Be-The-Change Corporations :)

Harsh Gupta, Feb 8, 2024 in Gandhi 3.0, 2024

[I think most of us would remember this incredible presentation by Jay -- a presentation that Wayne, as a fellow economist, referred to as paradigm-shifting!]

Good morning everyone. I want to start by paraphrasing something that Rohit said, "If you want to see us at our worst, go talk to our families." I wanted to start by acknowledging my wife Randi, who is responsible for me being here, not just by creating the space to allow me to do my work and care for our family, and having been the primary caregiver for our kids. She also carried the financial burden - when we started our first company, she was the only one of the three of us (who started the company) that actually had income. And so, to the extent that we had food on the table, it was because she was employed.

While that business grew incredibly rapidly and was quite successful, there was a period there in the back half of it which was also quite painful. There was a Cain and Abel, Isaac and Ishmael sort of schism; a split between me and my best friend and co-founder.

My wife is a Yogini, she has been a yoga teacher for 25 years. Around the time of my schism with my co-founder, my wife had been taking this course on Karma Yoga to deepen her practice. And she gave me a book she had read by Eknath Easwarana translation and commentary on the Gita — and she invited me to pay particular attention to Chapter 2, "The Illumined Man." Usually, when I read, I have a pen in hand and I'm scribbling everywhere on the sides of the pages. I’ve got a whole system of stars, underlines, checks, etc. And my wife never scribbles anything on any book she reads. But there was, next to this one passage in  Easwaran's book, a note that said "Oh my God!" . She didn't tell me anything about it, she had just given me the book. So, when I was reading and I thought, "Oh! That's there for a reason!." And I'm paraphrasing, but the basic gist of this passage was an admonition or a warning to Arjuna to not walk in somebody else's dharma. And her (Randi's) observation and gift to me was the observation that I had been in this successful company but I had been walking in someone else's dharma. And she had been noticing that there was an increasing friction. And that the friction between me and my best friend and partner - best men at each other's weddings, godfather each other's kids, quite a deep connection since we were 13 years old. It was clear to her before it was clear to me that the 'sound of the genuine' to which Rev. Howard Thurman and brother Stephen invited us to listen was not being expressed for me through this successful company called "AND1" that I had helped build. And that it was clear that I was moving in a different direction, but I was still tethered and constrained. And that was creating friction. Not anybody else's fault, not blaming, just like that's there. And so, she was in an "Oh my God" moment, and she said, you should take this class. So, I ended up taking this 8 or 10 week class on Karma Yoga, ultimately using the Gita as a frame for thinking about what has become the B Corp movement. And so, in a very concrete, tangible way, everything that's happened for me over the last 20 years, has been a gift from my wife Randi through her introduction of the Gita and Karma Yoga to me. Because one of the most powerful things that I learned through that text is that there are multiple paths up the mountain – Jñāna Yoga, Bhakti Yoga, Karma Yoga. Hers is more Bhakti. And she's like, "Dude! You're obviously Karma. You're going to have to do this through work, or you're not gonna do it at all." There's no bodhi tree in my life. There's no apple that hits me on the head like Newton. For me, it's a slow, painful awakening. More like the frog in the pot - I'm the frog. And so, the initial manifestation of this slow awakening was what's become "B Corp" — the "B Corporation" movement. Related to that, I have been now working on racial and economic justice, specifically with White men in the United States. I may not get a chance to talk about that, but I view all that as a continuing and interrelated set of issues and challenges, where my dharma is and where I'm being called to show up in the world.

When Nipun talks about design principles, the thing that was most animating to me is what would it mean to design an economy for the benefit of all? Because our current economy is not designed for that purpose. And so when people say our economic system is broken, at some level, they are of course correct. They are feeling that pain of a broken system. It's true that the system is rigged and broken. And, on the other hand, it's actually fundamentally not true. It indeed obscures a more fundamental truth, which is that the economy is functioning as it was designed to do. That is, the economy was designed to be extractive and exploitative. The question is, how could we reimagine an economy whose purpose was different? The animating energy behind everything that I'm doing is trying to pull from many different wisdom traditions. And it is flawed. So anything that I share, I beg your forgiveness and your grace, and I invite you to say, "Oh, that doesn't make sense." Or, "Here is a growth edge." Because of course, that is going to be true. Because it's not done evolving. All it reflects is the level of insight that I and then a much bigger group have collectively had over the last 17 years or so. What I'm sharing is a work in progress.

The "B" in "B Corp" comes from a quote attributed to Gandhi "Be the change." What?!? True story! The organization that is supporting and serving those B Corps is called B Lab. Anybody know why it was called a "lab"? Yes, from Gandhi’s autobiography "My Experiments with Truth." So you can see; from the very earliest energy, this was informed by Gandhian and other sacred principles from other wisdom traditions. I'll show you in our founding document. you'll see that expressed there.  This is the single statement of shared values that every B Corp in the world signs on to as they earn the certification — the "B Corp Declaration of Interdependence." I think that word interdependence is a fair proxy for the core spiritual teaching of every tradition, which is that we're all connected. It turns on its head the conceit of the American founding document and the sanctification of independence and individualism. In its very core, it is trying to invert and disrupt that cultural norm and frame. That's a little bit of a long preamble and gratitude to my wife for creating the energy. Like with Gandhi, when I am walking the path, I fail a million times through my own weakness, and yet I have faith and I keep persisting. So thanks for acknowledging at least my persistence on that.

Now, the question that animates me is what is a sacred economy?

This (slide) is me at the start of the original company, "AND1: Basketball, Footwear and Apparel Company". Moving on, 13 years later, we were on the cover of Sports Illustrated (slide) for a bunch of cool things that we did. And fun fact; on the same day that we appeared on the cover of Sports Illustrated was the day we sold the company. (That didn't make the editor of Sports Illustrated very happy with the writer). And while we were revolutionizing the culture and game of basketball, there was this other game that we were playing "an inner game" within the company as opposed to in the marketplace.

And here are some examples (Donating 5% of profits to charity, environment friendly practices, etc.) of things that we did in the company that our consumers didn't care about. There was no market reward for doing any of those things, but it's the company that we wanted to run, where we thought it could honor the gifts from our parents that gave us the opportunity, and be the kind of company that our children would be proud that their parents were involved with. That was the motivation. And so, in September of 2001, I had a viscerally bad month. My dad died of lung cancer four days after 9/11 in New York. My mom had died five years prior. My sister was in broadcast news at that time (in New York). On 9/11, she was saved by first responders on Vesey Street in New York (blocks from where the Towers came down). I had a friend on the 86th floor of one of the Towers (who luckily ended up alive). And two weeks later, the most beloved man in our company at AND1 was killed in a freak car accident on his way to work. It was a very rough month. And that month rocked me and catalyzed, in a multi-year sort of discernment, to find what is my highest and best use, where am I called to be, how am I called to be, what am I called to do? And how do I balance those things?

Since the beginning of AND1 we had given 5% of our profits to charity, and we had started to look for other things. For e.g. "Ben and Jerry's and Patagonia and other companies are giving 10%, maybe we could give 10%." That was creating some friction that maybe that's too much. "Newman's Own" was giving a hundred percent to charity - 20x us and 10x Patagonia and other companies. What if we could do one hundred percent? AND1 couldn't do that, but what if there were other companies that could follow the Newman's Own model?

I found 20 other companies like that around the US and UK; a wine company,  a travel company, a bottled water company, an office supplies company, who all marketed themselves as a Newman's Own of this and the Newman's Own of that.  So I brought them all together. This is early gestational work of what was already there. We collectively imaginedWhat if there was a whole sector of the economy – a Newman sector, as this engine of evergreen charitable wealth. What a cool thing to manifest in the world! So, I gathered all these companies and said, "Hey, did you know that you're one of this many? And what if we were all together and what if we raised a fund and we could invest in companies like this and we'd have this amazing ecosystem." They were all excited and we start talking to investors.

Other folks who'd been in this space of what we would call today as 'social entrepreneurship' or 'impact investing' felt this was a really cool idea. But they cautioned us gently, saying "Charity is not the most important act of a business." And if you read Gandhi, and other wise people, they're not super fans of charity. And so gradually over a four or five year period, this idea of a ‘Newman venture’ evolved to no longer be solely focused on charitable giving, but to look at all the other ways a company creates a positive impact or negative impact in the world. And when Paul Newman declined our ‘very sensible request’ to  license his little heart-money logo as a unifying brand   across all these other companies, we had to come up with another name. And so, we named it "B Corp." In the American economic system there are C Corps, there are S Corps - the "Corp" standing for wanting to be seen as a for-profit entity. We too wanted to harness the power of business, since business represents  three quarters of the economy, and  a higher percentage of political influence, etc. If you are going to try to look for leverage points, and if you are trying to shift systems, you have to look for where the power is. The power in our culture is in the private sector, in capitalism. And the power in capitalism is with capital. But the unit of engagement that we as citizens engage with is with companies. So, how do we shift that energy — that was the motive force behind the B Corp movement , which was intended to be an expression of the karma yoga — the yoga of work, the yoga of action — described in the Gita.

What you see is the image of the B Corporation Declaration of Interdependence that I described before. This is the founding document, the core energy of the B Corp community. The idea in this first sentence here is that we envision a full global economy now, not just a sector. We want to transform the whole thing -/ this new global economy will be comprised of a new type of corporation. In retrospect or if I were amending it, I'd say that the pathway is being trailblazed by entities such as B Corps. And there's lots of other folks in the ecosystem - it's not only about making everybody a B Corp.

The Declaration goes on to describe these B Corporations as ‘purpose driven, creating benefit for all stakeholders, not just shareholders.’ Speaking in tech metaphors, which I see Nipun does so beautifully, one could paraphrase this as "There's a source code error at the core of capitalism. The source code error that runs the operating system of capitalism is called Shareholder Primacy." This is a fancy legal term that means we (as a company) exist to maximize profits for our shareholders. That's the purpose of business. That's why we're doing what we do. And so everything else flows from that core source code. Everything else is downstream of that. So whatever we're doing with consciousness raising, with enlightened leadership, with conscious business, with this or that practice, is going to run up against, at some point, that edge. It's going to run up against a system that was designed for a different purpose, and therefore, will constrain anything that's trying to deviate from that purpose. And so, when I think about the powerful iceberg metaphor  shared earlier by Nipun, underneath the water is this source code that regenerates the iceberg, a system and culture of shareholder primacy or wealth supremacy. And until and unless we change that, nothing else is going to change on top of that, other than perhaps marginally.

The B Corp Declaration of Interdependence states that as investors and entrepreneurs of this new ecosystem, we believe that we must be the change we seek in the world. It starts with personal agency. As I reflect from this seat here today, this Gandhian phrase as used by the B Corp movement probably had more of a sense about personal agency than about personal transformation. One could read both into that if one wanted to at a later date but the starting point was personal agency. The Declaration goes on to say that ‘all business ought to be conducted as if people and place mattered.’ The line of the Declaration was inspired by E. F. Schumacher and his famous book, "Small Is Beautiful" as his articulation of Buddhist economics. Other lines in the Declaration were inspired by my four year Karma Yoga exploration as well as other faith traditions.

The Declaration continues: ‘Through their products, practices, and profits, businesses should aspire to do no harm and benefit all’ - ‘do no harm’ is an application in the world of business of  the Hippocratic oath taken by doctors; as well as the Golden Rule of many faith traditions to "do unto others..." and the final phrase "to benefit all" comes from chapter eight of the Tao Te Ching,the Stephen Mitchell translation, that begins: "The best, like water, benefit all and do not compete." So hopefully you can see that there are elements from different wisdom traditions that are trying to be baked into this Declaration for a better way to do business. It continues; ‘To do so requires that we act with the understanding that we are each dependent upon another and thus responsible for each other and future generations.’ So it's bringing in the indigenous wisdom that everything we do must consider the impact on the next "Seven Generations" — from the Iroquois philosophy that the decisions we make today should result in a sustainable world seven generations into the future. All of these ideas are baked into  the founding document of the B Corp movement. Again, to the extent that you find the B Corp idea or anything of the particulars of it wanting, and I could join you in writing a long list of things that are challenging or problematic or missing about it, you wouldn't be offending me at all. This Declaration serves as a north star, a touchstone. And it too can be amended of course. But the idea is we're striving for that.

There's a famous book in US culture by Henry Thoreau, where he stalks about, "In the end we only hit the targets we aim at, so we might as well aim high." Similarly here, we're trying to set an aspiration that we're trying to repurpose business and everything else flows from that. As of today, there are over 8,000 companies that have met very rigorous standards for social, environmental performance, worker practices, environmental practices, community practices, supply chain practices, etc. We measure them and we verify it. They're in over 80, I think it's now close to 90 countries, 160 industries, all with this one uniting vision, which is to redefine success, in business and in our culture.

There’s  another element of this I’d like to share,  demonstrated by the founders of the European B Corp community. See the confetti flying down  over what was likely 150 people celebrating — there's just so much joy. They are just in the most joyful state  celebrating what they're doing, both individually, with their individual businesses, and together. They realize they can't transform the economic system alone; no matter how big or successful their individual companies, they have to do it together. And so this is also my favorite image because it brings them all together into a "WE" perhaps, not yet the  "US" envisioned at Gandhi 3.0, but at least in a beautiful "WE" formation.

The other element that I will just take a moment to speak about here is the performance standards. Those metrics around worker practices and environmental practices against which all B Corporations are assessed, are always going to be imperfect. So, the other wing of the angel of the B Corp model is the legal accountability that these companies have voluntarily opted into. Back to the source code. The source code is literally a legal doctrine. Not just in the US but  replicated throughout the world. That idea of shareholder primacy is not a US thing - we're pretty exceptional at it, we're number one, but we've exported that in a pretty awful way around the world so that is now global corporate culture. And global corporate law says that your job, no matter how enlightened or wonderful, no matter how diverse or equitable, your board is, their legal obligation, what's called their "duty of care" is to maximize the return for their shareholders. That's the legal constraint that they're in. The change, the DNA shift in the B Corp model is that we shift that fiduciary duty. We change the fiduciary duty of the directors so that their duty is no longer to maximize profit. In the language of liberation, the current economy is a slaveholder economy. The current economy robs us of our freedom of choice and tells us explicitly and implicitly, your only job is to maximize shareholder value.

We'll get to later who those shareholders are, which makes it a little bit more insidious. So, every one of the B Corps has made that legal change to upend shareholder primacy, changing the fiduciary duty of their directors so their purpose is to create a materials positive impact of society and the environment, considering the impact of their decisions not only on their shareholders but on all their stakeholders. And we also created a literally different corporate structure. We passed laws in 40 states, and in six or seven other countries to create a different kind of corporation that gives everybody  the freedom of choice to operate in a different way. I would say this is a form of liberation. This is the first step towards a liberation economy, and away from   an oppression economy. And so, through this legal change and the model of behavior of these B Corporations, an economy whose purpose is to extract and exploit is shifting through a change in its DNA to an economy whose purpose is to uplift all stakeholders. That's liberating  in a deeper Gandhian mentality of don't hate the person. Gandhi didn't hate General Smuts in South Africa, and yet he resisted the system. The system is one of shareholder primacy. And so, without looking at individual capitalists as bad, you are looking at capitalism as something that needs at the very minimum a most radical reformation, if not a complete shift.

[Flipping quickly through a few slides]

My daughter shaving my head. Cancer.

[a photo of a field with tall grass and plants in the foreground and trees in the background] "How many shades of green?" That's a question you get to ask when you're moving really slowly, as cancer forced me to do for the first time in my life.

[a photo of design detail] Spiral learning of the B Corp movement, and of all of social change. That is a banister at this little gem of a park that I  found because I could only walk at a  snail's pace. So I was discovering things I hadn't discovered before because I  had always been moving too fast.

[photos of other details in nature] Beauty in the small things.

Then, 2020: the murder of George Floyd, racial reckoning, COVID, etc.. SMore trauma to the system and at every level of the fractal and more slowing down and time for the inner work of reflection. And out of that comes the realization, that capitalism and  shareholder primacy is sitting at the nexus of white supremacy and wealth supremacy, of race and class.

400 years of racial oppression in what we now call the US and an economy built on the exploitation of black bodies and stolen land from indigenous peoples. That's where US economic and political power comes from. That is a country built on a white supremacist system and culture. And now we are just more sophisticated, and more unconscious, about doing it. So we don't talk about it, we just talk about shareholder primacy, which sounds very colorblind because anybody could be a shareholder. Anyone can buy shares. It's a free country, a free market, knock yourself out. But because there has been 400 years of oppression and wealth extraction and theft, the wealth is not equitably distributed based upon talent and hard work. And so, the statistic, if you wanted to remember one statistic [and I know you come to Gandhi 3.0 for lots of good data and statistics:) ] is 92% of all the value of all shares of stock in the US, public and private, are held by White households. So when we maximize shareholder value, we increase the racial wealth gap. When we succeed, we fail.

Our objective in the B Corp movement is to create benefit for all and do no harm and it's baked into the design of the system. This quotation is from a book called, "Wealth Supremacy" by Marjorie Kelly. This is a really powerful quote from the preface and it talks about the culture of wealth supremacy. If B Corp is addressing the system and the structure of shareholder primacy, Marjorie Kelly talks about how the culture of wealth supremacy manifests. I've highlighted here something that hit me like a ton of bricks when I first read it, "Wealthy persons matter more than others." Think about how in your life you've observed the fact that wealthy persons seem to matter more than others. How does that show up implicitly in our social relationships, in our conversations and who we defer to, etc.?

That is culture. And as famous management theorist Peter Drucker said, "Culture eats strategy for breakfast." And so that is where the inner transformation work marries the outer work,  as we change our inner perspective , we change the outer practices, we change the outer systems. And that's why I am working with White men to develop a better understanding of our own whiteness and how our whiteness and all of our different racial identities shape our worldview and especially how we as White men show up. (Oh, by the way, you wanna have another great stat — two for the price of one :) 98.1% of all assets under management in the US are managed by White men. So if money is an expression of power or can express that power or can move that power, then who controls that? It's White guys like me, we control it all.

And we get really upset if you ask us to give up a little bit. It feels like oppression to us. We are used to controlling everything. That is the dynamic that we're dealing with. And by working with individual White men on that, they can come into their own courage to express that or to share that. That enables us collectively as a "WE", to help shift culture and to provide less resistance to enable the system to transform from within by making changes to things like  fiduciary duty , to how we invest and how we allocate capital in our businesses, consistent with a different purpose than maximizing profit for shareholders.

In the summer of 2020, some of the B Corp leaders and the leaders of other business for good networks and organizations worked with hundreds of other change makers around the world and created a group focused on more of narrative change, a critical part of the culture piece - a group called "Imperative 21." And out of that massive global co-creation process, we have distilled  these three design principles for a new global economy: design for interdependence, invest for justice, and account for all stakeholders. You see other sub principles underneath each .

Somebody mentioned before that art and music are also what help to shift  culture. Yes! So part of that is also about speaking a different language (not a wonky academic language like "fiduciary duty" and "shareholder primacy", which makes  people say  "What!?" ), but artwork and other things that can distill these ideas  and project them on the sides of buildings or do other cool things that make them feel more relatable, human, and  real,  expressing a new set of values that  help us begin to envision, imagine, and then inhabit a new story.

This artwork gives you an idea. Gandhi talked a ton about the living wage that is also showing up here. Going from "winner take all" economy to a shared prosperity economy.

We're at this inflection point, this liminal space between these two centuries and these two visions of what the purpose of the economy is. If we think of it from a positive invitational sense, we are moving in this direction. Come join us, let's throw a better party. It's a lot more fun when everyone's winning. It's fun not only for the people who were losing, but honestly there is a huge psychic toll on those who are winning, who know that their winning is coming at the expense of others. The repression of that knowledge is painful.

White men, in particular, have a lot to gain in this new space because we get to show up and be fully human and be fully connected with others. And it's a much more joyful place to be, when we can be at a dance party and everybody's dancing.

Here is a way to think about this: a  Golden Rule for a sacred economy. One of the things we learned after 17 years in the B Corp movement is that it is not all about the companies. At the end of the day, the companies do not have all the power. We think they do. We talked about CEOs, but it's really the investors who have the power. It is capital who has the power in capitalism; hence the name. So, even if we changed all the companies to have this new operating system with a new expanded fiduciary duty of care, if we don't change the operating system of the capital markets, it mostly doesn't matter.

When corporations and capital  battle, capital wins. That is why this is an evolution, our experiments with truth —  this continuing revelation from a Quaker perspective is that all businesses and all financial institutions shall be responsible not only for their financial returns — which isn't to say that financial returns are not important, just that it's not the only thing — but also for their impact on all stakeholders.

And then the last two lines here are brand new, which is thinking about not just stakeholders but also about systems. Corporations and financial institutions must also be responsible for the health of the social and natural systems on which all life depends.

Regarding social systems, I grew up in a country where I took democracy for granted, however flawed it was. We are heading into a pretty deep, dark place. And that's not only in the US. When we think about our natural systems — ; many people have talked about climate, emergency and biodiversity, etc. Those systems are at risk. And no matter what individual companies do, they don't have enough power to shift systems. That is really (that has got to be) the role of institutional investors. We talk about power, the power in the system is in capital. And we need to also think about how "WE" and "US" together help shift those systems. That means not only individual enlightened leaders and companies, but the capital providers, and the huge stewards of institutional capital. The pension funds, the insurance companies, the sovereign wealth funds, and all those other folks that have trillions and trillions of dollars. They need to think of their role as being stewards of the systems on whose health everything else depends on.

A third stat (sorry!): 85% or so of all the returns from all your portfolios are from the market return. Not your individual stock picking, or your broker, everything is about how the market as a whole is doing. And so the people who own the market, which are all the big institutional investors, whose diversified portfolios ensure that they own the largest block of shares in everything, their concern, in their own self-interest, should be the health of the market, the health of the system itself. By helping them see their role, as stewards, that can help preserve the system, that can create the conditions in which we can then make better, balanced decisions in the interest of all stakeholders.

Lastly, we don't know where we're going. This is all new. This has literally never existed. And so another principle that one finds across all wisdom traditions that we have to embrace uncertainty, and give ourselves over with humility to the fact that we don't know how to do this.

This is an amazing poem (on the slide). I won't read it, it’s in Spanish, but this basically means that we are building the road as we travel. There is no path. We have to make the path by walking. So, as we do this, we can keep a visual in mind that gives us one way to think about a sacred economy — "economy with heart at the center." This beautiful graffiti artistic rendition of a heart (on the slide) is from a subway station in Santiago, Chile.

This image helps me  to leave all of the stuff about institutional investors and fiduciary duty, and all these stupid stats behind. At the end of the day, all those are just trying to be manifestations of the inequities designed into the current failing system and sick culture. The real question is this: How do we bring heart into the center of an economy - an economy that has been based for 200 and some odd years on the invisible hand (of the markets). How do we shift our culture and systems so that they value not this invisible hand of the markets, but its visible heart?

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