Case 1 Marquis and Almandoz Can an ethical bank support guns and fracking copy 2

Topics: Harvard Business School, Board of directors, Gun Pages: 11 (2285 words) Published: August 11, 2015


Case Study

The Experts

Christopher Marquis is an associate professor at
Harvard Business School. Juan Almandoz is an assistant
professor at lESE Business School, in Barcelona.

Can an
'Ethical" Bank
Support Guns
and Frac king?
by Christopher Marquis and Juan Almandoz

Ken LaRoe, chairman and
CEO, First Green Bank

John Replogle, president
and CEO, Seventh Generation

| B | HBR's fictionalized case studies present
B l dilemmas faced by leaders in real
companies and offer solutions from experts. This
one is based on the HBS Case Study "First Green
Bank: Bringing Bloom to Desert Landscapes"
(case no. 9-413-073), by Christopher Marquis and
Juan Almandoz. It is available at

s the founder and president of
a new ethical bank focused on
environmental sustainability. Jay
McGuane realized that he and his board
needed to set guidelines about which
loans to approve and which to reject
on "values" grounds—and fast. In his
eagerness to get the business started, he'd
put the issue off. But now the bank was
facing two problematic requests: one from
a company involved in fracking, the other
from a gun maker.
Without clear ethics rules. Jay worried
that his already divided directors would
fall into bitter squabbling, leading to resignations, negative media attention, and a flight of investors.
Ethical banking had seemed so benign
when Jay had decided to enter the industry. Now it seemed like a hornet's nest.

A Green Vision
Jay didn't need this job. At age 50, he had
years of entrepreneurship behind him. He

had founded a bank in Maryland, expanded it to six branches and $400 million in assets, and sold it for a substantial profit.
While looking for his next project, he happened to see the movie An Inconvenient Truth and decided, during the sleepless
night afterward, to build something meaningful out of his concern for the environment, his love of his native Colorado, and his knowledge of banking. The result was
Rocky Mountain Green Bank, a company
with a mission to promote environmental
He established himself in Colorado
Springs and assembled a board of directors: Four successful entrepreneurs, a lawyer, an ex-mayor of the city, a former
executive in the Maryland bank, a doctor
who was a school friend and sometime
hunting partner, and an evangelical (and
ardently environmentalist) leader of a
megachurch Jay attended occasionally.
To drive home its mission, the board
hired a famous architect to make the
April 2014 Harvard Business Review 123


bank's headquarters an environmental
showcase, with prototjrpe solar-power
windows, a set of wind turbines, and a
butterfiy roof that channeled rain and
meltwater into underground cisterns.
Articles and TV segments about the
building and about Jay, the returned
native son and environmental crusader,
helped attract local depositors and small
borrowers, who'd grown disenchanted
with the big national and global banks.
Deposits grew at a healthy rate, but to succeed financially, the bank needed to make big loans to a few strong companies. So far,
that hadn't happened.
Moreover, the values-based approach
was proving harder to implement than Jay
had anticipated. îlifts among the directors had started to appear. The first sign of confiict came up in a discussion of what
Jay thought was a nonissue: a gym for
"Oh, come on," Neitha Wellman said,
shaking her head. "Are you going to have a
personal trainer on-site, too?"
"Actually, yes," Jay said. "Two afternoons a week."
She rolled her eyes. "Since when does a
gym or a personal trainer have anything to
do with being green?"
An avid fly fisher and former bouldering champion, Neitha considered herself a pragmatic environmentalist, and she
detested the idea of the "nanny state."
She actively campaigned for Libertarian
candidates—in fact, she had been at a rally
at a mall when a shooter had gone...
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