While in social innovation exploration mode, last month I reported back from an interesting conference on sustainable enterprise, in which we learned a few key buzzwords in the field.  One was the “Green MBA“—with special focus on triple bottom line accounting.

Which makes me wonder, is there a parallel “social innovation” LL.M course of study?
An LL.M is a postgraduate law degree (a Masters in Law) that is typically a one-year, full-time program. It is often pursued to specialize in an area of law. For example there are LL.M programs in taxation, environmental law, international law, and intellectual property.
With legislative innovations such as the benefit corporation and B corporation gaining traction, it seems that it would be useful and helpful to have attorneys who specialize in this emerging field.  Four pioneering states have already passed benefit corporation legislation. In California, the benefit corporation bill (AB 361) passed a vote in the state assembly 58 to 17, and New York’s benefit corporation legislation (A4692-A/Silver) is heading to the governor’s desk…With the connection between social innovation and law becoming a little more foreseeable than Mrs. Helen Palsgraf and harm caused by an ill-fated newspaper-wrapped package, it is food for thought to consider what tools and methods law students and attorneys have to study this subject further.

It would be great to hear feedback on any programs you know of, you can also find Innov8Social on Facebook and connect on this topic there.

 

If you are exploring signs of responsible business, you will likely come across the terms “B corporation” and “benefit corporation”…and while they may sound like synonymous buzzwords in social innovation, they are actually distinct concepts.

Here are 3 key differences to help keep them straight:

1. B Corporation is a voluntary certification.  B corporation certification recognizes companies that are purpose-driven and which create benefit for the community, the environment, and employees–as well as for shareholders. B corporation status is conferred on companies that apply with a passing score on the B Rating System and that agree to take steps to legally expand the fiduciary duty beneficiaries beyond shareholders.  The certification is granted by an advisory committee from B Lab–a non-profit organization dedication to B Corporation certification.
2. Benefit Corporation is a legal corporate structure.  You’ve likely heard of corporate structures such as a C corp or an S corp, similarly, benefit corporation is a new class of corporation that serves society and the environment, as well as shareholders. As of June 2011, four states have passed benefit corporation legislation (Maryland, Vermont, New Jersey, Virgina).
3. Becoming a Certified B Corporation is one way to meet statutory requirements for Benefit Corporation status. This is true for states that have passed benefit corporation legislation.
I had the serendipitous good fortune of being able to attend the U2 concert in Oakland yesterday after a good friend had an extra ticket. As only of the greatest bands can do, U2 made a lasting impression on upwards of 60,000 fans.

I Am One
ONE campaign wrist band from Oakland U2 show, June 2011

Bono and U2 offer a unique view of how social innovation can work. We have heard of celebrities championing causes, but attend a U2 concert and you may find the theme of social awareness is weaved in to nearly every aspect of performance.

The entire concert experience becomes a call to reflect, motivation to act, and a reason to believe.

In fact, even before the concert began, while enthusiastic ticket-holding fans were waiting in line, volunteers for the advocacy group ONE—co-founded by Bono—were on the scene. With iPads blazing.

With a few quick strokes and multitasking ease, they explained the “I Am One” campaign, added names to their petition, and handed out simple but dramatic wristbands. Bono even recognized the volunteers, the cause, and a few of ONE’s achievements during the concert.

So, what is the ONE campaign? Here are a few facts to put it in perspective:

  • ONE is an advocate. The ONE campaign is a grassroots advocacy movement fighting extreme poverty, preventable disease, and pressuring political leaders on policy ranging from supporting democracy to providing education for children.
  • ONE is a global citizen, with a special interest in Africa. With efforts spanning the world, ONE been key in securing over $100 billion in debt relief for nations struggling with extreme poverty, which has enabled countries in Africa to fund education to put 42 million more children in school. The ONE Campaign also recently supported $450 million in debt relief for Haiti after the earthquake.
  • ONE has rockstar lineage. What is now the ONE campaign is actually an amalgam of an anti-poverty advocacy group founded by Bono in 2002 and a separate grassroots anti-poverty movement launched in 2004. The two groups joined forces under the umbrella of ONE in 2008. The Board of Directors includes Bono, Bobby Shriver (of the Shriver family),  Howard and Susie Buffett (son & daughter of master investor Warren), as well as rockstars from academia, government, the non-proft sector, and business.
  • ONE is not asking for your donation. As an organization primarily focused on advocacy, ONE is not a fundraising effort. They work with world leaders to change and develop policy and practice. (note: apparently you can buy some ONE swag. ONE is also allied with (RED) the business venture designed to raise money to combat AIDS in Africa)
  • ONE wants to make its collective voice louder. ONE wants your signature, as your endorsement for its work. It wants to rachet up its member base so it can leverage its worldwide base of support in negotiating change with law makers and political leaders.
  • ONE is living proof. A big part of being a problem solver is being an active listener. The ONE campaign has a site dedicated telling the stories of issues it is addressing around the world. Real lives, and ONE living proof.
Interested in ONE? You can find more information and sign up on the ONE campaign website.

Meet the Founder Institute

I have attended two workshops hosted by the Founder Institute–a kind of accelerated startup MBA program for promising entrepreneurs–both hosted by the Institute’s Founder Adeo Ressi. From the talks I walked away feeling the passion, energy, and vision that Ressi and his team have for new entrepreneurs and budding startups.

Meet Adeo

I had a chance to catch up with Adeo after his talk on Startup Legal Q&A for Silicon Valley. Watch the quick video below to hear him outline the concept of the Founder Institute, his vision for its reach, and what inspired him to launch this initiative.

In the realm of social innovation I can’t help but think that innovation comes first—without innovation or entrepreneurial spirit there may be little with which to balance social or environmental values.

You can find out much more about the Founder Institute, the CEO mentors, the schedule of course offerings, and the application process on the Founder Institute website.

Watch the Interview

 

Ask any law school graduate, and they will probably tell you that Michigan Supreme Court in Dodge v. Ford Motor Co. 170 N.W. 668 (Mich.1919) did.

Ford Overdrive

Dodge v. Ford: A Swashbuckling Tale for Maximizing Shareholder Profit

 

The historic case Dodge v. Ford tells a page-turning tale of astonishing innovation, mind-blowing wealth, deep rumination, distrust, and defection. There are larger-than-life personalities all-around, unafraid to use (legal) sword and shield to pursue and protect their interests.Less clear, however, is who is the hero and who is the villain. That can only be judged by the lens through which you see the story.

 

Ford Motor Co. Circa 1919: The Unstoppable Model T

 

In his enlightening law review article, “Everything Old is New Again: Lessons from Dodge v. Ford Motor Company” (December 2007) University of Chicago Law School Professor M. Todd Henderson sets the scene of the automobile industry in the early 1900’s.After two unsuccessful ventures, Henry Ford’s Ford Motor Company began expanding in a big way in the early 1900’s. With efficient mass production of cars, a growing market, and increased demand—the Ford Motor Co. was virtually unstoppable. The advent of assembly-line manufacturing led production of Ford’s original “Model T” to increase from less than 2000 cars per year in 1905 to over 2 million per year by 1923—growing over 700% in the span of 2 years.

 

An OMG Reaction to ROI

 

As reported by Henderson, financial life was not bad for the handful of Ford shareholders. Investments snowballed in their rate of returns. For example the brothers Dodge—who were shareholders at the time—made an initial investment of $10,000 and would yield over $35M over the next 13 years.

 

Restless Shareholders and Distrust

 

In his article, Henderson also paints broad brush strokes in describing the personalities of Ford and the Dodges. Henry Ford is described as suspicious and to some degree–unimpressed–that shareholders were so richly rewarded for investment of only money and no effort in creating the triumphant Model T.In the same vein, the Dodges were perhaps growing restless in the shadow of their overwhelmingly successful investment. And were ready to strike on their own. They knew of Ford’s plan to withhold dividends and build a factory—which would further lower the cost of manufacturing an automobile. And, incidentally, make it harder for them compete.

Legal Swords and Shields


Dodge v. Ford was not the first time Henry Ford stepped into a courtroom. He was well-acquainted with litigation and had filed cases to defend his name and reputation.

The Dodges decided to take action to prevent the building of the new factory by flexing their shareholder muscle. They first sent a letter to Dodge questioning the propriety of denying dividends and investing those funds in a large, expensive factory.

After their inquiry went unanswered, they filed a complaint demanding that the Ford Motor Co. establish a dividend policy that distributed all earnings except certain emergency funds and that an injunction be issued to prevent construction of the factory.

The Weight of Wealth


It is not clear whether Ford was always benevolent, strategically benevolent, or whether a sense of benevolence developed as he amassed great wealth. According to Henderson’s article, it may have been a complex hybrid.

Said Ford, “I believe it is better for the nation, and far better for humanity, that between 20,000 and 30,000 people should be contented and well fed than that a few millionaires should be made.”

It probably didn’t hurt the Ford Motor Co.’s prospects that the proposed actions (i.e. withholding dividend and reducing the cost of a car by ramping up production) would not only endear Ford to Americans but would also undercut future competition.

 

The Michigan Supreme Court Issues a Decision


While the lower court called for a special dividend to be issued and an injunction. The Michigan Supreme Court took a more subtle approach. It tried to keep courts at bay from making business decisions by declaring that courts must defer to the rational business judgment of a company. But allowed itself a loophole, by saying that Ford did not follow a rational business objective in denying dividends.

At the end, the Michigan Supreme Court gave Dodges their special dividend and Ford–the go-ahead for building his new factory.

 

Just a Load of Dicta?


In case law speak, judicial commentary articulating an opinion and not decisive to the case is known as “dicta” and is not binding in the court of law. The comments that have made Dodge v. Ford the single-most known case for defining a corporation’s duty to maximize shareholder wealth…comes in, well, dicta.

That has led some, such as UCLA Law Professor Lynn A. Stout to argue that Dodge v. Ford is not actually good law. She does so in her law review article “Why We Should Stop Teaching Dodge v. Ford“.

 

Why I am Fascinated by Dodge v. Ford


While I love learning the details of all of the law school cases I studied (note: this may be an overstatement :), I have truly been fascinated by the far-reaching implications of this case since the day I learned about it in a Corporation Law course. Whether or not the case has been misconstrued or is wrongly emphasized as an articulation of the maximize shareholder wealth principle, it is taught by law professors and learned by law students in that context.

And, in that context, the concept that the legal framework supports a single financial bottom line pursuit by corporations, I think, may impact the incentives and methodologies business chooses.

While, as Henderson argues, the Michigan Supreme Court may have found an ‘elegant’ solution to a complex situation of competing interests, the long-range result of emphasizing shareholder wealth above other measures suggests that other costs and outcomes are de-emphasized.

 

Triple Bottom Line and Shareholder Redefinition

Perhaps, to some degree, and according to the long-living dicta of Dodge v. Ford, businesses are not always incentivized to consider externalities such a corporation’s relationship to the environment, employee well-being, community involvement, and social justice.

If there was a way to work in such externalities to the ‘bottom line’ of rational business judgment outlined by Dodge v. Ford or expanding our definition of ‘shareholders’ to include non-monetary contributors it could literally change the way business is done by rewarding a company for its business acumen as well as its social innovation.

What do you call it when you make big life changes to “find your destiny” or “realize your true potential” or to answer a whisper that has been long-marinating?

If you’ve lived in the past quarter-century of Oprah Winfrey, you may simply refer to it as the Oprah Effect.

I’m always amazed when I get a harsh or caustic reaction to the mention of Oprah’s name. I’m sure there are naysayers and skeptics–and reasons for their criticism– but I guess she has just been part of our household and my life for so long that for me there isn’t space to dismiss her reach, her passion, her success, and her motivation to inspire.
For my mom, moving to the U.S. in her mid-twenties, Oprah was a friendly voice and willing tour guide to America and its sometimes-surprising ways. For my sister and I she has been an inspiration, and has set a high bar for what is possible, and what we can contribute, teach, and achieve.
Watch her show and you will see profound examples of the Oprah Effect. Individuals who have creatively raised money for causes in need of support, who have used their own talents to serve, who have lived through excruciating circumstances with level grace and dignity, and who–in spite or because of–events in their lives have found a voice, a place, a purpose.
I would like to think the Oprah Effect has held the hand of social innovation—or at least given it a place to grow.
She is perhaps among the most known coincidental social innovator—using her acumen in enterprise, her expansive platform, and her team-building to raise awareness of social injustice, shed light on environmental issues, toast efforts (charitable and corporate) that are making a difference.
And above all, she has constantly underscored the importance of dialogue–a tenet of lasting social innovation.
We may never know Oprah’s celebrity–never be able to understand how profoundly it can impact the way decisions are made, how deals are brokered, the kind of compromises that are required, how empires are grown. But in seeing the rise and fall of those who have experienced it—I think her commitment to authenticity and service speaks lessons of a career well-pursued.
So, to those who have been moved to be the best version of themselves by the Oprah Effect and those of us who strive to—Oprah, good luck in your future endeavors. And Godspeed.

What is a “Compromise Trap”?

What do you call it when you have to find middle ground between your internal compass or set of values and demands of a workplace, academic environment, or an entrepreneurial venture—how about a “compromise trap”? The term describes a pretty familiar scenario for many at some point in their careers–and it is the title of Elizabeth Doty’s new book.

Meet Elizabeth Doty

Elizabeth DotyWith credentials from Berkeley and an MBA from Harvard, Doty approaches this issue with over 3 decades of experience with large organizations including serving as a management consultant to companies such as Intuit and Hewlitt-Packard.

Elizabeth led a lively discussion during an event organized by Net Impact San Fransisco on May 24, 2011. I caught up with her afterwards to see if she could explain the concept of a “compromise trap” and what she learned through research & writing her book.So here it is—a peek into The Compromise Trap in author Elizabeth Doty’s own words….

Watch the Interview

Walk into a grocery store these days and you will likely find that shortage of options is not an issue. Whether choosing flavors of bottled water or growing locale of a bushel of apples, you are the king, queen, and chief justice of choice.So what does that make you, me, and the billions of other buyers of goods and services—are we consumers…or voters? And what factors will tip us over the edge in deciding whether to pay or pass on something.Here are a few common factors that come to mind when deciding whether to buy a grocery product:
– cost (price, cost per serving, sales/promotions, incentives, bulk/bargain buys)
– nutrition (low calorie, low fat, high protein, gluten free, not gluten free, etc.)
– availability
– expiration date

but with a shifting focus on sustainability, health, and reducing our carbon footprint, a few more factors can come in play:
– was it grown locally?
– is it organic?
– fair trade?
– were hormones/pesticides used?
– did the company use sustainable practices?
– is the company a responsible employer?

voting or shopping

All of these various factors can complicate a simple grocery run for bread and milk—to say the least.

Certifications and badges can help guide our choices. For example the Guayaki bottle of organic mint yerba mate tea on the right features a mini display case of badges denoting its various certifications. And these can be decidedly helpful—if we know what they stand for & if we are on board with the certification process.

Guayaki notes its approval as a B corp—which is of special interest to me as that entails a number of other factors including social and environmental considerations.

Do certifications make a difference when you shop?
And do companies actually benefit by being evaluated for certifications?

Whether we see them as such or not, our purchases ($.25 or $25,000) are also votes for a particular product, brand, or type of product. Just as you cast a ballot for your favorite candidate, ‘voting’ for a product makes a statement to companies, suppliers, buyers, and retailers.

Arguably, however, no matter how aligned with our values a product may be, if it doesn’t meet our basic consumer instincts (i.e. do you love it? is it a good value?) it may not make it off the shelf and into our carts.

So, consumers or voters? I would venture to say both—and to examine further—we may see ourselves as consumers first and voters subsequent.  As ever, am curious to hear broader feedback :)

When delving into any field there is often special field-specific terminology that helps define and explain core concepts and ideas. Sustainable enterprise is no different. While attending the Sustainable Enterprise Conference I came across a few industry-specific buzzwords related to social enterprise, social entrepreneurship, and social innovation that were mentioned throughout the day. Here’s a rundown:

1. Triple Bottom Line

The “bottom line” for a company generally refers to profits. Triple bottom line results encompass people, planet, and profits (it is also called TBL or 3BL). It is the key performance indicator (KPI) for assessing a company’s success in the social enterprise context. The term, in fact, has been adopted by the United Nations as well as other organized bodies focused on sustainability. It calls for companies and organizations to focus on various affected stakeholders (social, environmental, financial) rather than solely the shareholders. Learn more about the Triple Bottom Line on Wikipedia, including supporting arguments and criticisms of the term.


2. Greenwashing

Greenwashing refers to the misleading or deceptive advertising or spin on products and services that make them appear to be environmentally-responsible when they may not be, or more environmentally-friendly than they actually are. Though there do not seem to be universal guidelines to determine the true “green” factor for a business, the Federal Trade Commission (FTC) has identified voluntary guidelines for environmental marketing claims. Greenpeace also outlines criteria for spotting “greenwash”.

 

3. Carbon Off-Setting

Carbon offsets refer to investments/donations to environmental projects and initiatives for the purpose of offsetting unavoidable carbon emissions. Products or services that label themselves as “carbon neutral” often take a two-step approach: 1) reduce their own carbon emissions (reducing waste, recycling, reusing, conserving); and 2) offset unavoidable emissions by funding initiatives that reduce greenhouse gases. The CORE Initiative website offers insight on identifying the “most influential” carbon offset programs.

 

4. AB 361

AB 361 is the title of the legislation being proposed in California to create an official “benefit corporation” corporate structure. The proposed benefit corporation would be a voluntary structure that would enable CA corporations to pursue triple bottom line goals. AB 361 was introduced by CA Assemblymember Jared Huffman.

 

5. Green MBA

Green MBA refers to graduate business management programs that examine in-depth the triple bottom line reporting and the complex interconnectivities between issues of business, environment, sustainability, management, conservation, and social justice. Two premier schools offering Green MBA’s represented at the Sustainable Enterprise Conference were Presidio Graduate School and Dominican University of California.

Read More:

I had the chance to attend the Sustainable Enterprise Conference in Sonoma this past Friday. It was an opportunity to get plugged in on local efforts, campaigns, and ventures in the realm of sustainability.It was a great experience—I was struck by the sense of community within the sustainable enterprise movement. Like a tuned ecosystem–many of these companies collaborate, pool resources, and both support and are supported by a growing infrastructure of conservation and social responsibility  Here’s a high-level overview of the event and sessions I attended (note: there were a number of other workshop options)…with links so you can continue your research into the various orgs, speakers, and concepts mentioned.sustainable enterprise conference
Welcome by Genevieve Taylor (Partner, CircadiaOne), Brad Baker (President/CEO, Codding Investments), and Robert Girling Ph.D. (Author).Keynote address “California Legislation for a Sustainable Future” by California State Assemblymember for the 6th Assembly District Jared Huffman, JD

Keynote address “Ecological Sustainability and Economic Drivers” by Maggie Winslow, Ph.D. (Academic Dean, Presidio Green MBA)

Keynote address “Green Energy in the Golden State Under a Brown Administration” by Panama Bartholomy (Deputy Dir., Effiency and Renewables Division, CA Energy Commission)


Workshop: “Straus Family Creamery Strategic Planning” panel including Edward L. Quevedo (Sr. Counsel & Chair of Sustainability Practice, Paladin Law Group, LLP), Sarah Isabel Parriott (Sustainability Strategy PM, Paladin Law Group), and Deborah Parrish (CFO, Straus Family Creamery), with special guest Albert Straus (Founder of Straus)

Keynote address “Pulp Non-Fiction: Changing the Paper Industry” by Jeff Mendelsohn (President/Founder, New Leaf Paper)

Workshop: “Behind the Scenes with B2B B Corporations: Building the Vision and Infrastructure to Shape, Support, and Scale the Sustainable Business Economy” panel including Matt Reynolds (CEO of Indigenous Designs), Jonathan Storper (Partner & Chair of Sustainable Business, Hanson Bridgett LLP), and Carolyn McMaster (Principal, ThinkShift Communications)

Workshop: “Localization and Sustainability: Tales of Success” with panel including Mike McGuire (4th Dist. Sonoma, County Supervisor), Tom Scott (VP and GM, Oliver’s Market), Nancy Bailey, (GM, Quivira Wineyards & Winery), and Evelina Molina (Co-Founder, North Bay Institute of Green Technology)

Lessons Learned, Call to Action and Closing Statements by Oren Wool (Executive Director, Sustainable Enterprise Conference)

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