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The B-Corp is an A+ Idea

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B-Corps are establishing the idea that corporations should care about more than profits

In 1916, nearly a century ago, Henry Ford was busy building up the modern concept of the corporation—and perhaps surprisingly, Ford held what could be considered populist views; namely, he was consistently trying to drive down prices for automobiles, while at the same time steadily increasing wages.

“My ambition is to employ still more men, to spread the benefits of this industrial system to the greatest possible number to help them build up their lives and their homes,” he announced that year.

But that viewpoint wasn’t popular with all of the company’s shareholders; in particular, Francis Dodge and Horace Dodge, brothers who owned 10 percent of the company (and in subsequent years would start their own car company). Concerned that Ford was investing forsaking profits in order to provide affordable goods and to pay his workers more, the Dodge brothers sued Ford.

featureThe subsequent ruling by the Michigan Supreme Court—against Ford, and stating that corporations exist primarily for shareholders’ benefits—set the tone for nearly a century of American big business. But over the past several years, that concept has been radically challenged, with a few hundred companies throughout the world—including a handful in southern Oregon—setting an entire different precedent, that corporations can and should exist for the public’s interest.

Ben & Jerry’s was certainly a fore-runner for this idea, setting out limits for their CEOs salaries (to not exceed four times the lowest paid employee) as well as establishing generous benefits for their workers, and donating to causes, like famously dedicating one percent of profits “to peace.”  

In recent years though, there has been a groundswell of companies adopting what once had been radical ideas—the so-called “Benefit-Corporation,” or more colloquially known as a B-Corp.

In southern Oregon, Rogue Creamery, Inesscents Aromatic Botanicals and an equity investment group, Gilded Rogue Enterprises all were pioneers for the concept. Like LEEDs-certification, which is a well-known scoring system that grades buildings as environmentally sustainable, the B-Corp also has a 200-point scoring system which considers the company’s commitment to “governance” (like Inesscents is a women-owned business and banks with a local, independent bank) and “community” (such as Gilded Rogue Enterprises investing in rural communities); to qualify as a B-Corp, a company must score at least 80 out of the 200 possible points.

There is no tax-break for B-Corps and, in fact, many B-Corp owners and CEOs estimate the designation cuts roughly ten percent from profits, as B-Corps often earmark profits as donations to local causes and spend money on perks to make their employees lives better, like commuter bikes or flex work time.

The surge in interest for B-Corps began percolating in 2007 with a Pennsylvania-based organization that popularized the scoring system. In the subsequent year, though, B-Corps received an unlikely and unfortunate boon when the national economy collapsed, largely due to greed and malfeasance by some of the country’s largest corporations, like Bank of America and Fannie Mae. Suddenly, the idea that a corporation should have a “soul” did not seem like an academic concept, but a very real urgency to families who were losing their homes to sour mortgages.

Instead of just leaving as an informal rating system, in the first few rounds of legislative sessions following the economic collapse of 2008, lawmakers in dozens of states tried to formalize the B-Corp in their individual states. Oregon was among the first group to try. Two such bills were introduced in the 2010-11 session by Rep. Deborah Boone (D-Cannon Beach) and Sen. Jackie Dingfelder (D-Portland). But both died in committee.

That same year, though, Maryland became the first state to enact laws that allowed companies there to file with the Secretary of State as a B-Corp. That concept swept like wildfire: In the subsequent four years, 29 other states, including Oregon in 2013, passed laws to recognize B-Corps.

In passing the law, State Rep. Tobias Read of Beaverton, who co-sponsored the bill, explained that it will legally protect companies that want to strive for more than just profits.

“It allows people to bring their values to work,” he said at a press conference. “B corps allows a company to say from the beginning: These are the values of our operation.”

In the first day to register in Oregon, then-Secretary of State Kate Brown stood on stage with dozens of business owners and, with twenty-nine businesses signing up as B-Corps, Oregon eclipsed all other states for first-day registrations. That number has grown twenty-fold in the subsequent two years.

More than an estimated 4000 workers are employed by B-corps in Oregon, they generate more than $300 million in revenue, with roughly ten percent of that being donated directly back to local charities.

To gain a bit more insight into the B-Corp, the Messenger caught up with Liz Bauer and Steph Lindsay with Gilded Rogue Enterprises.

RVM: Can you provide some of the highlights in terms of how Gilded Rogue Enterprises qualifies as a B-Corp? 

B-Corporations are for-profit businesses that hold themselves to a higher standard in social and environmental responsibility, accountability, and transparency. Although any business in Oregon can become an Oregon benefit company, there is a rigorous application process to become a “Certified B-Corp.”

Gilded Rogue is a private equity management firm that invests in rural communities throughout the Pacific Northwest. We believe the way to strengthen rural local economies is to invest in local businesses, help them grow, and then exit via broad based employee ownership so the jobs and dollars stay in the rural communities.

Each Gilded Rogue portfolio company also becomes an Oregon Benefit Company, and starts the Process to become a Certified B-Corp by choosing one way to give back to the local community. For example, our business Basil and Berries located in the Rogue Valley Mall, donates a meal to Access here in Jackson County for every meal served.

RVM: Why? What benefit does being a B-Corp provide?

Gilded Rogue believes the way to change the world is through making money and a difference, or “Conscious Capitalism” through the impact investing sector. It is imperative to us and our investors that we measure not just our financial performance, but how well we have done against our additional social and community standards.

RVM: Why would or do you recommend that other companies file/qualify as a B-Corp?

Committing to becoming a Certified B-Corp is setting a standard for how you approach business. Before becoming a Certified B-Corp, we already had many of the B-Corp practices in place. But after looking at the scorecard, we realized there was much more we could do very easily, many of which we had not though to implement. We believe becoming a B-Corp is being the change you want to see.

RVM: Isn’t it easier to simply run a company to make money?

Almost all B-Corps are for profit companies making money. What B-Corps believe is that the way to be the most profitable, serve the best customers, and attract the most extraordinary talent is to choose to make money and a difference.

In the Rogue Valley, we’ve always had companies that took care of their communities; now there is just a way to measure and help companies become even better. What is a company without its’ community? Without its’ customers?  Without dedicated employees?  That is a company no longer in business.  

RVM: Before founding Gilded Rogue Enterprises, what was your job?  Why did you leave?  

(Liz): Before founding Gilded Rogue, I was the EVP, Chief Financial Officer & General Counsel of C&K Market, Inc. I was at C&K for nearly seven years. There my teams were responsible for working with banks and hedge funds throughout the US. We also structured deals, reformed benefits, and navigated through the economic collapse and changing regulatory waters. I was proud of the many achievements the teams made, including being voted the Healthiest Large Employer in Oregon in 2012.

I left C&K when the new management team and I disagreed on moving forward strategy. Less than a year after I left, the company was in bankruptcy, and 1000 people lost their jobs. These are jobs in rural communities where a loss of ten jobs is a huge deal. I knew those communities; those families, and frankly decided that we in finance needed to do better. I needed to do something that could help. I wanted to use finance as a force of good.   

Very simply, I started Gilded Rogue to earn every one of the 1000 jobs back in our rural communities.  

RVM: Can you provide an example of a company you have worked with, and help “convince” to become a B-corp? Do you remember that “a-ha” moment for that entrepreneur?  

Our first portfolio company, Basil & Berries, become a benefit company in 2014 as soon as the benefit company legislation was passed. We were able to recruit our Executive Chef & COO, Jesse Sword of Basil & Berries because of the mission of what we were trying to do—serve locally sourced tasty food and donate a meal to solve childhood hunger for every meal we served. Jesse may not have originally known what a B-Corp was, but did not need to be convinced that Basil & Berries should become a B-Corp. He sought Basil & Berries out because he wanted to help kids, source locally, and change the way people thought about mall food. Since joining, Jesse has been a remarkable leader, becoming Jaime Oliver’s Southern Oregon representative for the Food Revolution, leading cooking classes, and volunteering for a variety of causes. He actively manages food costs to be able to source everything locally that he can and thanks to the efforts of Jesse and his team, Basil & Berries is now looking at its second location.  

 

1 Comment

  1. Avatar
    Josh
    January 25, 2016 at 11:45 pm — Reply

    Any article including Elizabeth Bauer or Guilded Rogue needs to include the bankruptcy of GR Roguewood, and the damage done to the employee’s and vendors.

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