or, worse, they end up offending people, and the policy-makers look historically ignorant, culturally arrogant and out of touch.

I wonder, however, if there’s something else at work here. People who speak the same language — a language “team leaders” don’t speak — are able start their own conversations about work and other topics. They can talk about their lives and their families. They can form new bonds and build networks within and beyond officially recognized teams.

Those informal bonds can pay off. It’s been repeatedly shown that unofficial, loose, self-directed, peer-to-peer social bonds help people learn from one another and develop new approaches to their work: people who share a language can share practices that have proven effective, find new ways to do things, or create unwritten rules and new combinations that will help them collaborate.

On the other hand, of course, workers can use a language they share to talk about the realities of their jobs, the possibilities they see for themselves within the organization, the conditions under which they work as well as the barriers to their advancement. And they can talk about their Anglophone leaders, too. I suspect those are conversations Whole Foods — “a staunchly anti-union enterprise” run by a man who sees himself as the benevolent father of his workers — probably wants to nip in the bud.

What’s Wrong With Howard Schultz’s Proposal To Save America From Itself?

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A letter from Starbucks CEO Howard Schultz has been making the rounds, asking other CEOs to join with him and “forgo all political contributions until Congress and the President return to Washington and deliver a fiscally-disciplined, long-term debt and deficit plan to the American people.”

The idea has gained plenty of admirers: “thousands of Americans – both CEOs and everyday citizens” (as CNN puts it) have contacted Schultz to express their support. Joe Nocera dedicated his entire column in the Times last week to Schultz’s proposal, praising the boycott as “hardheaded and practical, the kind of idea you would expect from a good businessman”.

That it is. But its virtues are also its limitations. Schultz wants to tackle a very big, very difficult problem: what he calls “the lack of cooperation and irresponsibility among elected officials as they have put partisan agendas before the people’s agenda. This is not the leadership we have come to expect, nor deserve.”

We can debate that last point: the current crop of ineffectual cowards in Washington might be exactly the leadership we have come to expect and deserve. Be that as it may, I am a little suspicious of grassroots movements in which angry “everyday citizens” find themselves in cahoots with angry CEOs; and it seems odd that we are being asked to entrust “the people’s agenda” to Schultz and his gang of CEOs – who may be well-meaning, but whose agenda (it seems fair to say) may not exactly match up with the aspirations and priorities of everyday citizens, or at least those of us who don’t happen to be leading multibillion-dollar multinationals.

I know that Starbucks bristles at the suggestion that multibillion-dollar companies might not always put the interests of its people, its “baristas” and “partners,” front and center. (But just a couple of weeks ago, baristas in Chile went on hunger strike because the company refused to negotiate with them over wages.) And I understand that Schultz prides himself on being a good CEO – one who has done well by doing good. He is, in fact, regularly singled out for praise by the business press as a CEO who defies the “the power-hungry stereotype,” and who will put the long-term good of his employees, his company or the environment over short-term advantage. (That’s the story Motley Fool’s Alyce Lomax told just last week in a Howard Schultz puff piece on AOL’s Daily Finance site.)

I’m not questioning Schultz’s good intentions. But the effort he’s mounted so far has a whiff of benevolent corporate paternalism about it; and the prospect of well-meaning CEOs around the country banding together on behalf of all the little people to fight political paralysis in Washington DC should — at least — give us pause. It sounds like a bloodless coup in the making, a plutocrats’ putsch.

There is something absurd here as well: aided and abetted by a pliant and misguided Supreme Court, corporate interests have already hijacked the political process; now they plan to withhold ransom payments until the ineffectual cowards we elected to represent and defend our interests – the public interest – deliver the economy back to them in sound condition, and deliver them from all “uncertainty.” Then they will create jobs. (Be sure to read Glenn Greenwald’s analysis of the uncertainty canard here.)

That said, the real trouble with Schultz’s proposal is not its presumption or its absurdity or its patronizing benevolence. The real trouble here is that Schultz fails to see the big picture, the broad agenda, the scope of the problem we face right now. Like most political and corporate leaders, he sees the people’s agenda – and the country’s uncertain prospects — through the narrow lens of jobs and economic growth. And while jobs and sustainable economic growth are undeniably important, and can be made to serve the public interest, the public interest can’t be reduced merely to those things; they may sometimes even be at odds with the public interest, as they sometimes are in human rights, labor or environmental disputes.

Real prosperity can’t be measured simply in terms of economic growth or high employment figures. I fear that what we have here is a failure to imagine the American future as anything more than a sunny financial forecast, the country as anything more than a happy work camp.

Goodness Has a New Flavor, Maybe a New Form

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Earlier this week, National Public Radio aired a story about efforts by lawyers in seven states to “rewrite laws” on behalf of social entrepreneurs.

Right now, according to April Dembosky’s report, social entrepreneurs operate in a state of legal limbo: in the eyes of the law, social enterprises are for-profit entities, but they have a non-profit ethos, a concern for doing good or simply doing less or no harm.

The law may respect and admire, but it doesn’t have to recognize that ethos; social enterprise is not – or not yet — a legitimate corporate form. The law in most states currently says that shareholders have the right to sue if your desire to do good compromises their ability to do well, or better than they are already doing. And shareholder value will always trump “social values” in a court of law.

But now there are now serious efforts, mainly in Vermont and California, to create the legal framework for a new, “for-benefit” corporate form. These efforts seek to undo what is commonly called “shareholder primacy” in the for-profit corporation and challenge the idea that the sole duty of corporate directors is to make decisions in the best interests of shareholders – or, as it’s usually put, to “maximize profits” or “maximize shareholder value.” Advocates say that corporations should also have a duty to various stakeholders, including employees and consumers as well as to society as a whole, and that this duty should be on par with, or sometimes trump, fiduciary duties – or, at the very least, that shareholders ought to take into account the costs corporations socialize (e.g., the degradation of the environment) for the sake of shareholder profits.

There is already a for-benefit certification companies can earn. Think of it as a Good Housekeeping Seal for politically progressive investors, job seekers and consumers. But the for-benefit legal movement wants to do much more. For this reason, the movement represents more than another extension of the corporate social responsibility movement, more than a new chapter in the old debate about the public purpose of the corporation that dates back (at least) to the Berle-Dodd debates of the 1930s. The newly-chartered for-benefit corporation or “B-Corp” would, presumably, use “the power of business to solve social and environmental problems.” It would have a legal mandate to do so. In other words, the B-Corp would be a legally chartered, for-profit agent of social change or social “benefit”; its directors would be bound by law to take stakeholder interests and social benefits into account when faced with a decision.

To illustrate the need for the new corporate form, Dembosky looked briefly back to Unilever’s 2000 takeover of Ben & Jerry’s Homemade Ice Cream. As a case study, it’s a bit hackneyed, but as I went back to review it I discovered some distortions in Dembosky’s reporting, and came up against a number of questions about the for-benefit movement, and social enterprise in general, that I’ve run into before.

Ben & Jerry’s is widely regarded as a sort of ur-social enterprise, an early experiment in “hippy capitalism”. The company was founded in 1978. By 2000, Ben & Jerry’s had grown far bigger than its founders ever imagined it would. They needed to raise cash. The company had not solved its distribution problems: Ben & Jerry were still hitching a ride on other “super premium” ice cream distribution networks (mainly Haagen Dazs and Dreyer’s). Ben Cohen and Jerry Greenfield no longer saw eye to eye. All this made the company vulnerable and the target of speculation.

Still, the company was well past its hippy phase, and this is probably the first place where Dembosky’s story starts to distort the picture.

To hear her tell it, these really cool social entrepreneurs were just making their ice cream and trying to make the world a better place when the Unilever harpy swooped down upon them and carried them away, arms flailing.

Not quite.

First of all, Unilever was already part of a buyout offer engineered by Ben Cohen himself in March of 2000. He had teamed up with Unilever and Meadowbrook Lane Capital; Meadowbrook, a socially responsible investment firm, had put together a group of investors that included Bodyshop founder Anita Roddick. This unlikely trio offered $38 per share; Ben & Jerry’s was then trading at around $30. A shareholder who was privy to the board’s deliberations told the New York Times that the board had approved the deal (over Jerry Greenfield’s angry objections).

But then, in April, things took an unexpected turn. Unilever offered $43.60 per share – a 25 percent premium, almost nine dollars over the then-current share price — for a total offer of $326 million in cash.

Why the aggressive offer? Not because Unilever admired the social mission Cohen and Greenfield had set for their company, except insofar as it added to the buzz of the Ben & Jerry’s brand. Unilever had a nationwide distribution network already in place in the United States and access to European markets; and the company was faced with growing pains of its own: the consensus among analysts was that the company’s “longer-term fundamental growth rate” was “not inspiring.” It needed to enter new markets and find new areas of growth.

When the offer came in, Ben & Jerry’s Board of Directors was in no position to refuse, or stand on principle. This much Dembosky had right. However they may have felt about Unilever, however much they may have feared for the social mission of the ice cream company, they were prudent – and they were right — to reject the lower offer from the Cohen-Roddick group in favor of the higher cash offer.

To do otherwise would be to risk being sued by shareholders, and to be accused of neglecting their duty of care – even if the Cohen-Meadowbrook-Unilever group could somehow have proven that they and they alone could keep the ice cream company true to its social mission.

Which is, by the way, exactly what the Cohen-Meadowbrook-Unilever group had done when making their offer. As the Times reported, Meadowbrook Lane “pledged to create a ‘social performance plan’ that would place women and minorities on the board, pay about 7.5 percent of the company’s pretax profits into the Ben & Jerry’s Foundation and provide venture capital to other ‘progressively minded enterprises,’ among other social efforts.”

(Missing from this list – at least as reported by the Times — was the original Ben & Jerry’s compensation scheme, whereby no executive would earn more than seven times what an entry-level employee learned. The company had abandoned that policy in 1995, and apparently there was no going back. But all the ideas in the Meadowbrook package were, and — most people will tell you — still are, very fine sentiments. Whether they are good business practice is open to debate; whether they are to be dignified with the phrase “social mission” or “social responsibility” is even harder to decide.)

In the end, none of this stuff really mattered to the merger agreement. None of it influenced the Board’s deliberations or could make up the difference in the offers. So, when the deal was done, Cohen and Greenfield issued a joint statement celebrating Unilever’s commitment “to pursue and expand a social mission that continues to be an essential part of Ben & Jerry’s,” and the European multinational mumbled something about nurturing community values. None of this talk was binding or even very credible. At the time, it all seemed a little discouraging.

By December of the same year, Ben Cohen was threatening to quit unless Unilever appointed a CEO with the right “business mentality”: “otherwise,” he was quoted as saying, “I’m not interested in hanging around and supporting what I’m sure is a destruction of the company.” It’s worth noting that while making these threats Cohen was angling to have his own choice for CEO, Ben & Jerry’s director Pierre Ferarri, assume the role. He lost that battle. But over time, it seems, the guys from Unilever started to get the idea – or at least they learned how to keep up Ben & Jerry’s “socially responsible” brand.

The company continued to make decisions in keeping with the social agenda Cohen and Greenfield had set for it. It switched to “eco-pint” packaging in 2001. On Earth Day of 2005, Ben & Jerry’s protested oil drilling in the Arctic National Wildlife Refuge by delivering a half-ton “Baked Alaska” to the Capitol. In the same year, the company committed to fair trade; and just last month, Ben & Jerry’s announced that its entire “global flavor portfolio” would use only “fair trade ingredients” by the year 2013, engaging with “smallholders, who grow nuts, bananas, vanilla, cocoa and other Fair Trade-certified ingredients.” And in September of 2009, Ben & Jerry’s changed the name of Chubby Hubby to Hubby Hubby, in support of gay marriage.

All’s well that ends well, I suppose. But surely there are larger lessons here. What are we to make of the real buyout story, and what does it tell us about the efforts now underway to create a new corporate form?

For Dembosky, the moral of the story, or at least the good news, is that the new for-benefit corporate form will allow – or legally require — a social enterprise to stay true to its mission and its values. It will attract a different kind of investor, one who cares about balancing profits with social costs and social responsibilities. That may be true. But questions remain. Consider what would have happened if Ben & Jerry’s had been legally incorporated as a B-Corp back in 1978, at its founding. How would its for-benefit incorporation have affected its growth? Would it have been possible for the company to make those early distribution deals with Haagen-Dazs or Dreyer’s, without requiring those companies to undergo an intrusive social audit? A fussy shareholder could have demanded it; any early deals or alliances could have been subject to the same additional scrutiny. It sounds cumbersome, and a little absurd.

I’m no lawyer, but I don’t really see how legally-binding social commitments wouldn’t hang over all legally-binding deals or contracts that the B-corporation makes (unless of course the “social values” inscribed into the B-Corp charter are easily manipulated or ignored when it’s convenient to do so). The Meadowbrook Lane social performance plan would have been legally binding, written right into the merger agreement. It’s unclear whether under those conditions Ben Cohen would have been able to bring Unilever to the table at all. Jerry Greenfield might have liked that just fine. But would Unilever have agreed to be bound by the social mission of a Vermont ice cream company? It’s hard to see how that deal would have shaped up under these circumstances, but it’s clear that B-Corp charter would have altered the merger equation. Couldn’t shareholders have objected — as Greenfield did — that Unilever would compromise the company’s social mission, and held the merger up on those grounds?

There are broader and more interesting questions here, too. One has to do with the phrase “for-benefit” itself, and whether it can stand up to very close legal scrutiny, or survive a legal challenge. Current definitions of for-benefit corporations don’t really help in this regard. The Vermont Benefit Corporation Act defines “public benefit” as “a material positive impact on society and the environment, as measured by a third-party standard, through activities that promote some combination of specific public benefits.” That is sufficiently vague as to open the door to all kinds of arguments; and it’s also worth noting that the proposed legislation sets out “no criteria to qualify to be a ‘benefit corporation’.” The company is required only to file “annual reports about its community-oriented work.”

I suppose the “third-party standard” is meant to be reassuring; but it is bound to raise the question who will guard the guardians. That question doesn’t matter all that much when “for-benefit” is simply a certification or thumbs up from the progressive business community, or from the non-profit B-Lab; but when it’s a matter of corporate law, you can expect that someone is eventually going to point out that the third party needs to be checked and balanced, and that the for-benefit corporation is essentially chartered to pursue what looks very much like a political agenda.

Of course it’s nothing too offensive – a concern for the environment, fair dealing, civil rights, workers’ rights. If it were a Ben & Jerry’s flavor, it would be Progressive Passionfruit, or Vibrant Vanilla: easily digestible, soft, kind of sweet. Hope and Change. But what about other flavors, other political agendas to the right or the left of the B-Corporation’s Unitarian progressivism? To put the question bluntly, is B-corporation law essentially legislating an idea of what constitutes a “social benefit,” and therefore deciding for the rest of us what is good? How — outside Vermont – can that stand without a quarrel? What about other ideas of how businesses benefit society? How long before Milton Friedman rises from the grave to tell us that increasing profits is the highest social responsibility of a business? Or what happens to the idea of social “benefits” (for example) when the American religious right gets into the social enterprise game?

What bothers me most about all this is that behind the Unitarian progressivism of the B-corporation, behind much of the talk about social enterprise and delivering social benefits through business, lurks another 19th century idea: benevolent corporate paternalism, which, as I suggested in a recent post, now manifests itself in a more politically correct, palatable way, so kind and soft and sweet and full of concern that it might be better termed benevolent corporate maternalism.

By chartering corporations to deliver social benefits, isn’t society also surrendering power? Instead of rewriting the laws to create for-benefit, for-profit companies, why don’t states more strictly enforce the existing laws, or enact laws on behalf of communities and the environment? The rise of the social enterprise may actually signal society’s loss of its power to regulate and restrict business. These fledgling efforts to rewrite the law may — albeit inadvertently — usher in a new era of lawlessness, in which companies can do whatever they want, as long as they can claim to be doing good.