Tag Archives: Patagonia

The Week in Ethics: 2012 Leadership Wins and Losses

One of the most powerful lessons from 2012 is how leaders use their influence.

Consider some examples of career sky dives from three men highly regarded in their field who failed to use their influence in ways to keep trust with  their constituencies: former CIA Director David Petraeus (an affair with his biographer); former Penn State University President Graham Spanier (criminal charges filed); and Lance Armstrong (stripped of all seven Tour de France medals).

Demonstrating effective personal influence tackling social or political issues is a hard road for CEOs, presumably easier for politicians. In the examples of the leaders of the City of New York, Chick-Fil-A, and Patagonia there were mixed results.

At the University of Virgina (UVA), influence was exerted over organizational change in a manner that drew widespread criticism.

While not all politicians are willing to risk using political capital to further social issues, New York City Mayor Michael Bloomberg risked unpopularity in escalating his war on obesity by banning the sale of large sugary drinks. The ban approved in September by New York City’s Health Board takes effect in March 2013. New York is the first U. S. city to take such action.

“It’s not perfect, Bloomberg said, “it’s not the only answer, it’s not the only cause of people being overweight – but we’ve got to do something. We have an obligation to warn you when things are not good for your health.”

Chick-Fil-A CEO Dan Cathy found himself in a firestorm of controversy last summer when the national restaurant chain used company dollars to support anti-gay marriage groups; this pleased some patrons, disenfranchised others and resulted in widespread protests that continued with different players once the company indicated it would no longer support political or social issues.

Patagonia’s founder and chairman Yvon Chouinard has become a leading corporate voice in environmental responsibility by taking small, consistent steps to address how his company does business. He has served as a volunteer adviser to Wal-Mart in green business practices. Patagonia’s mission statement seeks to bring people together: “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”  

Chouinard’s 2012 book The Responsible Company: What We’ve Learned From Patagonia’s First 40 Years  includes a checklist of 263 recommendations to help companies benchmark where they are and where they might want to be to improve their environmental track record.

An accrediting body accused UVA’s Board of Visitors of using its influence to compromise the institution’s integrity, and failing to follow appropriate governance procedures in the ouster of President Teresa Sullivan. Sullivan was reinstated after faculty and student protests.

Rector Helen Dragas (Board of Visitors’ chair) had a vision for the university that didn’t include Sullivan leading it; Sullivan had been hired two years before. Citing challenges facing higher education, Dragas led an effort to force her out  that met with strong, but civil, resistance from university constituencies who supported both Sullivan and a university culture that didn’t handle disagreements in the manner used by the Board of Visitors.

Governor Bob McDonnell reappointed Dragas to another term; however she has been meeting with Virginia legislative leaders lobbying to keep her position; the Legislature, which vets gubernatorial appointments, will vote in January on her reappointment.

Authority has limits. Influence fueled by earned trust has an infinite spectrum in which to operate.

Gael O’Brien December 31, 2012

The Week in Ethics

Gael O’Brien is also a columnist for Business Ethics Magazine; her December 2012 column is “Women in the C-Suite: Finding Ways to Break the Seal.” She is The Ethics Coach columnist for Entrepreneur Magazine.


The Week in Ethics: Benefit Corporations, A Path Away from Crises

How many crises would be averted – root causes eliminated or problems contained – if companies operated with a lens that included their impact on society as well as shareholder value?

Lessons learned from the crises of BP,  Toyota, Massey EnergyGoldman Sachs,  and the 2008 global economic meltdown — among many others — have demonstrated the human break down when companies focus on profits, losing sight of the impact of what they do (or fail to do) on people, communities, and society.

Slowly but perceptibly, other ways of doing business are posing alternatives to business as usual. Conscious Capitalism, shared value, social entrepreneurship, and the B Corporation or benefit corporation  are among the models.

In seven states (Vermont, Maryland, New Jersey, Virginia, Hawaii, New York, and California) over nearly two years, companies who have registered to become benefit corporations have broadened their lens beyond profit maximization. They can now structure their business to include social and environmental concerns  in their mission. The legal structure of benefit corporations provides a shield against shareholder lawsuits that say such activities dilute stock value. Several other states are considering legislation to adopt this corporate structure.

Patagonia  founder Yvon Chouinard was the first to register his company as a benefit corporation in California when its law went into effect January 2012. He indicated Patagonia was trying to build for the next 100 years: “Benefit corporation legislation creates the legal framework to enable mission-driven companies like Patagonia to stay mission-driven through succession, capital raises, and even changes in ownership,” he said, “by institutionalizing the values, culture, processes, and high standards put in place by founding entrepreneurs.”

Mission-driven companies like Patagonia are profitable and far less likely to show up on the damaged-reputation list of those felled by crises. For those filing as benefit corporations, the requirement that companies’ corporate purpose create a material positive impact on society and the environment further reduces the risk of crisis. It broadens the criteria that go into making good and sustainable business decisions.

An additional risk mitigation factor involves requiring benefit corporations to redefine fiduciary responsibility to consider the interests of workers, community and the environment. This will necessitate discussing in board and executive meetings the impact of proposed actions beyond the silo of a company’s own interest. Accountability and transparency are reinforced by benefit corporations being required to use an independent, third-party standard in reporting social and environmental performance.

Critics of benefit corporations argue this is just a legal fad. The argument goes that corporate directors already have the ability to justify actions like saving the whales or other causes they feel are in a company’s best interests. They point out that under current law, companies can demonstrate socially responsible behavior.

However, there is a difference between the option to demonstrate socially responsible behavior (perhaps under the auspices of a department like CSR) and having it permeate the DNA of your organization. By building it into your corporate purpose, your business strategy, the impact you want your company to have on society and the environment, it isn’t ancillary; it becomes how business is approached.

The benefit corporation is an example of a new way of doing business where the shareholder investor and the stakeholder of society both get what they need without either being jeopardized.

The existing business paradigm isn’t working, said Chouinard in January after he registered Patagonia as a benefit corporation. “This is the future.”

In the aftermath’s of 2011’s Occupy protests, benefit corporations invite the possibility that comes with thinking differently.

Gael O’Brien         January 31, 2012

The Week in Ethics

Gael O’Brien is also a columnist for Business Ethics Magazine; her January 2012 column was “After Paterno, Penn State’s Struggle to Rebuild Trust.”