B Lab Co-founder: We Are in a Culture War About the Purpose of Business | Bart Houlahan
Jul 23, 2024
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Bart Houlahan, Co-founder of B Lab, discusses the success of Benefit Corporations during financial crises, the importance of investing in people, and the rise of stakeholder capitalism. They explore the impact of corporate culture on stock prices, the benefits of B Corps, and the evolution of fiduciary duty towards stakeholder interests.
Companies that invest in people outperform in their field.
Benefit Corporations have low crisis attrition rates due to balancing profit with social impact.
Shifting to stakeholder capitalism builds resilient businesses prioritizing all stakeholders' well-being.
Deep dives
Corporate Purpose Beyond Profits
Defining success in business goes beyond traditional metrics like revenue growth and earnings per share. A successful business should prioritize employee engagement, community involvement, and environmental footprint management as key metrics in defining a good business. The shift in the purpose of business is towards creating value for all stakeholders, not solely focusing on shareholders. Decisions made based on considering and benefiting all stakeholders can lead to long-term value creation for shareholders.
Foundation of B-Lab and B Corporations
Bart Hulihan's experience with And One highlighted the importance of maintaining a company's values during ownership transitions. This led to the foundation of B-Lab aiming to create a legal framework allowing corporations to consider a triple bottom line approach. The B Impact Assessment evaluates impact across consumers, workers, community, environment, and governance, fostering a community of certified B corporations aiming to use business as a force for good.
Imperative of Stakeholder Capitalism
Shifting towards stakeholder capitalism is crucial for building resilient and successful businesses. Companies committed to stakeholders' well-being have proven to be more resilient during crises, demonstrating that investments in employees and communities result in stronger business performance and financial returns. The emphasis on stakeholder capitalism aims to create a culture where businesses prioritize creating value for all stakeholders over maximizing shareholder value.
Challenges in Cultural Change
The cultural war about the purpose of business involves changing behavior, structures, and perceptions around business success. Cultural change demands a shift from prioritizing profit maximization to valuing contributions to employees, communities, and the environment. This transformation requires aligning corporate behavior, legal structures, and cultural attitudes towards a more inclusive and purpose-driven economic system.
Aligning Personal Values and Professional Endeavors
Bart Hulihan's career journey reflects a focus on aligning personal values with professional endeavors. Working with people he respects and values and creating a culture that aligns with his beliefs are the key drivers of his career choices. By emphasizing relationships, values alignment, and purpose-driven work, Bart seeks to live a life where work is fulfilling and contributes to a greater societal impact.
The last two financial crises resulted in recessions, financial market instability, and high unemployment rates, but one group of companies proved resilient. Benefit Corporations – businesses that balance profit with social and environmental impact – experienced crisis attrition rates of less than 5%. Bart Houlahan, a co-founder of B Lab, joins Work for Humans to share why companies that invest in people outperform in their field.
Bart Houlahan is Partner at Irrational Capital, the first firm to quantitatively measure the impact of corporate culture on a company’s stock price. He is also co-founder of B Lab, a nonprofit organization that seeks to solve social and environmental problems while driving profitability. Currently, there are over 6,000 certified B Corporations across 150 industries in 80+ countries.
In this episode, Dart and Bart discuss: - The foundation and purpose behind Irrational Capital - Why companies that treat people well outperform - Corporate culture as a new investment factor - Bart’s take on the rise and fall of AND 1 - The 3 main components of a Benefit Corporation - How B Corps establish strong governance - The long-term benefits of stakeholder capitalism - And other topics…
Bart Houlahan is Partner at Irrational Capital and one of the co-founders of B Lab, a nonprofit organization that seeks to solve social and environmental problems while driving profitability. Currently, there are over 6,000 certified B Corporations across 150 industries in over 80 countries. Prior to B Lab, Bart was president at AND 1, where he helped to finance, operate, and scale the business to $250 MM in brand revenues while focusing on company values and corporate culture.
Bart is a graduate of Stanford University. During his career, he was also an investment banker with Stonebridge Associated, BNY Associates, and Prudential-Bache Securities. Bart is a Henry Crown Fellow of the Aspen Institute and serves as an Advisory Board Member of the Fuqua Center for the Advancement of Social Entrepreneurship (CASE), the Wharton Impact Investing Initiative, and the G8 Impact Measurement Working Group.
Work with Dart: Dart is the CEO and co-founder of the work design firm 11fold. Build work that makes employees feel alive, connected to their work, and focused on what’s most important to the business. Book a call at 11fold.com.
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