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What Matters Most: How a Small Group of Pioneers Is Teaching Social Responsibility to Big Business, and Why Big Business Is Listening

What Matters Most: How a Small Group of Pioneers Is Teaching Social Responsibility to Big Business, and Why Big Business Is Listening

by Jeffrey Hollender, Stephen Fenichell

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For more than sixteen years, Jeffrey Hollender has presided over Seventh Generation, a world leader in manufacturing environmentally friendly, nontoxic household products. What Matters Most illuminates the successful practices of Seventh Generation-and many other pioneering companies around the world-to demonstrate the pragmatic aspects of a corporate


For more than sixteen years, Jeffrey Hollender has presided over Seventh Generation, a world leader in manufacturing environmentally friendly, nontoxic household products. What Matters Most illuminates the successful practices of Seventh Generation-and many other pioneering companies around the world-to demonstrate the pragmatic aspects of a corporate strategy that hardwires social and environmental concerns into the company's culture, operating systems, and business relationships. It shows business leaders how to assess their own company's performance, adopt a socially responsible approach to doing business, and embark on a path of long-term growth. "Jeffrey Hollender...has shown that doing the right thing does pay off both in terms of building a brand that generates great customer loyalty and a business that has consistently generated superior growth." -Ben Cohen, Founder, Ben & Jerry's "What Matters Most stands out for its moderate and thoughtful analysis of a controversial issue.... Hollender is a voice of reason in today's important debate on corporate responsibility." -Soundview Speed Reviews

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Basic Books
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5.30(w) x 7.90(h) x 0.80(d)

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What Matters Most

How a Small Group of Pioneers Is Teaching Social Responsibility to Big Business, and Why Big Business Is Listening

By Jeffrey Hollender Basic Books

Copyright © 2006 Jeffrey Hollender
All right reserved.

ISBN: 9780465030866

Chapter One

The Making of a Movement

One summer day in 1990, I found myself in a Southern California retreat center sitting in a circle composed of Body Shop founder Anita Roddick; Ben & Jerry's Homemade founder Ben Cohen; Wayne Silby, chairman of the Calvert Group of mutual funds; and Joshua Mailman, a quirky, creative, quietly influential New York-based social investor and philanthropist who three years before had cofounded (with Silby) the organization responsible for the retreat: The Social Venture Network. SVN is a low-profile leadership group composed of socially progressive entrepreneurs, with a sprinkling of nonprofit participants, organized to promote the idea that business can and should be a vehicle for social change.

Three years earlier, Silby and Mailman had written a letter to about thirty-five potentially interested parties offering to host them for a "working weekend" at Gold Lake Mountain Resort, a rustic-style retreat about two hours outside of Denver, Colorado. As the letter explained:

Our purpose will be to explore the idea of forming some sort of ethical investment banking network that can serve as a model for bringing emerging social valuesinto a more collective sphere.

One reason the letter produced such an enthusiastic response-of the thirty-five invitees, seventy-two people actually showed up-may have been that 1987 was the year of Oliver Stone's Wall Street, which featured Gordon Gekko's memorable assertion, "greed is good." The source of this may be a well-known diatribe in Ayn Rand's The Fountainhead, disputing the notion that "money is the root of all evil." But whatever its source, this line-derived from an actual speech delivered by the financier Ivan Boesky-turned out to be a fitting slogan for the times. The heady free-market spirit of Reaganomics was very much in full swing, much to the distress of the majority of the conference's attendees. The conference organizers clearly hoped that by staging an event that ran culturally counter to the prevailing ethos, they might promote a valid alternative.

As a piece of social history, the agenda of that first SVN conference makes for some interesting reading. Following brief after-dinner opening remarks on Friday evening from Silby and Mailman, the participants were treated to a presentation by a social anthropologist, Dr. Frances Harwood, on the topic "The Entrepreneur as Shaman."

One of the many distinctive features of SVN conferences is the palpable presence of spiritual and religious leaders, including-on frequent occasions-Baba Ram Dass (born Richard Alpert and an assistant professor at Harvard and early disciple of Timothy Leary until he discovered his spiritual calling), Bernie Glassman, a Jewish Buddhist monk who runs a successful bakery in Yonkers, as well as the Venerable Chogyam Trungpa Rinpoche, a prominent Buddhist thinker and leader then based in Vermont, who attended the first SVN meeting.

This spiritual aspect reflects Wayne Silby's long-standing interest in infusing business practices with a spiritual, social, moral, and ethical dimension. He was clearly influenced by a 1979 Buddhist-sponsored conference in Vermont entitled "Right Livelihood."

Wayne was born in Iowa and traveled around India and much of Asia after graduating from law school. In his midtwenties, he founded the Calvert Investment Group, which he and his partners named after the street in Washington, D.C., where the fund had its first offices.

In the first of many incarnations, the Calvert Group dealt exclusively in "variable-rate securities," a Wall Street term for refinancing government-insured corporate debt. When interest rates spiked in the late 1970s, the Calvert fund gained a comparable boost, and before long Wayne and his young partners were managing over a billion dollars in assets.

Calvert's internal culture reflected Wayne's personal style. Employees wore jeans and bare feet to work, and "customers would come in," Wayne recently told us, "and put their life savings down on a cardboard table." Only after one of his staff members tried to steal $1.5 million in cash from the office did Wayne decide to tighten things up, at least sartorially. "I started wearing a tie the next day."

The Right Livelihood conference was a turning point not only for Wayne personally, but also strategically for the Calvert Fund Group. Before the 1979 conference, the funds were managed with no particular moral, ethical, or social criteria, which was the way nearly all mutual funds and financial instruments were governed at the time. But in Vermont it dawned upon him that "there was more to life than a few extra basis points"-basis points being the increments of 1/100th of 1 percent, which, then as now, ruled the world of mutual fund performance. "That conference turned my life around 180 degrees," Wayne recalled in the pleasantly chaotic living room of his Washington, D.C., townhouse, out of which he runs at least half a dozen for-profit and nonprofit organizations. "Nothing was the same after that."

Wayne's initial idea was to "somehow integrate the values of the Baby Boom generation into a financial product. We had money and resources which we felt needed to be deployed in keeping with our social values, which were themselves the product of the Civil Rights and anti-war movements of the late sixties, and the anti-apartheid movement of the seventies."

In 1981, Wayne had to overcome a certain degree of internal skepticism. "My partners told me in no uncertain terms that they thought I was on drugs. But I felt that this was really something I wanted to do, and I told my partner that I would throw a real tantrum if he-or they-tried to stop me. This was basically a chairman's pet project, because even though the vote at the meeting was five against one, as chairman I got five votes, so I won." Fortunately for Wayne and his investors (and for the future of the socially responsible investing movement), the renamed Calvert Social Investment Fund prospered.

Wayne Silby did not invent the idea of socially responsible investing (SRI). The first socially conscious investors on record belonged to the Society of Friends, better known as the Quakers, who began screening their investments according to moral and ethical criteria as early as the seventeenth century. The highly industrious Quakers tended to have a fair amount of money to invest, and they would steer away from companies that profited from activities of which they disapproved.

The Quakers were against slavery and against war-totally, utterly, uncompromisingly. In the seventeenth, eighteenth, and even nineteenth centuries, such a stance sharply limited your investment portfolio, because so many companies made their money through weapons production, other forms of military supply, or by growing the great agricultural commodities of the pre-industrial world: cotton, tobacco, sugar, coffee, and tea, nearly every one of which employed some form of enforced servitude.

By the 1920s, a number of religious institutions had taken up the idea of aligning their investing practices with their moral and spiritual principles. "Many Christians would never consider operating a casino, owning a liquor store, manufacturing weapons, using near-slave labor or operating a lending business charging usurious rates," wrote Gary Moore in The Thoughtful Christian's Guide to Investing, published in the midtwenties. Thoughtful Christians, Moore pointed out, would be well-advised to consider the potentially sinful purposes to which their stocks, bonds, and bank deposits might be put. Many religiously oriented people began to query their investment advisors as to how their money was making money.

In 1928, a financier named Philip L. Carret launched the Pioneer Fund in Boston to fill what he perceived as the growing need for a morally beneficial investment policy. Carret actively managed his fund for seventy years, until his death in 1998, with such consistency and quality of performance that "socially responsible investing" gained a degree of credibility based simply on Carret's track record. When Mutual Fund magazine rated the Pioneer Fund "the best mutual fund ever," the idea of socially responsible investing no longer seemed so off the wall.

Yet the universe of socially responsible mutual funds didn't really take off until nearly forty years after the founding of Carret's pioneering fund. The SRI idea lay dormant in the fifties and early sixties, but by the late sixties, a deeply divided and generationally polarized population was open to change in a variety of fields, including the rarefied and notoriously straitlaced world of money management.

Corporate complicity in environmental pollution, Ralph Nader's revelations of shoddy automobile manufacture, the successful consumer boycott of Dow Chemical for producing napalm during the Vietnam War-all began to change the moral and ethical lens through which corporate behavior was viewed in the United States. An increasing level of popular skepticism and hostility toward business-in particular big business-shifted the landscape to such a degree that gradually an emerging SRI movement began to take form. Steering your money into avenues where it might do some good, and away from avenues where it might do some bad, became more broadly perceived as a legitimate vehicle for social change.

In 1971, the Pax World fund became the first mutual fund to capitalize, as it were, on the burgeoning antiwar mood. Pax screened out defense stocks and only defense stocks, and successfully attracted investors who wanted to abide by this morally and ethically informed investment policy. That year marked a watershed in the evolving relationship between consumers, investors, and corporate managers, who up until then had treated both consumers and investors with a degree of disengagement that might charitably be described as paternalistic. The president of the Episcopal Church in the United States petitioned General Motors to cease all operations in South Africa, a shareholder resolution that to GM's shock and horror attracted widespread shareholder support. The walls were, as the song said, tumbling down.

Within months, a number of U.S. cities and municipalities (starting, not surprisingly, with Madison, Wisconsin) had begun passing local laws prohibiting governments under their jurisdiction from conducting business with companies active in South Africa. By the mid-seventies, these boycotts had begun to take their toll on management, on investor relations, on corporate reputations and goodwill, and eventually on share prices. When share prices suffered, managers were forced to sit up and take notice. This was no sentimental fringe fad.

By 1982, the year Wayne Silby launched his Calvert Social Investment Fund, a significant number of companies with operations in South Africa-including Mobil, Goodyear, RJR Nabisco, and Johnson & Johnson-had responded to the mounting consumer pressure by divesting themselves of their South African operations, often at substantial markdowns to their book values, and thus a loss to shareholder equity. The consumer boycott had irredeemably changed not only the operational profile of business, but its reputational profile as well. SRI, as it was soon to be known, had effectively rewritten the rules of a very old game.

For the first time in history, iconic American companies had been punished where it hurt most-in their balance sheets, and in their shareholders' brokerage firm statements-for failing to heed a moral imperative. Many managers and investors were furious at the unwelcome interference when into the fray stepped Leon Sullivan, an American clergyman, who forged an effective compromise to an increasingly polarized situation. His Sullivan Principles rewarded companies for good behavior with regard to South Africa, as opposed to simply punishing bad behavior. Though the term was not yet part of the popular parlance, the Sullivan Principles functioned effectively as a positive screen as well as a vehicle for social change.

When Wayne began soliciting funds for Calvert Social Investment Fund in 1982, he says now,

We became the first fund to just say no to all sorts of things. We didn't say no to drugs, like Nancy Reagan, because for the most part, we were high on pharmaceuticals. But we did say no to defense stocks, no to stocks in companies in bed with South Africa, no to stocks that made money out of environmental degradation, no to stocks in companies that failed to respect human rights, no to stocks in companies that trampled on the rights of indigenous peoples around the world.

One of Calvert's contributions to what had by then become a burgeoning if still somewhat minor field was to create an advisory board of experts comprising a wide range of academics and activists. "Our values were formed and informed by our advisory council," Wayne recalls. "We made sure to cast our net pretty wide. We had Amory and Hunter Lovins and Bob Rodale from the environmental field, Hazel Henderson from the field of environmental economics, and a number of experts and anthropologists on the rights of indigenous people." This last became one of Calvert Fund's special areas of concern.

At a pivotal moment in the evolution of the Calvert Fund, Wayne met the young philanthropist Joshua Mailman through the Threshold Foundation. "Meeting Josh Mailman," Wayne recalled, "was like a revelation, because it made me finally realize what it must have been like for people to meet me." He and Joshua quickly discovered a spiritual and intellectual kinship. They soon concluded that where social change was concerned, two were better than one, twenty were better than ten, and four dozen might be better than two dozen. After hitting that number, they really weren't sure.

Wayne describes the Threshold Foundation, otherwise known as "the dough nuts"-which remains active today-as "a group of people who want to get people to start thinking differently about money." The organization to which I was briefly a member includes the children of some of America's wealthiest families from the original robber barons to an eclectic collection of names that you might find today in the Forbes list of the 500 wealthiest individuals in America. The foundation's Web site says much the same thing, in a bit more detail.

Threshold provides a place where people with significant financial resources, a commitment to social change and an interest in their own emotional, psychological and spiritual development can come together to scheme, dream, learn, work, play and see what happens. We have observed that social change flows from personal growth so we work on our inner lives and social responsibility simultaneously.


Excerpted from What Matters Most by Jeffrey Hollender Copyright © 2006 by Jeffrey Hollender. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Meet the Author

Jeffrey Hollender is President and CEO of the Vermont-based Seventh Generation. A frequent commentator on corporate responsibility, he has appeared before such varied groups as the Harvard Environmental Forum, the World Resources Institute Sustainable Enterprise Summit, Nike's Apparel Group, the Environmental Protection Agency's Waste Conference, the United Nations Summit on Sustain-able Growth, and many others. He is the author of the best-selling How to Make the World a Better Place and resides in Charlotte, Vermont. Stephen Fenichell is a nonfiction author. His titles range from Plastic: The Making of a Synthetic Century and Passport for Profit (with emerging markets pioneer Mark Mobius) to A New Brand World with brand consultant Scott Bedbury. His articles have appeared in Men's Journal, GQ, Business 2.0, Discover, and Newsweek International. He lives in New York.

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