B corporation
UV5319
May 10, 2010
B CORPORATION: A NEW SUSTAINABLE BUSINESS MODEL
“We envision a new sector of the economy which harnesses the power of private enterprise to create public benefit.”
—B Lab, “Declaration of Interdependence,” 2010
Introduction
Jay Coen Gilbert and Bart Houlahan were friends as undergraduates at Stanford
University. In 1993, a few years after graduation, they helped start the basketball shoe and apparel company AND1. As the company grew, cofounder Gilbert and president Houlahan emphasized financial success along with corporate social responsibility (also called triple bottom line strategy and sustainable business): AND1 paid employees respectable wages, donated 5% of profits to charity, and made sure factories in China met their standards. The company was generating close to $250 million in annual revenue when it was sold to American Sporting
Goods, Inc., in 2005. Gilbert and Houlahan were personally enriched—but disempowered: They watched their effort to create an innovative business model vanish under the new owners.1
Gilbert and Houlahan were not alone. Ben & Jerry’s, known for its ice cream and its social responsibility, was sold to Unilever in 2000. Although some board members had misgivings, they voted for the sale because Vermont, like most states, required the board to act in the interest of the shareholders, which meant accepting Unilever’s exceptionally lucrative offer.
Gilbert and Houlahan wanted a way to protect the triple bottom line (combined financial, social, and environmental performance) of companies even as companies switched owners, evolved over time, or grappled with shareholders’ desire for greater dividends. That desire motivated them to contact another Stanford classmate, Andrew Kassoy, a private equity investor with the MSD Capital real estate fund of the Michael & Susan Dell Foundation. Each man invested $1 million of his own money to start the nonprofit B Lab in 2006 to bring about their
1
May 10, 2010
B CORPORATION: A NEW SUSTAINABLE BUSINESS MODEL
“We envision a new sector of the economy which harnesses the power of private enterprise to create public benefit.”
—B Lab, “Declaration of Interdependence,” 2010
Introduction
Jay Coen Gilbert and Bart Houlahan were friends as undergraduates at Stanford
University. In 1993, a few years after graduation, they helped start the basketball shoe and apparel company AND1. As the company grew, cofounder Gilbert and president Houlahan emphasized financial success along with corporate social responsibility (also called triple bottom line strategy and sustainable business): AND1 paid employees respectable wages, donated 5% of profits to charity, and made sure factories in China met their standards. The company was generating close to $250 million in annual revenue when it was sold to American Sporting
Goods, Inc., in 2005. Gilbert and Houlahan were personally enriched—but disempowered: They watched their effort to create an innovative business model vanish under the new owners.1
Gilbert and Houlahan were not alone. Ben & Jerry’s, known for its ice cream and its social responsibility, was sold to Unilever in 2000. Although some board members had misgivings, they voted for the sale because Vermont, like most states, required the board to act in the interest of the shareholders, which meant accepting Unilever’s exceptionally lucrative offer.
Gilbert and Houlahan wanted a way to protect the triple bottom line (combined financial, social, and environmental performance) of companies even as companies switched owners, evolved over time, or grappled with shareholders’ desire for greater dividends. That desire motivated them to contact another Stanford classmate, Andrew Kassoy, a private equity investor with the MSD Capital real estate fund of the Michael & Susan Dell Foundation. Each man invested $1 million of his own money to start the nonprofit B Lab in 2006 to bring about their
1