JULIA KENNEDY: Thank you all so much for joining us. This is a great group. I can't wait for the discussion. I'm Julia Taylor Kennedy. I'm program officer here at the Carnegie Council.
Our methods during these workshops, for those of you who are new today, are inspired by the Giving Voice to Values curriculum.
I also want, before we launch, to thank Alice for helping galvanize this group. She has been instrumental in bringing together this wonderful, robust group of speakers.
Today we are going to be talking about a range of governance issues related to business and to nonprofit boards. Specifically, some of the issues we are going to be focusing on are the interplay between profit and revenue motives, on the one hand, and mission and citizenship, on the other.
We'll start with a few quick framing remarks and then delve into a couple of cases that we've brought for you today. Let me start with Alice Korngold.
I found Alice a few years ago through her blog on FastCompany. She really has her finger on the pulse of the NGO [non-governmental organization] and CSR [corporate social responsibility] world. In addition to being a prolific blogger and writer, she consults to leading corporations, foundations, and nonprofit boards on CSR, leadership development, board governance, and strategic philanthropy. She also is instrumental in placing young executives on nonprofit boards. I can't wait to hear what she has to share with us today. Welcome.
ALICE KORNGOLD: Thank you so much. I'm very excited to be here at one of these outstanding programs put together by Julia and Carnegie Council, and with some incredible colleagues and a wonderful audience today.
To put this in context, over the past 20 years we are seeing interesting shifts in the business and the NGO/nonprofit sector. Twenty years ago, businesses stuck to profit-making, nonprofits to their missions. What we are seeing is a convergence towards the center, with businesses thinking more about sustainability and social issues and nonprofits/NGOs thinking about revenues and profits.
What we're going to talk about today are some of the factors that are driving the shifts and the roles of boards of directors in determining and monitoring the appropriate balance for the two different sectors. And we have two case studies, as Julia said, and I think an exciting discussion and amazing speakers. I look forward to the discussion today.
JULIA KENNEDY: Great. Let's also hear from Holly Gregory, who is an attorney with Weil Gotshal & Manges. She counsels clients on a range of governance issues. Her clients are a stunning array, including the Ford Foundation, J.C. Penney, Pfizer. She has also organized governance-related programs for another stunning array—the World Bank, Yale University, and Transparency International, among many others. So it's wonderful to have her here.
HOLLY GREGORY: I'm really honored to be here and looking forward to a robust discussion.
When Alice and Julia asked me to come and be one of the experts, I thought, I'm really not an expert on corporate social responsibility at all. My world is the boardroom and helping boards—mostly of for-profit entities, but also I work with not-for-profits, usually on a pro bono basis—to think about their responsibilities and how they fulfill what the organization was set up to do.
But I have dealt in the area of corporate social responsibility when the issues come up for clients. Increasingly, for corporate boards the issue comes up in the notion of risk oversight and disclosure, transparency. In the world of public companies, investors are very, very concerned these days around issues of corporate social responsibility.
In fact, in this proxy season the most common shareholder proposal, a third of the shareholder proposals, is around disclosure of political giving and board oversight of political giving by corporations, which is really a corporate social responsibility issue. And last year more than half of the shareholder proposals that were brought at corporations had to do with social and environmental issues. So it's huge in corporate America.
I want to share some of my biases with you. I really come from the perspective of thinking that the majority of CEOs and board members and employees of corporations want to do the right thing. They care about the world, just like people at NGOs care about the world. And at the same time, I agree that we can all probably do a much better job of understanding the impact of our actions, of thinking more long term when we're faced with an immediate decision, and who else should care about this decision and how it might affect people.
I think we get into a lot of squishy concepts when we talk about corporate social responsibility. We know that the corporation is supposed to create a profit for its shareholders. But we also have this notion that they are supposed to care about stakeholders. So some of the issues get a little bit squishy.
It leads really to my next bias. I think that when they talk about corporate performance and corporate goals and corporate strategy, corporate directors and managers need to become much more focused on and more comfortable in exploring what the social impact is and what the social benefit is.
I learned in law school that corporations were created, they were chartered, for a social purpose, which was to bring money together—to aggregate capital, if you will—from diverse sources and put it to a use that was good for society. That's why early corporations such as the East India Company were chartered by the king, because they were going to do good for society that couldn't otherwise happen.
I think we need to get back to that notion, that corporations generally do good when they are entrepreneurial, when they are innovative, when they make goods and services that society needs and wants. And I think we need to get corporate directors and managers more comfortable in thinking about that in their decision-making and thinking about and integrating into corporate identity: How are we benefitting society?—just in our daily "What we do, what we are producing; who we are employing; how we pay taxes; and what are the other impacts—how else do we good, how can we do good for society?"
So those are my biases.
JULIA KENNEDY: Great. Thank you for sharing them, and I think a lot of people around the table share them.
I also want to give the floor to Tamara Belinfanti to give some other framing remarks which may pull these ideas back. She is our resident academic expert, so she will zoom out and put some of these things in context.
TAMARA BELINFANTI: And Holly actually gave me a nice segue.
First of all, thank you to you and the Carnegie Council team for inviting me to be part of this really important discussion.
As Holly mentioned, corporations didn't start off being about profits and economics. There was a time in history where there was a general sense that corporations were there for the greater social good. But we got the shift—and I'm happy to talk off record about what brought about the shift—but we got the shift, and two broad conceptions of the corporations emerged.
The first one is that the corporation is owned by and operated exclusively for the shareholders and for profits.
The second conception that you see in the case law and in the corporate law literature is the same idea, that the corporation is a creation of the state and it is supposed to be formed to advance the public interest, the interest of the shareholders and other stakeholders.
But over time, for a variety of reasons, the first conception, this idea that the corporation is there for the shareholders and profits, becomes the dominant conception of the corporation.
This conception pretty much served us well up until about 2001, and then we get into Enron and WorldCom, and then people began to take a little step back and say, "Well, wait a minute. Is this really the right view of the corporation?" and academic literature that was on the sidelines begins to become a little bit more central.
We get the passage of Sarbanes-Oxley in an attempt to correct some of the ills that people saw emerging from Enron and WorldCom. Clearly, that didn't help us all the way, because we had the 2008 financial crisis, you have things like BP, you have people really beginning to pay attention and saying, "Well, wait a minute. We've given these things this title, we've given them this grant of power; what are they returning to society?" Or you have the Occupy Wall Street movement. So you have all these trends.
I think the time is right for a real robust discussion about CSR and how to actually implement CSR into the corporate framework. In a way, there is a tipping point, if you will. I think we are approaching a tipping point where the corporate world will begin to take on a more expansive notion of corporations.
So I look forward to the discussion. I think it's extremely timely.
JULIA KENNEDY: Great. Over the next hour-and-a-half, we will be looking at specific ways that boards can be part of this tipping point. So let's get right into the cases. Thank you for those brief remarks.
We're very pleased to have Suhas Apte, Vice President of Kimberly-Clark, with us here, all the way from Atlanta. Alice will tell you more about him as they give the background of our first case. They will talk through an anecdote, we'll stop, have a little bit of discussion, and then go on to talk about some of Kimberly-Clark's solutions.
So take it away.
ALICE KORNGOLD: Thank you.
The first case, as Julia said, is Kimberly-Clark.
Some background: the company has 53,000 employees, $21 billion in sales, operations in 36 countries, global brands sold in more than 175 countries. Their global brands and solutions are in health and hygiene and wellbeing. Some of their well-known brands are Kleenex and Huggies.
Suhas Apte is senior leader in the company, senior executive, who runs the organization that is responsible for global sustainability, which includes health, environment, safety, energy use, and sustainability. He has had 34 years of experience in all facets of management, including strategic planning, supply chain management, operations, finance, and acquisitions.
Suhas, let me ask you the first question, which is: What are some of the reputational and strategic challenges that were facing Kimberly-Clark in the 1990s that led the company to start rethinking its approach to strategy?
SUHAS APTE: Alice, first of all, thank you for the great introduction. I think you asked for two things, strategic and reputational.
I can give you some background of Kimberly-Clark. Kimberly-Clark was a paper company back in the 1970s. In the 1980s, we started to move towards becoming a consumer goods company, and in the 1990s we started to move towards becoming a global company.
So, obviously, in my case, once you start moving in that direction, from a strategic perspective our challenges were that we had a conglomerate of businesses which were not focused to be from a consumer-goods company perspective. So the company in the 1990s started to shed some of those businesses. One major business we shed in the 1990s was the cigarette paper company. We used to be the largest cigarette paper manufacturer in the United States.
Another asset we shed was we had an airline business. A lot of people think, Why would Kimberly-Clark have an airline business? That's because we had three sites where no airline was flying. So Kimberly-Clark created an airline to fly between Neenah, Wisconsin, Atlanta, and Dallas, where we had three headquarters. That was Midwest Airlines. It was a profitable airline. Eventually, in the 1990s, we got rid of that because that wasn't our core focus.
Then, as we rolled into the 2000s, we realized that we don't want to be in the pulp and forestry business. So we got rid of the Neenah Paper business also in 2004.
So the transition started in the 1990s to make it more towards a consumer packaged goods company from a strategic perspective.
From a reputational perspective, obviously the 1990s was the beginning of a lot of things coming to stream. Kimberly-Clark on their own created—our internal brand for that program was called Vision. We created an environmental program for the company as we started to become global so we could start monitoring our own footprint, and then we established criteria for reduction of our own footprint around the world related to energy use.
We were reducing energy consumption around the world. We started areas around reducing waste going to the landfill, improving the quality of wastewater that we discharged, as well as looking at toxic chemicals that we were discharging. The program was focused in the 1990s on those aspects around the world.
The second aspect: what we did was, since we were using a lot of trees in order to manufacture our products, we had a policy on sustainable use of natural materials. Kimberly-Clark was in some fashion the first company to put a policy on their own.
That was the evolution in the 1990s. Then we continued those Vision and fiber programs going forward in the 2000s.
ALICE KORNGOLD: Thank you, Suhas.
What happened in early 2000 with regard to Greenpeace? What were some of the challenges and reputational issues around that?
SUHAS APTE: Kimberly-Clark felt that we are an ethical company, we have done most of the stuff right in our past. If you step back to even the 1950s, Kimberly-Clark was concerned about availability of wood resources over time. So in the 1950s we started nurseries in Canada—that was a new concept in the 1950s to have nurseries in Canada—so that we can replant the trees.
As I told you, we had then a policy on sustainable use of natural resources. But we were not strict enough to really figure out where our resources were coming from.
In 2004, Greenpeace approached us and shared with us that some of the wood that we were sourcing comes from a high-growth rainforest area in Canada. Our policy was to meet all the local regulations, and the local regulations were Ontario government regulations. Our policy was meeting those regulations. So we didn't think we were doing anything wrong.
Our immediate response to Greenpeace was, "This is a noise, we should ignore it, and it will go away."
ALICE KORNGOLD: Let me ask you, how did they approach you? Was this a quiet little approach, or was this a little bit noisier or public? [laughter]
SUHAS APTE: I think in the beginning they tried to approach my predecessor, who was head of the sustainability group. But when they didn't get any positive response—in those days, because social media wasn't there, the standard method most NGOs were adopting was doing blocking and tackling.[laughter] I think when you look at what they did from 2004-2007, they were blocking entrances to our factories, so that even the [inaudible] couldn't come in. They were blocking entrances so the employees couldn't come in. They chained themselves to the front gate of one of our facilities so that employees couldn't come in.
Every year, as a shareholder, they went to our board of directors meeting and were making noise at the board of directors meeting.
They also went to the University of Wisconsin, where our chairman was giving a presentation. These guys are almost like college kids. They changed some of the slides that our chairman was presenting. So when the chairman's first slide came on, it had a Greenpeace message on it.
They were doing a lot of those tactics which I call a nuisance and irritation to the corporation.
From a financial perspective, the impact on the business was small. Where the impact was coming was mostly in educational institutions because they gathered a lot of students together at certain universities, and students made a lot of noise to the university. Then they changed the sourcing of our products in those universities. The financial impact was relatively small. We were more concerned about the reputational damage they were creating to the brands and the brands we owned.
ALICE KORNGOLD: What was the relationship between management and the board at that time?
SUHAS APTE: I think the board was aware of it, because at every shareholder meeting they used to show up. But I think our management was sharing with them in the 2004-2005-2006-2007 timeframe that our policies are sound policies; we are the first people who have an ethical policy in place, because in 2003 Kimberly-Clark, when we increased the level of our policy, we talked about how "we want all our fiber to come from a certified source." We were the first paper company to announce a policy that we would source 100 percent of our fiber from a certified source.
In 2004, as I mentioned to you earlier, we divested Neenah Paper, which was mostly pulp and our forestry business. So we were getting out of some of those businesses.
Our policies were sound. The board understood those. The board was more concerned in those days from a risk and risk-mitigation perspective for the shareholders, and that's what we were discussing most of the time, what are the risks associated.
ALICE KORNGOLD: Thank you, Suhas. I'm going to return to Julia.
JULIA KENNEDY: I want to start the discussion here so that we can start figuring out —and I'm going to have you take different roles as if you were part of this situation.
Before, though, there's just one other quick question I have for you, which is: At some point the management of Kimberly-Clark started to say, "We need to take a different approach." What was the impetus for that?
SUHAS APTE: I think it's, as I said to you, a lot of actions that Greenpeace was doing were more of a nuisance in nature and we were more concerned with reputational damage to Kimberly-Clark and its brand names. For that reason, back in 2008 Kimberly-Clark decided, "We ought to take a different approach to this whole thing."
JULIA KENNEDY: Okay. So the reputational risk starts to grow, right?
SUHAS APTE: Yes.
JULIA KENNEDY: They're not going away. It has been four years that Greenpeace was really actively protesting.
So, first, say you were management at Kimberly-Clark and you are tasked with creating a plan to address these challenges and trying to figure out what's the best way to mitigate this reputational risk or change your strategy to respond to Greenpeace. You say, "Okay, it has been going on for four years. Maybe we'd better respond, look at these rainforest issues." So what would you recommend, and then how would you lobby management to get support for your claim?
JACQUELINE BREVARD: Before I respond to the recommendation, I'd like to simply explore this a little bit further. I actually have a couple of questions in the same vein.
The first is: Did you divest yourselves of this business because of the so-called nuisance? So that's one question.
Then, as a follow-up, when you divested yourself of the business, did the reputational damage continue to stick to you, so to speak, after it was transferred to another company? I ask that because in many instances the public-interest groups don't really care that you don't own it anymore; they expect you to continue to influence even the third-party purchaser. So I would just like to hear a little bit more about that.
SUHAS APTE: To your first point, no, this was part of their long-range strategic plan to get out of the printing-grade business, which is what Neenah Paper was, an associated pulp and forestry business, because the company had decided we would focus on consumer packaged goods side of brands.
Moreover, the pulp business is very cyclical in nature, so the company had decided to get out of cyclical business because it was difficult to manage from expectations of Wall Street. So that decision was made even before this campaign started.
Related to your second question, since we have brand names in front of consumers, our reputational risk never goes away. I think what has come over time is we need to not only look at our own footprint, but we had to go back and look at our supply chain and look at all the way back to where we are sourcing our materials from and bring more transparency in going forward.
JULIA KENNEDY: Any other thoughts about strategy?
DONNA DABNEY: One question I had for you is whether you got your board of directors involved in any change in approach to Greenpeace.
JULIA KENNEDY: Before we go there, which I think we should, first think about—so it sounds like you would suggest that, right? So let me ask you, if you were in the shoes of upper management, how would you engage the board of directors and how would you go about getting all the players involved?
DONNA DABNEY: I've had some experience. In 2002 at Alcoa we created a board-level committee to focus on risk to reputation. We called it the public issues committee. Originally, it was a committee with just a lot of white space. In other words, we didn't have a big charter for it other than "just think about risk to reputation," which was wonderfully liberating, because you could then focus on what were the key long-range issues going forward.
The wonderful thing is it focuses management's attention very quickly when a board has oversight responsibility for it. So then we got into the idea of, six times a year management would have to report to the board on issues that are critical to the company's reputation. So it started thinking about it and then creating a structure around it so that you could report these things.
We found it to be extremely helpful to our business, and we immediately found a lot of crises kinds of situations that did require board guidance and judgment in terms of how to handle them.
JULIA KENNEDY: So one strategy would be to make this structural in nature and say, "Here's a space, here's a forum to consider these issues," and then the discussions can proliferate.
PARTICIPANT: Speaking to that point, I think, in addition to having the access to a potential board committee that might have some jurisdiction over these kinds of issues, I would also suggest the audit committee of the board would be a very good place to start if you don't have a more specialized committee.
The other structural thing that's very helpful that we have in our company, and I know a lot of companies have, is a corporate responsibility committee or compliance and ethics or governance committee that meets on a regular basis, that has some of the top, senior-level people involved.
We have something, for example: every two months we go there, we talk about our top risks, we talk about how we're addressing those top risks; whether or not we need a new policy, a new training program, any other kind of an initiative. I'm the chair of that.
So if you have someone like that who also reports to the board, then you have the structure within the company itself and you have the messaging going into the board. So if you can have that dual structure, I think that's a very helpful way of surfacing these issues.
JULIA KENNEDY: Has it always been like that at your company or was it something that you set up, and was it something where you suggested it and everybody was immediately on board, or—
PARTICIPANT: No. It evolved over time. It was something that I think, with a few issues that came to the surface a few years back, people became more focused on "We need to do more proactive risk management." So this was a way to do that. I give my company credit—I wasn't there at the time—for creating this because it really helped the entire senior management focus on "Hey, there are a bunch of issues here that we don't normally pay attention to that we really need to pay attention to."
I think sometimes it takes a scandal or a reputational hit or other kinds of troubles to focus senior management. But I think that's a great moment, it's a big point moment, to bring people together and say "Oh, we need to do something structural."
JULIA KENNEDY: So you can use it as a catalyst.
HOLLY GREGORY: There are a number of companies that haven't created that kind of specialized structure but have within them a similar committee, like a disclosure committee, where senior management has to come together and think about: What are the kinds of key issues that we need to be transparent about because of SEC [Securities and Exchange Commission] rule and regulation? Many companies also use it as a place to gather issues before they are ready for disclosure, issues for board readiness as well. So we often see these kinds of issues bubbling up into that committee as a central structure before they get teed up to the board.
PARTICIPANT: What kind of experience are you looking for when you appoint people to these committees? The audit committee would be fairly obvious—you're looking for people from accounting firms, et cetera. But this is something else. What were you looking for?
JACQUELINE BREVARD: We had a similar committee when I was at Merck. It was called the corporate responsibility committee. There was a representative from all divisions and functional groups and I, as the chief ethics officer, sat on that committee.
HOLLY GREGORY: [off-microphone - inaudible] talking about two different kinds of committees, one as a board-level committee and one as a management-level committee.
The management-level committees have usually key senior people—maybe the chief ethics, compliance, somebody from legal, but also hopefully from finance, from key divisions, at a senior enough level that these issues can really get visibility.
For boards, if you have a corporate responsibility committee, it's not unusual to have done some kind recruiting to make sure you have some people who are familiar with that. So I see former congressmen sometimes on these committees, people who are ethics professionals in other lives, those kinds of things.
PARTICIPANT: A question is whether at any point in this process you brought in third parties, like certification counsels.
JULIA KENNEDY: Right. And why is that a good strategy, in addition to creating this internal committee, to bring in a third party? Do you want to elaborate on that?
PARTICIPANT: Because essentially you are defusing the sort of tit-for-tat thing that's going on between you and Greenpeace. You have another third party whose business is to, in essence, not mediate, but to state what they see as the facts of the case.
JULIA KENNEDY: What you're also arguing towards is to engage directly with Greenpeace, not to just create a committee over here and say, "Look, we're addressing the problem publicly," but then also to directly engage with the NGO.
Does anyone else want to weigh in on why that might be a good idea?
PARTICIPANT: It brings in the fact that maybe the people who are involved within the company do not have the experience necessary. So as you bring the experts or the consultants, then you have a broader idea, you have a bigger picture per se, as opposed to having a narrow picture that is what the board of directors have.
PARTICIPANT: I also think it defuses the issue a little bit. Look at the Apple situation right now, where the Foxconn issue is going to be looked at by a third party.
And there are examples from the past. Mattel did this, Freeport McMoRan did this, where they brought in a third-party social auditor to look at environmental health and safety, labor issues, and that sort of thing. It helped the company recover from its reputational issues and also have a legitimate response, because they actually followed through with some of the recommendations. Now, whether that is maintained for posterity or not is another story, but at the time it certainly helped those companies. It will probably help Apple with Foxconn.
PARTICIPANT: Having been involved in the industry at the time that all this was happening, we introduced the Marcal Small Steps brand at the same time into the tissue category, which is based on environmental benefits, 100 percent recycled. So I know the history of what transpired. I think it was the right move that did occur.
I think the question that I have really has to go to what we were struggling with was Greenpeace partnering with you in the development of its go-forward plan. We always looked at Greenpeace as the people who held up the flag and called out when there was a wrong. I guess I question whether these NGO groups now, because they are now partnering more so, are they going to lose their reason for being and their importance of calling an issue out because they are partnering?
So it was I think the right strategy. I don't know if anyone has any perspective.
JULIA KENNEDY: It's almost an issue of cooption that you're bringing up—let's just call it that, right?—that you're leaning towards, that there needs to be a spectrum within the NGO world of people that are going to chain themselves to a gate.
JULIA KENNEDY: Actually, if it's okay, let's share the solution, because we're hinting at it anyway, and then we can continue the discussion.
SUHAS APTE: I think all of you had wonderful points. I think we took probably in essence parts of each one of what you talked about. I'll share with you what happened.
From a board perspective, we have an audit committee that every quarter anything which has risk associated and mitigation plans is shared with the board on a quarterly basis. And on an annual basis we do an enterprise risk map to the board. But since, as I told you, the financial impact of this was very, very small, this thing never really materialized up to the level that it was a high bubble on that chart.
Second step: Greenpeace campaign started very hard blocking and tackling in 2004 and 2005 but it started to die out in 2006 and 2007, and there were only a few universities where they were campaigning. It was on and off, it wasn't really concentrated, after 2007.
So a combination of all that stuff, where business management decided that we had to look at this from a different perspective. We decided to appoint somebody who has a business background to tackle this problem instead of those who were involved who were subject matter experts. The previous people who were involved were subject matter experts but they had scars on their body from previous negotiations.
So we brought in somebody completely different who has a business background to solve this problem. That individual 1 percent, and there's 1 percent from Greenpeace, worked together to come up with the framework of how we can further improve our policy going forward. That's what we agreed with them in 2009.
To your point about Greenpeace becoming partners, I think I'll share with you what the Greenpeace gentleman Scott Paul always reminds me, that in their mind there are never permanent friends and there are never permanent enemies. I can tell you they keep us on our toes at all times. There are no easy sleeping times working with NGOs.
ALICE KORNGOLD: Which is the role of their board also probably—
SUHAS APTE: I guess so.
ALICE KORNGOLD: —the oversight their board plays. And transparency—they're accountable to donors.
SUHAS APTE: And to the question you raised about FSC [Forest Stewardship Council], yes, I think the reason we didn't think we were doing anything wrong was because we were meeting all the local regulations. That was our biggest challenge. What Greenpeace was trying to force us was to raise the bar because there are five certifications in the forestry business that are recognized.
We were getting product from an SFI certification, which is called the Sustainable Forestry Initiative. Greenpeace and other NGOs consider that FSC, which is Forest Stewardship Council, is the gold standard. That required basically setting aside more land, more stringent on-the-ground mechanisms. So we had differences in our thinking perspective as to what's right from a legal perspective, because we thought we were following the laws and meeting all the regulations.
But I think, working with Greenpeace and others, we have come to the realization that we can be a better corporation by listening to those ideas and implementing those. So we have now set FSC criteria going forward, and we increased the bar.
They never let us sleep easy on our bar, every year the number continues to increase, and we are delivering those, because I think it's the right thing to do.
ALICE KORNGOLD: Do you have a board committee that you work with and do you present directly to the board at any point?
SUHAS APTE: I think as I mentioned to you, the board was always engaged in sustainability. But in the past the board was engaged from a perspective of diminishing risk and mitigation plans.
On an annual basis, we were presenting an enterprise risk map to the board, and on a quarterly basis we were doing some deep dives with the board on specific issues. Like last quarter we did work on water: What is the implication on water across the world for us for our business?
Also, businesses, when they on a quarterly basis give their presentation, they also identify risk and mitigation plans.
Two years ago, we thought we would change the scope, because historically, as I mentioned to you, we were looking only at our footprint. But what we have started to now look at—we went back all the way up to the sourcing and supply, saying that we need to start influencing sourcing and supply, we need to start influencing our design teams so that they make sustainable products.
Then we went onto the right side of the equation of value chain. Then we got our brands start to be engaged in this. I will give you one example of how brands can make an impact on societal issues.
In this country, 20 percent of women do not have enough money to access diapers. So we worked with our brand Huggies and we have created something called Diaper Bank, which is quite similar to a food bank. Those who have diapers give diapers to the Diaper Bank and those who don't have diapers take diapers from the Diaper Bank. We call that program "Every Little Bottom Counts." And now we are expanding this to the other markets.
So if you are creative in a marketing sense, you can engage your brands to do stuff that's right for the society.
Then we are looking all the way further out. Since we make disposable products, we are concerned about what happens post-use. So we have started a program in New Zealand where we collect the soiled diapers. We mix them with green waste and use that for composting. We have signed a global deal with that company to take that concept across the world.
This is a journey, and I think we all have to take small steps and eventually we will be in a better position.
JULIA KENNEDY: I actually want to throw it back to the group for just a minute, if that's okay, just to say obviously Suhas has, since coming in, made a lot of change and gotten the company to look more from risk to opportunity when considering sustainability initiatives. That's another discussion point, I think, when you're dealing with other managers and with the board, to have that shift of perspective. He has some strategies that he can share.
But before he does I just want to see—say you were tasked with this, you are presenting regularly to the board, and you want them to start looking at sustainability as an opportunity for your brand rather than simply mitigating reputational risk. How would you go about communicating that message and sending that message?
PARTICIPANT: I'll start by asking a question. It's a bit of a reality check. You noted a number of initiatives—let's call them opportunity pursuits—through the sustainable strategies that preceded the Greenpeace questions. Did you get any credit for that with Greenpeace?
SUHAS APTE: I think with Greenpeace—I would say in general with broader NGOs we are getting credit for it, that we are more open and inclusive, that we are embracing and engaging NGOs for their ideas. They understand that we do not agree on everything that they are suggesting, but at least we are making baby steps in the right direction.
TAMARA BELINFANTI: Did you see or get any reward for that, did it pay off in the stock market at all, do you know, when you implemented these initiatives?
SUHAS APTE: I think it's very difficult to segregate the stock price with one element. So it's very difficult for me to tell you whether this had a positive impact or not.
But I can tell you our reputation among NGOs has definitely improved. Our reputation among those who are managing social investment funds has improved.
PARTICIPANT: Tamara is actually following where I was generally heading. Is there any interest in developing some way of measuring the relative effect of such initiatives versus stock prices?
As has been pointed out, all these things arise as risk management. Risk management is translated through monetary measures—market share, sales, access to capital, or whatnot. Is there any other basis, either by separating out the effect of your initiatives on these measures or something else? But is there some basis in evaluating the effect in and of itself?
SUHAS APTE: I'll answer that in two different ways.
Number one, I think, first thing, we are a 140-year-old company. The challenge that we have presented to our management and to the board was that for us to be around for another 140 years, there are not enough natural resources that exist on this planet. So we had to start thinking about what are the alternate materials we need in order to continue the growth.
To give you an example, in the United States the average mom uses five diapers. As we get 2 billion more consumers in the world, if all those moms start using five diapers, there is not enough superabsorbent, not enough poly. It just doesn't exist, whether it is Kimberly-Clark's share or Procter & Gamble's share. So we had to start thinking about alternate materials for survival of the business, for sustainability of the business.
Going back to the comment, what you asked, Julia, earlier, I think our approach always had been—internally I don't talk about being green, because that's not music to most of the management. Internally I always convert that and monetize it. I do not talk about greenhouse gases. Externally we have announced we will have 5 percent reduction in greenhouse gases. Internally we communicate that as we will save $40 million.
ALICE KORNGOLD: In terms of reputational risk, you were asking, George, about the costs and benefits and the risk and opportunity. I think in terms of reputational issues, today, with social media, the implications would be far greater with a Greenpeace campaign or any NGO campaign. Do you want to talk about that—or the woman from Alcoa, if you want to talk about that?
SUHAS APTE: I think what you said is very true. I think in some fashion we were lucky when Greenpeace did a campaign against us. In today's environment, that can become viral in 30 seconds and it can have more impact on many, many multiple countries. The impact of Greenpeace on our business was only in North America and, as I told you, mostly in the institutional side of our business. It did not really impact the consumer side. But today the story would be very different.
JULIA KENNEDY: Are there any other remaining questions or comments on Kimberly-Clark before we move to iMentor?
ROBERT VAMBERY: What we seem to be observing is that if a corporation does the right thing, there may not be a significant measurable positive payoff, but if you don't do the right thing, then there can be a very significant negative impact. So maybe doing the right thing is a defensive action. In a religious sense, you can say that if you are good you may or may not go to heaven but if you are bad you will go to hell. [Laughter]
SUHAS APTE: That is a lovely analogy. There is only one study which I know of—I think it's a Goldman Sachs study done four or five years ago—which shows those who have proactive sustainable strategies, the shareholder return for those companies is higher versus those who do not have proactive. That is the only study I know of which was done externally across many companies. But for Kimberly-Clark, I would not be able to tell you exactly if the share price moved because we solved the Greenpeace issue.
ALICE KORNGOLD: Suhas talked about the cost savings that are quite significant, and I know the private equity firms now are multiplying that out based on the number of companies they own. So there are significant savings and reductions and values.
SUHAS APTE: I think internally I always talk about "green is green dollars."
ELIA YI ARMSTRONG: I wanted to pick up the thread of third-party involvement in terms of the certification authority. Was there, or did you envision, any government intervention? And, if there hadn't been the right one at the time, if you could have envisioned, what would have been a helpful government intervention in that particular situation?
SUHAS APTE: As I said to you, the government already had forestry practices and laws in Ontario, which were quite advanced. We were following those. I think NGOs were taking it to the next level.
Now what has happened is recently on boreal, there is a committee formed of eight NGOs and seven manufacturers, those who use products, and there is a council created, which is now looking at what should be the boreal standards in the boreal region. So these are eight NGOs and six manufacturers who are predominant users of that boreal forest working together with the government trying to define what should be the next strategies. So everybody can play a role going forward, I think.
HOLLY GREGORY: I wanted to comment on a thread that I've heard, talking about how do you measure the impact. I was struck by a piece of data from a survey by the Economist Intelligence Unit for Deloitte. It was looking at business leaders' attitudes about the purpose, impact, and leadership of business on society.
They found that 76 percent—and this was just about two months ago—76 percent of business leaders believe the value of a company should be measured by the positive contribution of the core business to society as well as by its profits. And 73 percent believe that their core business activities make a positive contribution to society.
What I found really interesting is by implication that means that—and I think it's disturbing—27 percent of business leaders apparently don't think that their core business activity contributes to society.
It comes back to this notion of language and how you use different language when you're talking to the NGOs and when you're talking internally to business people. I think to really address these issues, at some point, we've got to make businesspeople comfortable about recognizing that their company is doing good stuff when it makes things that people wants, when it provides services that people want, and you should talk about it in those terms because then they can wrap in the other good things that the corporation could and should be doing for society. So we need to get over that issue of language so we can talk about how we really drive things forward.
JULIA KENNEDY: I think that's a fabulous segue to our next case.
But, Tamara, did you have something to add too?
TAMARA BELINFANTI: In addition to language, I also think it's a question of framework, meaning that if people think they are operating within a framework that supports these types of ideas, then they are more likely to act on these ideas.
As an educator, it starts with the schools. I think it starts with the people in the MBA programs, the people in law schools, just understanding that it doesn't have to be only about profit and dollars, it can be about CSR and being green, and everybody can be happy together.
SUHAS APTE: I would just add a last comment to your point. I think for us to attract talent it has become very, very important to have good sustainable initiatives. All the young kids who are graduating from college today, they look at what a company is doing and then decide if they want to work for the company.
TAMARA BELINFANTI: Yes, and there is a wealth of studies on Generation Y, the new generation that will be coming into business. These are exactly the types of things that they are looking at.
HOLLY GREGORY: I do want us to step back and reflect a little bit. I don't think that the concern about the corporate role in society is anything new and I don't think it sprang up in 2001. I think it's as old as the corporation itself.
I want to read a quote from the 17th century. This is attributed to Edward, First Baron Thurlow, Lord Chancellor of England, and it's from the Oxford Dictionary of Quotations: "Did you ever expect a corporation to have a conscience when it has no soul to be damned and no body to be kicked?"
So there has always been this concern about corporate responsibility.
JULIA KENNEDY: And then you start thinking about Citizens United as part of that quote, too. That's what springs to mind for me.
HOLLY GREGORY: Yes, right.
JULIA KENNEDY: But I think this strain of conversation really also hearkens back to Alice's opening comment, which is there is this spectrum of the way that we view NGOs and corporations, and that spectrum is getting closer together as you change the language or change the framework through which you see business.
So let's talk a little bit about iMentor and talk about how they really have to think about revenue—you know, you can't just go out and do good; you have to be able to fund it—and some of the questions that come along with that in relation to board governance.
But first let me brag about Caroline Kim Oh a little bit before we jump into it. She is president of iMentor and has helped guide this organization through enormous growth. She was director of Programs when they were just getting started, from 2000-2002; then she became the organization's executive director until around 2008; and is now president since then.
She focuses on board and leadership group development and on strategic special projects. She also serves on several nonprofit boards. And she is very passionate about youth mentorship and leadership, as iMentor clearly cares deeply about making a high-quality and lasting impact on the high schoolers it serves.
Why don't we start with you sharing what iMentor is and then a little more about your role within the organization?
CAROLINE KIM OH: Sure. Thank you.
IMentor is a not-for-profit organization based in New York City. We are a youth-mentoring program that uses in-person events and email communication and curriculum to match and build really caring one-on-one mentoring relationships for high school students from low-income communities. We use these relationships to help the students graduate from high school and, hopefully, enter and succeed in college. So that's what we do.
In New York City, we have over 2,000 mentor-mentee pairs that we're serving, so that's 4,000 people plus. We do everything about those matches—from mentor screening, training, management. We are there speaking to mentors and mentees every week.
Then, nationally we have a program called iMentor Interactive, which we'll talk more about in a little bit, that helps other organizations start up or run their quality mentoring programs using our platform and best practices.
JULIA KENNEDY: Great. And a lot of that has to do with the technical piece, right?
CAROLINE KIM OH: Sure.
JULIA KENNEDY: But we'll talk about that more.
So now tell us a little bit about your board and how it was constructed and how it relates to the organization.
CAROLINE KIM OH: We have a board made up of 15 individuals. Tim Grant is one of our board members, sitting here.
Initially they were made up of our founders, so it was a hedge fund manager and two public interest lawyers and people in their networks. They started to recruit people from an accounting background and legal background and so forth and obviously nonprofit expertise. Then, most recently, we are really focused on getting the right kind of board members who can also bring up the fundraising capacity for the organization as we grow.
JULIA KENNEDY: Tell me about this iMentor Interactive and how it was seen as a way to serve both the mission and revenue generation.
CAROLINE KIM OH: About 2006 we were able to get a special grant to start up this national program called iMentor Interactive. At that time we had grown in New York City. We felt that we had built a really strong direct-service program. We knew that we wanted to make a national impact and give back to the mentoring community that we had benefited from.
We were getting a lot of inquiries from organizations. You may notice that a lot of youth organizations will say they do two or three things. They do organizing or they do college prep, sports education, and mentoring is like the third bullet. A lot of organizations want to do it or they do some portion of it, but it's very hard to do well.
These organizations were reaching out to us asking for help in some component of our program, whether it's the technology platform that we built that we use to intake applications, do the matches, and screen the emails, and really use the real-time data to manage these relationships; or they wanted to use our curriculum; or just wanting to talk about how to expand; just use our name—whatever it may be.
Then we started to think that there was a real opportunity to contribute in that way, using all of our best practices, including curriculum and these platforms. You can think of it like Facebook for youth mentoring, where all of the communication between mentors and mentees are live, you can monitor the activities. So this is a tool that we use.
The financial side—
JULIA KENNEDY: Before we get to that, you're being very modest. One of the great things about this organization as Caroline has described it to me is the opportunity to—you know, so many of these mentorship relationships, people are busy and they kind of drop the ball, or the emails get more and more sparse. So this platform really allows for iMentor's organizers to be in direct contact with these volunteer mentors, to make sure they are living up to their end of the bargain in a way. So it's a really great tool for these other organizations.
CAROLINE KIM OH: Even in our New York City program we found that the combination of in-person events and monitored email communication following the curriculum has really helped to strengthen and lengthen the matches that we support. So that's something that we wanted to bring back to other organizations and help them run on their own. So that's the mission goal of the national program iMI, or iMentor Interactive.
And then on the financial side, we also saw an opportunity there to help iMentor with the building of our fundraising capacity. What we thought at the time was reducing our dependence on traditional philanthropy, having to write a grant application for every $5,000 that will support one pair.
What we were able to do was—this program was designed as a social enterprise, where the organizations that were using our systems and getting our support would pay a membership fee. It would be some combination of setup fee and per-user sort of like a license fee that they would pay that would over time—and we had calculated that it would take us five years and a large amount of growth capital from interested funders, visionary funders, to bring the program to scale enough where we would break even in five years and start to contribute financially to the organization beyond just paying for itself in terms of the technology and servers and stuff.
JULIA KENNEDY: So you're on this five-year break-even plan. You are two years in. What do you see?
CAROLINE KIM OH: In order to implement our five-year growth plan, we went out and presented this plan to a group of potential funders. We were able to secure a large sum of funding from individuals and foundations that believed in this growth plan and the model to financial sustainability, independence from traditional philanthropy, and so forth.
Two years into it, we are realizing that the program is in some ways going well. We are happy that we are doing it; we are impacting lives. But we are not meeting either the number of users that we are trying to serve, and also that is tied to the revenue goals.
And then, also, we were not happy with some of the quality of the organizations that we are working with. Thinking back, that makes sense. You can't just give technology or a curriculum or even do weekly phone calls with organizations and expect that you have a quality mentoring program, because in New York City it took us several years to get there.
So we are realizing that you really need to screen for the organizations that this was the right fit. Because our specialty is in youth development, we are finding that the organizations with that mission would work best for this. So we learned a lot of lessons.
We also had a tough time finding the right type of talent to staff this program, someone who has the right blend of running almost a technology business and having our right mission instinct and all the nonprofit management expertise.
We were at a point where—we only wanted to do this because we wanted to expand our quality mentoring program everywhere—we weren't totally happy with the quality. And then, we were also at a point where if we were focusing strictly on the program quality and vetting out potential paying members, then we would not be closer to breaking even at the five-year mark.
JULIA KENNEDY: So you are at this decision point between keeping the pool small and high quality or meeting your revenue goals?
CAROLINE KIM OH: Right. And we have funders to answer to as well, because these people buy into the plan whose goal was to expand quality mentoring programs and also to reach this breakeven point in five years.
JULIA KENNEDY: What role was the board playing in this process? Then we'll open it up and have people bat around potential directions to go.
CAROLINE KIM OH: We had a lot of discussions at the board level. We have quarterly board meetings. This became a topic for in-depth discussion and talking about: "Okay, so we have two goals. Can we choose one or can we choose both? What are the implications of going with this or the other? Do we need to go back to the funders?"—and a lot of these funders were actually from the network of our board members—trying to figure out what our non-negotiables were, going back and discussing our mission, and so forth. Those were the types of discussions that we were having at the board meetings.
JULIA KENNEDY: What was your goal in your relationship with the board as you were having to massage the direction? What was your strategic goal? Was it to stick to the mission? That's how you wanted to navigate this process.
CAROLINE KIM OH: I think that all of us wanted to stick to our mission. No one is at iMentor to make money, clearly. We're just trying to figure how do we get out of this situation, what's the most wise way of handling it. I think we are looking to our board for guidance.
We've always had this mandate for quality from our board, and that's something that's shared in all of our staff. So, literally, we are looking to figure out a solution. There was a lot of back-and-forth and differing opinions.
JULIA KENNEDY:Why don't we open it up? So say you're iMentor and you've been working closely with the board to develop this plan. You're two years in, and it looks like you have to open up and accept some organizations that might not be as high quality, meeting all of your mentorship criteria, or not bringing the revenue that you were hoping to.
CAROLINE KIM OH: Potential organizations that we were being contacted by or we were already working with on a pilot basis. So one was that Goldman Sachs had this wonderful program, called 10,000 Women, that was matching up their employees with third-world women that were running their own business. We are piloting with them.
There were a bunch of financial services institutions that were already supporting iMentor's New York City program that were potentially interesting in using iMI for their internal mentoring program with their associates or whatever their equivalents were.
There was a pharmaceutical company that was interested in using this to match up people that were just recently diagnosed with a certain chronically ill disease with people that had been living with it for a long time, so that they could mentor the newly diagnosed younger people with best practices and how to manage their illness.
So it is a really interesting, not necessarily so clear-cut "money vs. good" type of situation.
JULIA KENNEDY: Of course. But also a wide range, a broad definition of mentorship.
CAROLINE KIM OH: And these were all organizations that were willing to pay, but we would probably have to make adjustments to our technology or staffing or some sort of adjustments.
HOLLY GREGORY: I have a question. You've been talking about mission. I'd like to know what you mean by that.
But I'd like to step back. The thing that governs legally is what your articles say you were formed for. So are you using "mission" to mean that? Or are you using "mission" to mean sort of an expanded interpretation around what our articles say we're supposed to be doing?
CAROLINE KIM OH: Our mission was to improve the lives of young people.
HOLLY GREGORY: That's what it says in your articles?
CAROLINE KIM OH: Yes. When I talked about college earlier, we are starting to focus what do we do with a quality mentoring program, that we want to help students with college and so forth. But what the articles say is "to improve the lives of young people from low-income communities through innovative approaches to education and technology." That's our mission.
PARTICIPANT: You said that the issue about iMI was on the board agenda and the board meets four times a year. Was there also a specific board committee that focused on this?
CAROLINE KIM OH: Eventually.
JULIA KENNEDY: A committee might be another framework.
PARTICIPANT: I sit on the board of a nonprofit as well. Our mission is serving the ethics and compliance community of professionals. Our mission isn't to make money, but we have to make enough money to have resources internally to be able to serve the community and give them the programs that they need.
One of the things that we have done, I think very successfully, over the last few years is we've done a strategic rethink exercise with the board, where the entire board spends a day basically off-site looking through either the old strategy and/or rethinking a new strategy and then really narrowing it down to the granular level of what are the tactics, what are the things that you need to do.
You just mentioned you might have a committee that's going to do this. We have a committee that's called the external and governmental affairs committee, which looks at how do we relate to other parties that might be organizations that we want to have MOUs [memorandums of understanding] with or some other kind of partnership with.
That committee has actually developed a set of criteria that gives a little quality control and guidance to the senior staff of the organization, that when they are looking to hook up with another organization that there are certain things in place, and that there are certain considerations in place as well in terms of the relationship, so that if there are some costs involved that there is some kind of an arrangement that allows maybe the organization to hire an additional resource internally and—you talked about technology—if you need to expand your technology offerings, and so on.
So I think it starts also with a mission kind of rethink and strategic rethink and then a committee that's deployed to help you with figuring out what are the criteria, what are the guidelines, that you want for those kinds of relationships. And then you can maybe expand your repertoire.
JULIA KENNEDY: So one direction to take would be to expand the repertoire and say: "We need this revenue. Let's make it work."
PARTICIPANT: At Global Giving we faced a very similar dilemma probably in 2008, so four years ago. We had made various promises to various funders that we were going to break even. We had received a whole amount of capital around it. The funders—and we obviously—had a specific plan as to how we were going to get there, because you don't get funded with large amounts of money without a specific plan.
In retrospect—we achieved break-even last year, so we actually got there, but not according to the plan that I presented six, seven years ago—in retrospect, I found that process of re-negotiating an alternative vision of how to get to break-even probably more complicated than I needed it to be because the funders were specifically vested in this particular approach to reaching break-even.
I ended up achieving break-even through a variety of different things. There was no silver bullet. There was no alternative much better idea that, "God, I should have been thinking about this." It was a tweaking of this—tweaking of expenses, tweaking of fees, tweaking of target demographics—that finally got us to where we had to get to.
In retrospect, I wish I had been freed up a little earlier to sort of say, "Okay, eyes on the prize. This is where we want to get to. How we get there should be very much a work in progress and something that we can—"
You know, we didn't anticipate we would have such a large corporate partnership dimension to our business, but today it represents over 60 percent of our revenue. Back then, the plan that I presented to the funders was 90 percent consumer-driven.
HOLLY GREGORY: It's really interesting. What I'm getting from this is there is a distinction among not-for-profits in the way that they approach strategy and execution.
In a for-profit business you set a strategy but you expect it to change, you expect it to be constantly tweaked and tinkered with. What's different about not-for-profits is you often have a board and/or funders who are really emotionally invested in the means of the strategy, the very specific means, and say they need to negotiate with them. Quite interesting.
PARTICIPANT: I've been the chairman of a not-for-profit, so I fully understand the balance between the mission and the need to raise money.
You raised an issue before which made me scratch my head, because you were talking about something which didn't sound like it was the mission. If the mission is to help improve the lives of high school students, and I think you said it was Goldman Sachs came to you with the women's initiative—and I know they probably come with a large carrot that's dangled in front of you—the problem for any not-for-profit is to balance the mission with the need for money. Sometimes you have to walk away from the money—
CAROLINE KIM OH: Absolutely.
PARTICIPANT: —if it takes you away from your mission, because if your mission—forgive me—gets mishmashed, you suddenly lose it all. I've been there and I've seen it happen. You have to be very, very careful of that.
JULIA KENNEDY: I want to pick up on this and move the discussion a little bit further, kick it a little down the road. So say you're a senior manager and that's the conclusion you come to, is basically "this is a little too far outside our mission." Then what do you do? How do you get everybody else on board and convince them, "We're not going to jump for this carrot"? How do you accomplish that? How do you sell it?
HOLLY GREGORY: Unfortunately, I'm going to give you the lawyer's answer. If it's really out of mission, if it's really inconsistent with what your articles say you are formed to do, you can't do it. So you can't do it.
You could go and restate your articles. You could go and try to reformulate your mission. But remember what mission is. In a sense, you are given a special status under law to perform a particular thing, to undertake a particular thing, and your donors are giving you money for that. So that really becomes—for the profit-making entity it's like profit, it's your polestar, it's the thing that you have to go and get done somehow.
So the easy case is when it's clearly outside of your mission.
The difficult case is when it's really arguably related; or you look at some entities that were created at the turn of the century, a long time ago, and technology and the world has changed such that the way the mission was stated then didn't contemplate this whole new world.
So the easy answer is when it's really different from mission.
The difficult thing is—the Goldman Sachs example is a good one. I was thinking the same thing: How do you marry that? Are those young women? Are they youth? I don't know. I'd love to know what you came up with.
PARTICIPANT: The Global Giving case sounded really interesting. One is, did you put a sort of escape clause at the outset, where you said, "This blueprint is subject to change"? Do you think that would realistically address those concerns? That's one question.
The other one: What about just regular, say quarterly, reporting to your funders—"This is where we are, this is where we think we're going"?
Did you use those tactics, and do you think they would solve some of those problems?
PARTICIPANT: No, there was no legal escape clause as such.
To be fair, the grant agreement was quite loose. It was for "general operating support." In legal rights we were totally within our rights to mess around with our strategy.
We did have quarterly updates. But the foundation that had given us the lion's share of the money had a very particular way in which they conceived their own mission objectives, and how we accomplished it was as important to them as what we accomplished.
The updates were there. We kept trying to say, "We think we need to do X, Y, and Z." They were like, "We disagree."
PARTICIPANT: Two questions.
Why would Goldman Sachs come to you? is the first question.
The second question is: For all of you with not-for-profit organizations, do your boards take you as seriously as the for-profit board of directors takes their duties?
CAROLINE KIM OH: The first question was how did Goldman Sachs or any of these companies that approached us about internal mentoring programs come to us. For our New York City program we partner. We have very strong partnerships with a lot of these companies that provide mentors as well as funding to our New York City program. So we already worked with them. Because we have strong partnerships, when they learned about the iMI program, many of these places were interested in potentially using the program. So we had exploratory conversations with many organizations and companies.
JULIA KENNEDY: So she was in demand. It sounds like it.
Tim, I want to call on you and ask you what your perspective was on all of this? Tim was on the board at the time and watching this happen from the board perspective.
TIM GRANT: Thanks. This is really fascinating, and I think your question about for-profit vs. not-for-profit is exactly the one.
I have to give a precursor to my answer, which is I worked in finance—still work in finance—at UBS and in 2008 reported to the board directly on UBS's real estate workout group. If you know much about 2008, you will know that we were pretty much right bang in the middle of it all. I think I'm probably legally bound to stop saying anything else about UBS at this point. But I have been involved at the board level of a huge investment bank.
Then I have also been involved in the board of a not-for profit, and now I'm working at Benchmark Solutions, which is a next-generation financial intelligence company. Our mission is transparency. It's the same size, interestingly, as iMentor; it's about 70 people. I came from a board meeting there earlier this morning. So it's all kind of rolling into one.
My answer to your question is it should all get distilled into purpose and engagement. I think the answer to your question is that there are not-for-profits that have extremely engaged boards that know the purpose and there are for-profits that have extremely disengaged boards who don't know the purpose. I think you get the spectrum across the board—no pun intended. There is no consistency across all of these for-profits or not-for-profits. I really applaud Carnegie Council for bringing for-profits and not-for-profits together, because it's the same issue at the end of the day.
So to our problem, which—I would like to put this forward. We do have a very engaged board. I think the senior leadership team would agree with that. Our chairman has brought together an extraordinarily talented group of people who are extremely engaged in the purpose of what we do, which is to improve the lives of the children and the students that we interact with. I think we were actually very lucky that the way to solve this problem was that we were engaged and we were consistently asking the question of "What is our purpose?"
I think we very quickly, when we asked for dashboards and we asked for numbers, we very quickly—and I think two years is pretty quick on a five-year growth plan—said: "Hang on a minute. This isn't working. Maybe we need to talk about this."
I think what we as a board did—and I actually remember very specifically the moment that this happened because I was traveling around the world at the time and I was on a boat, and I remember being on a board call and saying right at the end of it in the executive session, "Maybe we should get a subcommittee together to discuss this iMI problem." John, our chairman, was in agreement, and that group came together.
I think what came out of that conversation was truly a redefinition of what we were supposed to do. Isn't that what we should be doing all of the time?
You made the comment about people who come in with their own predisposed ideas about how things should be and there's a sort of inertia about moving. You mentioned about your organization as well that you are able to be nimble about it and change and move and "Let's not all be wedded to this particular route; let's all make sure we know what the purpose is first and then get there any way we can." I think therein lies your answer, that we were able to actually step aside and have a conversation.
What I viewed in other areas that I've been involved in is that that's not the case. That's so far from the case that it's kind of laughable and comical. You have to ask yourself: "What are you doing on this board, why are you even here, if you're not engaged and you don't know what the purpose is?"
I hope that answers your question.
JULIA KENNEDY: Yes.
We have a lot of hands and not a lot of time.
HOLLY GREGORY: I see a different kind of range. I work with both for-profit and not-for-profit boards, and I work with them both in good times and in crises.
I think for not-for-profit boards the extremes tend to be more extreme. So on a not-for-profit board sometimes you'll have a board that's really not engaged at all. Or you'll have a board that's really over-engaged because everyone is so passionate about what the organization is doing that they're not really stepping back and saying, "What's my oversight role? How do I empower my executive staff to run and do, and how do I help them have the resources but get a little bit"—we like to say "nose in, fingers out." NIFO—that's what a board is supposed to do.
Unfortunately, a lot of not-for-profits, because people are so passionate, they want to be volunteers, they want to be in the weeds.
JACQUELINE BREVARD: I simply want to say that when I was active vice chair of the Ethics and Compliance Officers Association we began every board meeting by reminding ourselves of the mission. I read the mission statement at the beginning of every board meeting.
JULIA KENNEDY: That's a way to remember, yes.
Caroline, do you want to share what happened?
CAROLINE KIM OH: Sure. What happened is this iMI subcommittee, which Tim was part of—and none of this was done in isolation of the senior staff, so the staff was in there—and we talked about everything from the issues with specific donations to, obviously, our mission first; the issue of staffing, like, "This is how many staff we have, this is how many hours we have, and there is only so much we can do."
What also came out of that committee is sort of like the quality standards for our member organizations. At the end of the day we decided that quality comes before, in our case, the break-even point or the financial target and we had to be okay with not meeting those financial goals, because for us it had to be either/or at that time. This quality mandate from our board to staff at all levels continues.
I think Suhas said this is a journey. It's really true. It's something that we are still looking at and working through all the time.
Just yesterday I spoke to a current funder who proposed: If we gave you a certain amount of funding, would you be able to modify your iMI model to serve a previously incarcerated population that's not directly—I mean it was a wonderful mentoring program, and we know we can add value because we are one of the mentoring experts, but it's not really going to work in terms of our current focus.
We have even deeper focus from our mission, where we are going to use all these strong relationships to help them through high school graduation and college success. So I anticipate that this will be something that we will be working through.
JULIA KENNEDY: And I think it's a really interesting challenge that you have, because you are dealing with organizations—I mean these are all good for the world, all of these projects add value to the world. But you're saying, "We're experts here and this is how we know we can have impact and that's how we're going to define—"
CAROLINE KIM OH: One more subtle thing is that when we were starting up the iMI program, the national program, for that particular program we wanted to really push and try to see where this model works best, and an even bigger goal of expanding quality mentoring programs everywhere. It was like that the first year. So we were willing to be a little bit out of our comfort zone in piloting small programs that may not have been exactly what we are doing in New York City. Since then we have really come back.
PARTICIPANT: Could I ask a question: have you ever thought about spinning off—
PARTICIPANT: We have talked about that as well.
PARTICIPANT: —and making a for-profit that could generate the funds to support the not-for-profit?
CAROLINE KIM OH: Yes, we have spoken about that. I think partly capacity, that's one issue. At that time, five years ago, we really wanted to make this as the mentoring program that we have full control over, that we would really be able to help with quality—it was the "teaching to fish" model—including the technology and curriculum and our manpower and intellectual property, that we would really help with a quality mentoring program, not just selling our services. But it was discussed, yes.
TIM GRANT: It's not off the table.
CAROLINE KIM OH: It was discussed. So the journey continues.
JULIA KENNEDY: Great. Thank you so much for those comments.
Alice, I think you had some concluding remarks.
ALICE KORNGOLD: Thank you.
I mentioned earlier for-profits and non-profits and the focus here on financial results and here on mission and both moving towards the center; and I think we've heard a lot today about the power of partnerships between the sectors and how positive that has been; and the focus of the discussion on the role of each board to hold organizations accountable and to determine and monitor the balance within each organization.
The additional role that we've talked about that I think is very powerful—and someone invoked the case of Apple and Foxconn—is the role of consumers, especially with social media, and consumers both for nonprofits and for for-profits; and also employees. That has become a powerful force in holding organizations and companies accountable; and the demand for transparency. That just changes the entire conversation and will going forward, and gives consumers and employees a powerful role in the whole equation, which I think is quite extraordinary.
So thank you for having us, Julia.
JULIA KENNEDY: Thank you all so much for coming.