The following piece, “Social Entrepreneurship,” is chapter 17 in the book: Values & Ethics: From Living Room to Boardroom (itself based on an Internet-based talk radio show of the same name I did in times past). My enterprising and industrious partner in dialogue is John Abrams. He is the author of The Company We Keep: Reinventing Small Business for People, Community, and Place. John is the CEO and founder of the South Mountain Company, a 40-year-old, employee-owned design and building company on Martha’s Vineyard, Massachusetts. John’s words are indicated by the initials JA, and mine are JM. For paragraphs with no initials, assume they are a continuation of the speaker who was speaking in the previous paragraph. I highlight words having to do with values and virtues by placing them in boldface type. Enjoy this look at values-based leadership, business ethics, social entrepreneurship, corporate social responsibility, and worker-owned business.
“If the people who make the decisions are the people who will also bear responsibility for the consequences of those decisions, perhaps better decisions will result.”
JM: That’s an elegant thought by the man I’m excited to talk with today, John Abrams, the author of The Company We Keep: Reinventing Small Business for People, Community, and Place. He’s CEO and founder of the South Mountain Company. The South Mountain Company is a 30-year-old, employee-owned design and building company on Martha’s Vineyard, Massachusetts. He chairs the Island Affordable Housing Fund and is vice-chairperson of the Island Housing Trust. They are both nonprofit organizations dedicated to solving the community’s affordable housing crisis. For many years, he has written and spoken about socially responsible business practices, affordable housing, and ecological building issues. I think he’s got a very grounded, solid, ethical perspective about how to do business and how to be a member of a community – and not just a member, a leader, or as he would characterize it, a social entrepreneur. Now I’d like to bring John on the line. Hi there—
“Business is the only mechanism on the planet today powerful enough to produce the changes necessary to reverse global-environmental and social degradation.” ~ Paul Hawken
JA: Hi Jason, nice to talk to you.
JM: You as well. Let’s spend some time talking about your ideas and your book. Give us some background so that the listeners and I will have an understanding of where you’re coming from.
JA: Well, the book is really about the experiences of the last 30 years in The South Mountain Company, which I kind of inadvertently started with a partner in 1975. We were just really following our particular passion, which was designing and building houses, but we didn’t have any intention of “being in business.” We kept trying to build the perfect house, and kept failing at that, but kept going.
A particular pivotal moment for me was when a long-time mentor who believed in our work came to visit. We showed him some houses, and he said: “My God the work is beautiful! You making any money?” I said, “No.” He replied, “Well, Abrams, you’ve got a unique idea here – subsidized housing for the rich. You’re building these nice houses for people of wealth, but aren’t really making any money.” At that moment, I began to think about business. And I began to think that the pursuit of profit and the ability to use those profits to do good things was a valuable exercise.
So the company turned into something that was very near and dear to us, but was also a very tight-knit group, and about ten years into it, my partner had left and two long-time employees came to me and said, “You know, we really want to stay and make our careers here, but we need more of a stake than an hourly wage.” So, we put our heads together and soon after we restructured the company (and those employees) became an employee-owned, cooperative corporation – whereby anybody that worked there for five years would become a full owner and share in both the profits and the control of the company. At this point, well over half of our employees are owners and all the rest are on a track to ownership. I would have to say that this restructuring and bringing workplace democracy to the company has probably been the most important aspect of our success.
“There is intense debate within the movement for socially-responsible business about a parallel growth-related issue: how to manage growth, and how to keep their original values intact.” ~ John Abrams
JM: Ok. Let me tell readers a little bit about the book, The Company We Keep. It’s “part memoir, part guide to democratizing the workplace and part prescription for strong, local economies. It marks the debut of an important new voice in American business.” And, paraphrasing the publisher: As a proponent of the benefit of working for the people and community, you explore the role of business in promoting local culture, celebrating social equity, and maintaining ecological balance. Conventional business concepts such as “bigger is better,” “profits come first,” and that “location is incidental” are challenged. The experiences that you document in the book demonstrate that one can bring high personal values to the workplace, protect natural resources, uphold high standards of craftsmanship, control growth, and still run a successful and highly-collaborative enterprise. It sounds very admirable and aspirational.
JA: Well, we’re still having fun, and that’s the most important part. I’m incredibly fortunate to have this great group of people as collaborators. To write the book, I took a sabbatical (two winters) meant to accomplish two important goals. One was to do the project, but the other was to get me, as the founder of the enterprise, out of the way for a little while and let the company emerge from under me and see how we did. It was astonishing; people stepped up in remarkable ways.
It was a great experience having that time to think and write, but the thrilling part was coming back to a company that was much better than the one I left. The changes have continued. One of the things that has most impressed me since returning is that we now have a conviction that South Mountain Company is going to exist way beyond me.
“Democracy is strongest when people own the homes in which they live and have a direct ownership stake in the assets on which their livelihood depends. When workers are owners, the conflict between workers and owners disappears.” ~ David C. Korten
JM: Hmm. Can you please define social entrepreneurship? It’s a bit complicated.
JA: Yeah, it’s a bit complicated for me! Social entrepreneurship means taking an entrepreneurial approach to solving social problems. We use the skills that we’ve gained in business (a profit-making enterprise) to work on community problems. The big one for us is affordable housing. We tackle it in many ways, and “take the bull by the horns.” For example, inventing projects, bringing them to the community, and finding ways to fund them. It’s really diving in and giving back to the community.
JM: I see. And yet, in doing so, you’re not having financial difficulties such that you are not able to stay viable?
JA: Absolutely. Our profits are limited, and we need to do some very important things with that. People need to make a great living and have the best benefit package in the world, and then they need to share some of the profits. We can devote the remainder to good work.
“The question for the citizen today is: Are we responsible only for our own good or also for the common good? Even a benevolent tyranny can permit us the former; only a genuine democracy can make possible the latter.” ~ Robert N. Bellah et. al.
JM: The employees literally participate in decision-making at The South Mountain Company. Do they know enough? Does it lead to inefficiency or impasses? Is this a model you have learned about or was it trial and error?
JA: I speak primarily from my particular experience. South Mountain’s governance system is a democracy with clear divisions of responsibility and authority. Much of the authority to act is delegated to management. This delegation comes easily because this was the established mode of operation before the ownership of the company was shared. The difference is that there is now a clear mechanism for discussion, debate, and change. In our case, “consensus decision-making” has only broadened our view; it has not watered down decisions or derailed our ability to make them in any discernible way.
JM: Ok. I can see why this is called social entrepreneurship. It sounds like a great way to get a lot of “buy-in” from employees and preserve the wisdom that long-time employees have gained. Happy employees stick around, work more honestly (e.g., no “time theft”) and are probably more likely to uphold the values of the company because there is a consonance between those who persevere and the core values of the company.
I like the process of decision-making present in your and similar companies, since it is so very democratic and has certain advantages. As you mention in the book (and you reference Malcolm Gladwell and Robin Dunbar and Joe Cabral), groups above 150 persons lose a lot of the effectiveness, cohesiveness, and efficiency relative to smaller groups. In your book you speak to this issue:
“Over the years, as we came to recognize and define South Mountain values, we were also learning more about decision-making. Gradually we were gaining understanding of the fact that ideas placed before us were meant to be discussed, shaped further, and accepted or rejected as a group. Each was fair game for adjustment, change, back-burnering, or scrapping, so there was no need to fight for or against new proposals. We had only to listen, to consider, to muse, to articulate. Dialogue produced satisfaction; argument did not.”
…Tell me about growth – how you perceive and how you manage it? I know you use the word harmony in reference to this issue.
JA: Achieving a delicate balance between the number of employees, the workload, and workplace harmony is a constant and unremittingly challenging pursuit. For the past decade we mostly agreed that growth at a snail’s pace is appropriate. We have aimed to be steady but deliberate, but lately we agreed that, for now, we have reached an optimal size.
JM: This is conservative. I bet 99% of business leaders wouldn’t have the guts to slow or halt growth.
JA: Yes. You can turn down inappropriate projects when there are fewer people involved (stakeholders), and if you have a reserve fund that can help navigate the rough waters of a slowdown. Strong financial position and small size preserve options.
JM: I believe it’s wise to not let something which grows get beyond your ability to manage. I mean, we don’t want our bodies to continually grow, or our lawn and landscaping to be out of control. Certainly greed hurt financial services companies in the run-up to the Great Recession, and contractors and developers in the residential construction sector are notorious for “overbuilding” during economic/housing expansions – becoming “overextended” as a result. That’s about the difficulty being content with what one has, and constantly striving for more, more, more. It reminds me of the term affluenza, about which David Goldblatt writes:
“[Author] Oliver James argues that the spread of the US model of capitalism is responsible for the epidemic of emotional distress that has swept across the developed world, and is threatening to engulf the new China and Russia, among others. The competitive drive for money, status, and power results in a profound deformation of the human soul. We end up treating ourselves and others as commodities, as mere means to vacuous ends. Our capacity to form authentic, loving relationships, to feel secure and balanced, is destroyed. Anomie, alienation and addiction await us.”
JA: To forgo opportunities for growth means employees have chosen to value the quality of their work life over the size of the potential compensation that might come with more growth.
JM: You’re on the island of Martha’s Vineyard, Massachusetts. You have done a fair amount of work to analyze your particular system and make purposeful movements toward success. According to your book, here are some of the things you and your employees say you like about Martha’s Vineyard: the easygoing pace, the illusion of distance [from modern America], the freedom, the sense of youthfulness, the lack of social judgment, the egalitarian nature of the place, the way children are valued, and the strong sense of community children are raised with. I see why you say you want “to keep the Vineyard special”.
You report you have concerns about the following: new visitors and residents seeming impatient, sprawl and traffic, year-round pressure to work, the investors who seek out property in the Vineyard, and “conspicuous consumption.”
The solutions you are working toward are: achieving political unity [regionally, locally], creating the Vineyard Institute, promoting adequate and appropriate housing, preserving and enhancing rural character, supporting the “new traditional economy,” making a transportation system that works, committing to environmental stewardship, and maintaining cultural traditions. Clearly I am only citing “the Roman numerals” here, and I urge the interested listener to buy your accessible and inspirational book on social entrepreneurship, The Company We Keep.
“I believe we can accomplish great and profitable things within a new conceptual framework…one that values our legacy, honors diversity, and feeds ecosystems and societies… It is time for designs that are creative, abundant, prosperous, and intelligent from the start.” ~ William McDonough
…Is keeping it small, local, and democratic a model that is a viable alternative to globalization?
JA: That’s a big one! We don’t agree with doing business “without regard to place” – at this point, businesses tend to be located wherever it’s most convenient, or cheapest. We have a very different sense about business; our feeling is that we are inextricably tied to the community and the region within which we work. It’s the place that we know; it’s the place that sustains us. So, it really is an antidote, to some degree, to the trend toward globalization.
JM: How do you feel about globalization? Tell me more.
JA: I don’t think that globalization as a concept is completely bad – nor do I think it is as good as some proponents claim. The idea of using information networks and the “information economy” to open up the possibility of doing business in new ways has merit. I think the way it’s being done is tremendously damaging. At the same time, I have a firm belief that business is the most likely force on the planet to be restorative and to do the kind of environmental restoration and social restoration we need to do, because business is so pervasive and so powerful. Unfortunately, I don’t think it’s being used that way in many cases.
“…it’s extremely important and makes good business sense to have a strong ‘moral compass,’ a strong set of values that serves as the foundation of a business.” ~ Gary Wenet
JM: Got it – it’s used primarily as a way for corporations that don’t share the values you’re talking about to be more easily able to make money by using labor that’s less expensive, or enjoying laws that are less stringent. Kind of the opposite of the social entrepreneurship model.
JA: It’s often about accumulating wealth without regard to consequences of that accumulation. It’s very rough: privately-held companies can do what they want, whereas publically-held companies have a legal obligation to maximize return to the shareholder. Therefore, you can’t say that these are bad people – they are just “doing their duty.” But shareholders, in most cases, are not the people who are creating the wealth. The people who are creating the wealth take a backseat when it comes to sharing that wealth. Everybody knows that working people are gradually losing out in this equation and that the people at the top are taking a larger and larger percentage. We need some redistribution there.
JM: So, is cooperative enterprise a viable alternative to globalization?
JA: My sense is that when there is this shared enterprise and everybody is involved in ownership and decision-making, there is a much greater commitment to service, quality, and productivity. When we started our business 30 years ago, there were 2 million people in this country who shared some part of the ownership of their business; there are now 23 million (part-employee-owned businesses). So this is very much a growing movement, and it’s partly because people see that productivity is greater. Ownership is a very big thing! Somebody once said that “In the history of mankind, nobody has ever washed a rental car.”
JM: Franklin D. Roosevelt believed: “If civilization is to survive, we must cultivate the science of human relationships, the ability of people of all kinds to live together in the same world, at peace.”
“If capitalism has one pervasive untruth, it is the delusion that business is an open, linear system: that through resource extraction and technology, growth is always possible, given sufficient capital and will. In other words, there are no inherent limits to further expansion, and those who wish to impose them have a political agenda.” ~ Paul Hawken
…I have a quote – one I just keep coming back to when it comes to thinking about corporations. Robert C. Hinckley refers here to the directors of a corporation when he maintains: “A Director shall discharge the duties of the position of Director in good faith; but not at the expense of the environment, human rights, the public health or safety, the community in which the Corporation operates, or the dignity of its employees.” How does that strike you?
JA: It’s a wonderful one, and I believe that Hinckley uses that as what he believes corporate law should be. It certainly isn’t what it is.
JM: Yes, it’s aspirational. He’s an attorney, and he notes that corporations are permitted by law to put profit-making above all else. He was noting that if society simply added those 25 words to the Charter, the corporate officers’ mandate, then it would change the entire nature of business. He wonders why we don’t do that because it seems so simple.
JA: There’s a group out of Boston and San Francisco called Corporation 20/20, begun by Allen White of The Tellus Institute and Marjorie Kelly, the publisher of Business Ethics. They recently began to try to restructure the American corporation and work toward a constitutional convention to really bring this before the American people. It will be interesting to see if that goes anywhere.
I’m talking with John Abrams about social entrepreneurship here on World Talk Radio. Thank you for sticking with us. Yes, John, Corporation 20/20 is very well-intentioned. I see at www.corporation2020.org that you are among the sponsors of their efforts. Congratulations. Also listed are: AVEDA, Citi, The Corporate Library, Department of Trade and Industry (UK), Domini Social Investments, Gardener’s Supply Company, General Electric Company, The Global Legacy Group, Granite Construction, Green Mountain Coffee Roasters, Greenpeace, Henkel Corporation, Hewlett-Packard, KLD Research and Analytics, Metanoia Fund, Monterey Institute for Social Architecture, Morgan Family Foundation, Pierre and Pamela Omidyar Fund, Portfolio 21 Investments, Seventh Generation, and State Street Corporation.
With the effect of money on politics, it’s difficult for nearly anything to be done that doesn’t have corporate America’s blessing. Changing the way that money interacts with politics is a hugely important goal. It’s like swimming upstream. I don’t really know how to make change in that system happen, short of a massive upwelling of public sentiment – enough to scare the daylights out of the political class and the owning class. Bernie tried it in 2016 and made a lot of progress, but ultimately was railroaded.
“The basic principle which has contributed more than any other to the building of our business as it is today is the ownership of our company by the people employed in it.” ~ James E. Casey
JA: Another approach, which we favor, is to take it one small place at a time, one neighborhood at a time, one town at a time, one region at a time. About ten years ago, we made a commitment as a company to do all our work in this one region and to devote as much energy as possible over the next 10, 20, 50, 100 years to making this the very best community we can. So, many small efforts like that scattered all over might also have an impact.
JM: Yeah, I found this in one of your writings: “Many ecologists and a few intrepid economists question whether the planet can sustain a global economy that enjoys perpetual growth, but the idea of individual enterprise growth is rarely challenged in the world of business.” So, would you say then that short-term profits are not necessarily the most important thing to be considering?
JA: Well, some businesses, it seems to me, have an optimal size, and yet our culture says that a small business is just “a business that hasn’t succeeded enough to grow large,” and that we must “grow or perish.” I don’t believe this is true. I’m not so certain that growth is always a good thing.
“Business can be a force for good, and you can earn profit for doing good.” ~ Pierre Omidyar
JM: I think one can use a metaphor that it would be silly for a life form to grow as large as possible; they have an optimal “set point” for growth and undergrown loses potential, but overgrown can lead to problems. A 100’ oak tree is perfect; it has achieved its proper maximum size, but it’s not going to grow to be 1,000 feet. And no one would consider a 200-year-old oak tree to be a failure. I guess maybe what some corporations and shareholders feel is that if they don’t grow as big and as fast as possible, they will figuratively be eaten by a predator. In other words, outcompeted.
JA: Well, in some cases that’s true. But many businesses can choose: What do we want to be? How do we work best?
Well thank you kindly for your time, John. I hope the South Mountain Company stays in business for generations and that your book about social entrepreneurship provides inspiration for remaking this crony-capitalistic system that has racked us up so much debt, brought the planet to the brink, disenfranchised so many workers, and cost so many lives. I hope your ideas are helpful as we become mired in this globalization frenzy (unless we change course).
JA: Well, Jason, thank you so much for all you’re doing to bring these ideas out.
Absolutely. Tune in next week for another discussion about our problems and our potential, here on Values and Ethics: from Living Room to Boardroom, only on World Talk Radio. Shows are also archived on my website, www.ValuesoftheWise.com.
Here are a few quotations about social entrepreneurship, corporate social responsibility, employee-owned business models, and critiques of capitalism:
“Many companies are beginning to recognize their responsibility to the world around them. Their premise is simple: corporations, because they are the dominant institution on the planet, must squarely face and address the social and environmental problems that afflict humankind.” ~ William McDonough
“… corporate managers aren’t against the environment, human rights, and other elements of the public interest; they just don’t see these things as relevant to their job. Why? Because the corporate law says that their job is simply to use their best efforts to pursue profit on behalf of the shareholders. Human rights, social justice, and the environment don’t factor into that equation — at least, not directly.” ~ Robert C. Hinckley
“Companies around the country are learning that they can get a higher return on their social capital if they value and respond to the needs of the people they employ.” ~ Jan Phillips
“…just how beautiful business can be when we put our creativity, care, and energy into producing a product or service that our community needs. I was just beginning my journey. I didn’t know then what I do now: that when you connect head and heart in business, you can transform not just business as usual, but the economy in general. You can find a way to make economic exchange one of the most satisfying, meaningful, and loving of human interactions.” ~ Judy Wicks
“Generally, the smaller the business, the more it resembles the great myths of capitalism. If you want to find out what free enterprise is really about, talk to a street vendor and not to a Fortune 500 executive.” ~ Sam Smith
“…employers who care about their employees (while caring about their business) always offer them the best possible working conditions. These employees are joyful and grateful, as a rule, which ensures a superior efficiency and loyalty on their part. Good spirit is good profit.” ~ Laurent Grenier
“A clear, constructive purpose and compelling ethical principles evoked from and shared by all participants should be the essence of every institution.” ~ Dee Hock
Footnote:  I guess it is conceivable to not work for part of the year in places such as Martha’s Vineyard, or near ski resorts, and so on.
keywords: social entrepreneurship, corporate social responsibility, employee-owned business models, and critiques of capitalism