NINE
LIVING PURPOSE
Creating the Conditions for Life

One of the most extraordinarily alive companies I know is a tiny children’s bookstore in Minneapolis called Wild Rumpus, where I love to take friends and family in the same spirit with which I might take them to visit a museum or a treasured church or a sacred grove of trees. To visit this store is an event. We often make a morning of it, and inevitably we linger. I show my niece the mice under glass in the floor, a hidden warren of life literally beneath the floorboards. I tell her, watch for the chickens—they’re funny chickens without tails, and with heads that are barely visible, so they look like bits of white fluff walking about. And then there are the cats, the Manx cats, the world’s friendliest cats, who submit to nonstop petting by children all the day long, remarkably without complaint. It is the animals who draw me to this place, and once there, I browse amid the books, taking home a journal for myself, an early Christmas gift for a nephew, or a bookmark for my partner. I have a sense of ownership about this store. I feel at home there, always. It is alive. It is a place that has what architect Christopher Alexander calls that “sleepy awkward grace which comes from perfect ease.” I leave with a sense of gratitude.

What makes the place alive, one might imagine, are the animals. Yet this bookstore is very different from the Rainforest Café across town, out at the Mall of America, which also features animals. Granted, they’re stuffed animals: plush parrots hanging from perches, calling out their mechanical “caw” when you walk by. Wild Rumpus is also very different from PetSmart, which has animals, live ones, all in cages down neat rows on immaculate linoleum floors.

The difference is more than the animals. It’s a spirit, a sense of aliveness, not only in the animals but in me when I’m in the place, and in everyone I’ve ever taken there. I’ve visited a lot of companies in the field of socially responsible business, and I’ve felt this spirit at other places, large and small. I’ve seen it driven out of companies more times than I can count. In my third set of journeys, I wanted to pin down more precisely what it is, what makes it happen, what keeps it alive over time, what kills it.

What makes a company a living company?

What makes an enterprise not just responsible, or ethical, or in possession of the right legal charter, but literally alive, a place where you want to go and where you feel alive when you do? Respect for the living community of the earth is a critical starting point, but by itself it’s not enough. Living companies are about more than sustainability, as it’s commonly understood. In business terms, sustainability too often means greening a product line but keeping the growth machine revved on high, keeping the people who make and sell the products in a state of subordination, and treating customers like sources of profit and little more.

There is a broader sensibility in a truly living company that I wanted to see in action. It has to do not only with physical technologies but also with social architectures: how companies themselves come alive in a human, social sense. What I wanted to see in this set of journeys was how the living relationships that compose a company become living processes. Not deadening processes, like what the machinery of mortgage creation became, but living systems that feel alive to those within them and that help create the conditions for life all around.

THE QUALITY WITHOUT A NAME

The question I ask about the social architecture of companies is one that Alexander asks about the physical architecture of buildings: what makes them come alive? He explores the answers in his seminal work on architecture, The Timeless Way of Building, published in 1979 and a classic still widely read today. He begins:

There is a central quality which is the root criterion of life and spirit in a man, a town, a building, or a wilderness. This quality is objective and precise, but it cannot be named. The search which we make for this quality, in our own lives, is the central search of any person, and the crux of any individual person’s story. It is the search for those moments and situations when we are most alive.¹

Alexander called this root criterion “the quality without a name.” It cannot be named precisely, he said, for it is never the same twice, always taking its shape from the particular place where it occurs. We often call this quality aliveness. We might also use words like whole, comfortable, or free, he said. He suggested further, perhaps egoless or eternal. I would add the word genuine.

“It is a subtle kind of freedom from inner contradictions,” Alexander wrote. “A system has this quality when it is at one with itself; it lacks it when it is divided. It has it when it is true to its own inner forces; lacks it when it is untrue to its own inner forces.” We know this quality when we encounter it in a person, he continued, for when a person “is true to himself, you feel at once that he is ‘more real’ than other people are.” When our world has this quality, people can be alive and self-creating. When the world lacks this quality, he says, people cannot be alive but will be self-destroying, and miserable.²

To define this quality in a building or a town, Alexander suggested we begin by recognizing that every place is given its character by the patterns of events that keep happening there. Each building and town is made of these patterns in space and of nothing else. The more living patterns there are in a place, “the more it has that self-maintaining fire which is the quality without a name.” We feel this quality, he continued, in “some tiny gothic church, an old New England house, an Alpine hill village, an ancient Zen temple, a seat by a mountain stream, a courtyard filled with blue and yellow tiles among the earth.” To unlock the secrets of how to generate this quality, “we must first learn how to discover patterns which are deep, and capable of generating life.” And then we must find ways to speak to one another about these patterns. We need a language to describe them: a pattern language.

While buildings are made of patterns in space, companies and organizations are made of patterns of relationships. A person walks into Starbucks and orders a decaf soy latte, and the employee makes it fresh, by hand. An investor buys stock in a company, and its executives measure success as a rising stock price. I walk into Wild Rumpus and show my niece the mice. The patterns that compose an enterprise are made from the patterns of interactions among various parties: owners, investors, employees, customers. When I walk into a bank, I don’t go behind the desk and start printing out loan documents and deciding on interest rates. That’s the banker’s role. As an investor, I don’t tell a company’s workers how often they should wax the floors. That’s their work.

The patterns of events that happen at Beverly Cooperative Bank are distinctly different from those at Aegis. Making a loan to a neighbor, keeping that loan on the books, dealing with the borrower when he or she hits a hard time—this is a pattern of relationships true to its own inner forces. It is a system rooted in a particular place, focused on a Living Purpose of serving that human community. It is a system capable of resolving its own forces, maintaining its own energies, and benefiting most everyone involved. It’s a very different pattern of relationships than what is at work when a mortgage broker for Aegis writes a loan for the Haroldsons with terms they don’t understand and then sells off that loan to investors, knowing it may go bad. That’s a company not true to its own forces. It is setting forces loose that will be resolved only when the Haroldsons lose their home, when investors suffer a loss, and ultimately, when Aegis itself goes bankrupt.

The very different patterns of relationships of these two financial firms are held together, most fundamentally, by a set of values, and by a purpose based on those values, which is institutionalized in the organization. Aegis is focused on financial wealth for its owners. Beverly Cooperative Bank is focused on the ongoing life of the bank and the community.

When an enterprise says it’s focused on the community and actually is focused on the community, it is free from contradiction. When systems are free from inner contradictions, Alexander said, “they take their place among the order of things which stand outside of time.” They become eternal. What makes them eternal, he said, is their ordinariness.³ Beverly Cooperative Bank need not be, and is not, a heroic institution. It’s not a national leader in all things socially responsible. It’s a bank going about the real business of banking, much like a tree going about the business of being a tree. It’s simply itself. By being a genuine bank, it is naturally in service to the community, for this is the reason why communities allow banks to exist.

Living Purpose—being of service to the community as a way to feed the self—is the sine qua non of all generative ownership design. It is the single irreducibly necessary core of every generative enterprise. We see Living Purpose at work in the design of the Maine lobster industry, in the work of Grameen Bank, in the community forests of Mexico, in the community ownership of Hull Wind, in the employee ownership of South Mountain Company.

THE HIDDEN FORCES OF FINANCIAL PURPOSE

These entities may or may not have a formal mission statement framed on a wall somewhere. As systems theorist Donella Meadows observed, “A system’s function or purpose is not necessarily spoken, written, or expressed explicitly, except through the operation of the system.” She said the best way to determine a system’s purpose is to watch how it behaves. Purpose isn’t about rhetoric or stated goals. It’s about behavior.⁴

System purpose reveals itself over time as a series of events.

A system is true to itself when the values it espouses—like ethics, sustainability, and community service—are consonant with its behavior over time. Enron had a lovely code of ethics, which had virtually nothing to do with its behavior. It was a company harboring “hidden forces,” to use Alexander’s term. As he wrote, “when a person’s forces are resolved, it makes us feel at home, because we know, by some sixth sense, that there are no other unexpected forces lurking underground.” By contrast, when a system is not true to itself, it will have hidden forces operating in the background. “When a place is lifeless or unreal, there is almost always a mastermind behind it,” Alexander wrote. “It is so filled with the will of its maker that there is no room for its own nature.” It is divided against itself.⁵

I saw unexpected forces lurking underground at companies many times when I was publishing Business Ethics. To take one example, I watched apparel and footwear companies adopt ethical codes of conduct for their suppliers, going so far as to send auditors to factories overseas to gauge compliance. The aim was to set up a feedback loop that said, respect wage laws, treat workers decently. And the players involved seemed sincere. Yet their work was subtly counteracted by a stronger feedback loop operating in the background, which sent a contradictory message. Its signals reached suppliers when buyers from the same companies said, deliver your goods to us at the lowest possible price, on the fastest possible schedule. Low costs and fast schedules do not create conditions conducive to worker well-being. Yet suppliers knew their income depended on meeting buyer requirements. Buyers’ signals arrived, so to speak, with checks attached.

Money speaks more loudly than ethical codes. And money is what feeds company income statements, which are based on a model of maximizing income and minimizing costs. With publicly traded companies, these financial statements link to financial markets, where the feedback loops say, keep profits/earnings growing in order to keep stock price climbing. Stock prices, in turn, link to stock options for executives. Needless to say, this financial feedback loop is stronger than the weak feedback loop of an ethical code, no matter how sincere the auditors.

Maximizing financial gains lurks in the background of publicly traded companies because it’s in their fundamental ownership frame. Most basically, it is the heart of their purpose. Ethics training, corporate social responsibility (CSR), and sustainability programs too often don’t penetrate to the heart of the matter. They don’t alter company purpose. This is the reason why I watched whole industries grow up in ethics training, CSR programs, and the rest—only to marvel at how profit maximization remained impervious to every kind of ethical code thrown at it.

THE ROLE OF LAW

For many years, I believed the problem was in the law. I wasn’t alone in that thinking. Still today, the idea that public corporations have a legal duty to maximize gains for shareholders remains the conventional wisdom. It’s widely accepted by business and policy elites in the United States and much of the rest of the world, and has been the dominant theory of corporate purpose since the 1990s. But it isn’t true. That’s the view of an increasing number of legal theorists, including Lynn Stout, professor of corporate and securities law at Cornell Law School. In her new book, The Shareholder Value Myth, she states that United States corporate law does not require, and never has required, directors of public corporations to maximize shareholder wealth.

This supposed duty rests on incorrect factual assumptions, she continues, including the erroneous idea that shareholders “own” the corporation. In truth, what shareholders own are their shares, not the corporation itself, Stout says. The notion that corporations have a legal duty to maximize profits for shareholders is simply an ideology. And it’s an ideology that’s increasingly outmoded, under challenge by new scholarly articles appearing almost daily, Stout observes. “As a theory of corporate purpose,” she adds, “it is poised for intellectual collapse.”⁶

Much more can be said about the legal debate around corporate purpose. Be forewarned: this is the thicket from which few emerge with sanity intact. For those intrepid souls willing to venture deeper into this territory, I recommend Stout’s book.

While legal scholars wrangle, others are working to establish a new, more generative corporate model—the benefit corporation—with a broader purpose baked into its governing legal documents. Benefit corporations, as recognized in the laws of a few states, aim to benefit society and the environment in addition to their shareholders. A slight variation on the model is the B Corporation, created through a private certification process that requires companies to declare a social purpose in their governing documents and to meet independent standards of social and environmental performance.⁷

The broad concept of the benefit corporation is based in part on the ideas of Leslie Christian, president of Portfolio 21 Investments. During her long participation in Corporation 20/20, I watched as she formulated and launched a new kind of company called Upstream 21, an Oregon holding company that buys and holds small, local companies committed to sustainability. Oregon state law—like the law of many US states and the law of many nations around the world—says that corporate directors must act in the best interests of the corporation and its shareholders. Working within that framework, Upstream 21 adopted articles of incorporation that say the “best interests” of the company embrace not only shareholder interests but also those of the environment, customers, suppliers, and local communities. The firm also changed voting rights, so that those with a living stake in the firm—such as employees and initial direct investors—have more voting power than those who might purchase company stock secondhand. Voting rights diminish when they pass from direct investors to investors in the secondary market.⁸

Drawing on the language of purpose devised by Upstream 21, the founders of B Lab—Jay Coen Gilbert, Bart Houlahan, and Andrew Kassoy—created a standard template for a new kind of company, built around this expanded purpose. They designed and added a set of social performance standards. And from Heerad Sabeti, a social entrepreneur leading the work for new kinds of social enterprises, they obtained permission to use the name he devised: the “benefit” company.⁹ In 2010, Maryland became the first state to pass benefit corporation legislation, formalizing this new option in law. Other states soon followed, including Vermont, New Jersey, New York, Virginia, Hawaii, and California, with many others expressing interest.¹⁰

Within two years, some 500 companies signed up to be B Corporations, including a few fairly substantial companies, like Seventh Generation, a national distributor of household products for green living, with $150 million in sales. Here, however, is where the plot thickens.

UNTO THE NEXT GENERATION

Seventh Generation was cofounded more than 20 years ago by Jeffrey Hollender, someone active in Corporation 20/20. He was one among many founders of socially responsible companies who wrestled with the challenge of keeping their social legacy alive as their companies grew larger, brought in investors, and began passing leadership to the next generation. It was a challenge that we at Business Ethics dubbed the “legacy problem.”¹¹ Few of the companies I’d studied solved it to their full satisfaction.

Many once-idealistic companies found their social mission under pressure once they went public or were sold to publicly traded companies. There was Ben & Jerry’s, sold to Unilever against its founders’ wishes; Aveda, sold to Estée Lauder; Stonyfield Yogurt to Groupe Danone; Kashi to Kellogg; Tom’s of Maine to Colgate; Odwalla to Coca-Cola. I remembered hearing the founder of Odwalla, Greg Steltenpohl, speak at a meeting after he’d sold his firm, commenting ruefully, “I used to be in the business of making great juice; now I’m in the business of making money.”

Jeffrey Hollender seemed to have the challenge under control. For six years, Seventh Generation had been a publicly traded company, but in 1999 Jeffrey took it private again, because he found that the costs and pressures of being public outweighed the benefits. He remained at the helm—personally committed, in the words of a company “Corporate Consciousness Report,” to embracing “a model of deeper business purpose, where economic growth is merged with social justice.”¹² For Jeffrey, I knew that commitment was real. When he signed up Seventh Generation as a founding B Corporation, it seemed he was on his way to solving the social legacy problem. As he wrote in his book The Responsibility Revolution, “Perhaps there’s no surer way for a company to live up to the authentic imperative … than to become a B Corporation.”¹³

Then the day came when I was helping organize a meeting on company design and Jeffrey was scheduled to join us but had to back out at the last minute. New leadership was being brought in, he explained over the phone, and he needed to tend the home fires, because he found himself engaged in a struggle for the company’s soul. Within a few months, news reached me that in late 2010, Jeffrey had been pushed out of the company he’d cofounded.

Even though Seventh Generation was no longer publicly traded, it succumbed to the pressure for growth and profit maximization. It had brought in a mainstream-minded new CEO plus $30 million in outside investments and had set the course for a plan to take the company from $150 million to a massive $1 billion in sales. Growth like that can be crushing to employees in a firm.¹⁴ And as Jeffrey recognized, a company intent solely on growth may not always be focused on the rigorous choices needed in ecological sourcing, nor prepared to make the occasional sacrifices required to be truly sustainable. He and the board had serious philosophical differences about issues like transparency, employee ownership, and how best to create shareholder value. In addition, Jeff told me, his board didn’t consider him a “professional manager,” despite his record in growing the firm to $150 million. Ultimately, the board ushered him out the door.¹⁵

Speaking publicly about the whole experience later, at the Sustainable Brands conference in June 2011, Jeffrey said he’d failed to put the right ownership design protections in place. “I didn’t institutionalize values in the corporate structure,” he said. “I took too much money from the wrong people. I failed to give enough of the company to the employees who would have protected what we’d built.”¹⁶ One lesson of the story seemed clear:

Benefit corporation language in company documents isn’t enough.

Lynn Stout is right. The problem is not primarily in the law. Changing the legal language of articles and bylaws does not necessarily touch a company’s true purpose.

Let me hasten to add: The benefit corporation movement is without doubt a huge step in the right direction. It represents a vital codification of an emerging new sensibility. The B Corporation certification builds consumer awareness, brands responsible companies, and creates a potential learning community of companies. As society becomes more familiar with the concept of benefit corporations, the concept could also help create the cultural awareness that will facilitate further systemic reforms. The benefit corporation model is vitally important.

And as it exists at this point, it is not a complete design. It’s like a house with an excellent floor but no ceiling and only one partial wall: a good place to start building but not a finished structure. My sense is that the creators of the B Corporation are smart guys, interested in developing the model over time. Perhaps what’s needed is a larger set of standards analogous to a building code, similar to the LEED standards for green buildings. In the same way that LEED buildings are rated silver, gold, and platinum, ownership designs might receive similar graduated ratings for progressive design excellence. Meanwhile, single enterprises might adopt B certification as a floor and build their own design additions on top of it.¹⁷

The test of benefit corporations will be how well they succeed, over time, at those moments when founders lose control.

One of these moments is when a company brings in substantial capital or goes public. As a temporal pattern, we can call it a time of Capital Infusion. The second moment is when the founder retires or sells. We might name this the temporal pattern of Founder Departure. These are the moments when the forces of finance have the chance to exert their magnetic influence, pulling good companies out of their previous orbit. The power of finance is that nearly irresistible lure of the potential to pocket massive amounts of financial wealth. The gale-force winds of this opportunity can be resisted only by those clearly focused on something more compelling, who have a guiding star so clearly in view that they know who they are and where they’re going. And this allows them to put in place sturdy structures, rooted firmly to place, embodying that Living Purpose—with other design protections also built in. Good people empowered by good design: that’s the aim. And no single design pattern constitutes a complete system that can accomplish it. As systems thinking tells us:

Resilience arises from patterns of many feedback loops, operating through different and redundant mechanisms—so if one fails, another kicks in.¹⁸

On the B Corporation website is a powerful statement that says benefit corporations “are required to make decisions that are good for society, not just their shareholders.”¹⁹ It’s a worthy goal, but the B Corporation model isn’t there yet. Company founders will need to lead the way in making these designs more robust if they are to ensure that social mission is sustained into subsequent generations, past the founders’ era.

It’s one thing to have a truly living company when you’re a tiny children’s bookstore and the founder is still at the helm. That’s analogous to the situation at virtually all B Corporations. It’s something else again to keep that spirit alive when the company raises substantial capital or needs to help equity investors get their money back. Or when founders want to cash out. Or when the company grows large.

Even in the most ideal economy of the future, large companies will surely be needed. There’s an argument to be made—as E. F. Schumacher did so eloquently—that small is beautiful, that the best companies may always be relatively small. This is an important topic for further research: is there an optimal scale for generative companies? I hope colleagues in the field of ownership design take up this question and find the definitive answer. But it’s a conversation for another day.

What I hoped to solve, in my final set of journeys, was a different question: are there companies substantially larger than mom-and-pop shops, where the founders are long gone, that are truly living companies?

Are there large companies that have solved the legacy problem?

Some activists and theorists would suggest that this question is the wrong one, that the real issue is how to force all major companies into responsible design. They want to start with law, with regulation. My instincts tell me to begin instead with positive models. The energies of a system can’t organize themselves around a negative (don’t do this, don’t do that). We need a positive vision of generative design that is so strong, it exerts it own magnetic power, drawing people in—just as the vision of democracy has magnetized people around the world. The seeds of this design are there in small, local, living companies. But if we can’t solve the issue of keeping the souls of these companies alive past their founders, how can we possibly hope to make real change at large companies across the entire system?

What we need may not be a complicated legal formula but clear, simple descriptions of patterns that all of us can use. As Christopher Alexander wrote, we need languages “with the patterns in them so intense, so full of life again, that what we make within these languages will, almost of its own accord, begin to sing.”²⁰

Is it possible that these patterns are already alive and working at large firms? This seemed to me a critical test of the whole idea of generative design. Do such firms exist—and if so, what makes them work? If legal language doesn’t complete their designs, what does? Firms that hint at the answers, I began to discover, are found all over the world. One I wanted to see—one I found utterly compelling—was the John Lewis Partnership in London. What I’d heard about this firm left me wondering if it was simply too good to be true. Was it?