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Do-Good Companies Pay It Forward

Local Matters


Published June 1, 2005 at 4:00 p.m.

When Baby Boomers go down in history, it won't just be for rock 'n' roll and free love. At least some of the Americans who came of age in the 1960s are striving to leave as a legacy the socially responsible approach to making money.

The means for handing this model down to the next generation will be considered at a June 6 seminar on "The Legacy Question." The event at the Sheraton in South Burlington is co-sponsored by the Vermont Employee Ownership Center, a consultation and advocacy organization that is holding its third annual conference later the same day.

Answering the legacy question is "the biggest challenge socially responsible businesses are facing now," says Marjorie Kelly, editor of Business Ethics magazine and lead presenter at next week's seminar. "It's a generational issue," she adds, noting that the first contingent of socially responsible business owners -- "the pioneers" -- are nearing retirement age. They must decide how best to advance their revolutionary form of capitalism, which views just treatment of workers, communities and the environment as equal in importance to private profit-making.

Ownership structure is what ultimately drives a company's social mission, Kelly observes. And giving employees control over a company, usually through a stock ownership plan, offers the surest guarantee of continued social responsibility.

But employee ownership may not be a feasible choice for every company, Kelly cautions. "That's why we need to develop new ways of operating businesses. We have to continue being creative in meeting challenges."

Many business owners grappling with the legacy issue look to the experience of Ben & Jerry's as one to be assiduously avoided, Kelly says. The takeover of this new-model

ice cream company by an old-fashioned multinational corporation led to the loss of most of Ben & Jerry's defining characteristics, Kelly points out. In the five years since stockholders basically forced the sale to Unilever, the company's social mission has gone into remission and its Vermont roots have withered.

Fear of just such an eventuality motivated Frank Sands to restructure his family's 210-year-old business as an employee-owned company. "My experience with sales of companies is that lots of times the buyers don't have the best long-term interests of the business in mind," says Sands, chairman of the board of King Arthur Flour and a keynoter at the June 6 seminar.

Sands, 69, inherited King Arthur in 1963 and moved it to Norwich from the Boston area in the mid-1980s. He decided to relocate to Vermont rather than New Hampshire because there's a stronger social consciousness on this side of the Connecticut River, he says.

The company also began building an employee stock ownership plan (Esop) that has put King Arthur entirely in the hands of its 150 workers. The key to the successful transfer, Sands says, was the company's sell-off of unionized subsidiaries in 1980. "Almost by definition, labor unions have to maintain the schism between management and workers. As long as that existed, there was no possibility of developing employee ownership."

Sands says the Esop resulted in enormous productivity gains; King Arthur will soon pass Pillsbury to become the No. 2 branded flour company in the United States, trailing only General Mills' gold medal. "When you're an owner, you think about the business all the time. You don't watch the clock; you're always developing ideas for doing things better," Sands observes.

Giving employees control of the Autumn Harp lip balm company would have been "personally a very satisfying move," says co-founder Kevin Harper, who will also speak at the seminar. Layoffs in 1999 obviated that option, however. "Part of our downsizing involved elimination of a management team that might have been able to collectively organize to run a $10 million business," Harper explains.

The trauma of the layoffs and shifts in Autumn Harp's market orientation pushed Harper to the selling point. "For me, 25 years was enough. I also wanted to get into other things," says Harper, 53, who now serves on the boards of four Vermont nonprofits.

He hired a broker to find a buyer. Inquiries and offers poured in from around the world, but Harper eventually decided on someone in Autumn Harp's own backyard. Dave Logan, a Shelburne entrepreneur, bought the Bristol-based business in 2001 and has since doubled its workforce as well as its revenues.

Harper says he chose Logan "because I was sure he would manage the company in much the same way it had been managed." For Harper, the true bottom line was "proving it was possible to pay people well, treat them fairly, provide them with health coverage -- all the things they sweat the most. I also wanted to make products people need and to do it without taxing the planet," he says. "Now all this can continue."