Erika told me she was out to transform the all-powerful capital markets so that they would correctly value sustainability, thereby reorienting capitalism to a higher purpose. Whoa.
“What I learned were too many things were dependent on my perspective and my belief and that’s not good for any business,” Hollender says. “The values have to be woven into the fabric not just culturally, but legally.” Hollender wishes he had enshrined more practices in bylaws and other legal documents.
“So, for example,” he says, “Seventh Generation has given 10 percent of its profits away to charitable nonprofit organizations. Now that’s not in the bylaws of the company, that’s not in the charter of the company. That can be changed at any time. Well, you know what, that’s a mistake… It should be in the bylaws and it should only be able to be changed by a supermajority that includes the employees… So if I failed, and I think I did fail in a lot of ways, I failed to institutionalize the values I believed in.” Heimert points out the 10 percent giving continues as it always has, directed by board member Sheila Hollender, Jeffrey's wife.
That's probably just one of the reasons Hollender isn't saying he predicts these things will change. In fact he repeatedly stressed that he doesn’t expect them to, but this is a time of reflection for him as he examines what led him to be ousted from his company. And he makes a passionate argument for using new tools to protect the core principles of values-driven businesses. He cites B-Corporation status, which requires a company to alter its bylaws so the leadership has to consider environmental and social impacts as well as financial factors before making corporate decisions. Seventh Generation was a founding B-Corporation when the concept was created three years ago. But those bylaw changes didn’t address 10 percent giving, CEO pay, or publishing a corporate responsibility report according to Global Reporting Initiative standards, all practices instituted by Hollender.
Dave Rappaport, the Senior Director of Corporate Consciousness, says he doesn’t know of any plans to alter the bylaws to enshrine any of those policies but says “there’s been no change to our commitment to all of the things we’ve been working on.”
(Rappaport's title in another company would be director of corporate responsibility, but one founder-inspired quirk of Seventh Generation is that company leaders make up their titles—at one point Hollender named himself Chief of Un-Fucking Up the World. That title lasted one day.)
Rappaport who was hired by Hollender after working in the NGO world, says all of the practices listed by Hollender will stick around. “Although the company was launched by Jeff’s vision, it is embraced by everyone here. It has been a part of everybody’s perception of their roles. Down to the innovations we’ve created on sustainability and corporate responsibility you will find the work of employees who took the vision to heart.”
He says, since letting Hollender go, the board of directors has approved the creation of a new committee on corporate social responsibility and sustainability. “With Jeffrey’s departure we know we have to institutionalize all of the things” he advocated for, to make sure there is management oversight and “continued direct board oversight, which there was through him” when he was on the board, Rappaport says.
Rappaport cited a few specific initiatives indicating how transparency continues to increase, including publishing the corporate responsibility report in an accessible online form and a new initiative to make more company data available to the public in the same way data.gov publishes government data. He hopes consumers and publications like GOOD will use it to hold his company accountable.
In possibly the most comforting statement he could give in this position, Rappaport echoed the man who hired him with a Hollender-esque call to consumers, "don't just take our word for it. Watch and see. Nobody deserves to get a pass on their actions ... our consumers need to be the ultimate judge of what we do."
Hollender had been planning to transition out of day-to-day management of Seventh Generation for some time. That transition did not go as planned. Though Hollender was initially excited when the company hired Chuck Maniscalco, a former PepsiCo executive, to take over as CEO, he has come to regret the choice of leadership he once supported. Hollender retained the title of Chief Inspired Protagonist and remained the company’s moral compass.
“I think that, while the idea to bring in a CEO was the right idea,” he says, “bringing in someone who didn’t have any corporate responsibility experience, bringing someone in who came from such a big company was not the right decision.”
For example, Hollender says, one of the most successful ways that Seventh Generation grew was by building a loyal and passionate customer base, not through advertising or traditional marketing but through a consistent commitment to transparency and specifically talking about what’s wrong with the products and what’s wrong with the company. “That’s not something that most people at large companies are comfortable with. They are surrounded by lawyers who tell them not to talk about those things,” Hollender says.
Senior Director of Corporate Consciousness, Dave Rappaport says the company has no intention to backtrack on any of those transparency habits. “There’s been no change to all the things we’ve been working on.” (Read more in part two of this post about how Seventh Generation is re-affirming its commitment to Hollender’s values, and what Hollender suggests customers can watch for to be sure.) Rappaport adds there are plans to become even more transparent with an initiative to be announced later this year where the company will make raw data available on responsibility and sustainability. He compares it to how data.gov makes government data available.
But the divergence between Hollender and his former company seems to run deeper than transparency, touching on a perennial question for successful values-based businesses: how to scale without sacrificing standards, be they product standards or investor standards. Hollender built the company into a $150 million a year business, and Maniscalco’s appointment was meant to signal a new era of growth, to transform Seventh Generation into a $1 billion sustainable business. That’s a kind of scale that has scuttled the best-laid plans of other iconic business leaders at companies like Ben and Jerry’s and the Body Shop.
Hollender was careful not to reveal too much when asked about money. “What I can say, is that over the past couple of years, not directly related to hiring a new CEO, I would say the board and I increasingly began to see things a little differently. And my interests for Seventh Generation, which produced pretty good financial results, I think, perhaps, began to diverge with what the board wanted to focus on.”
Hollender confirms this divergence of vision with the board happened as the company brought in more private equity money to fund the expansion of the company, including a recent $25 million round of funding that Hollender says was raised by the board on Maniscalco’s resume.
“You know one of the things I always advise people,” he says speaking of values-based businesses generally, “is to be more careful about the money you take than the people you hire, because you can’t get rid of the money. Once someone owns your leg or your arm or your ear, they’re stuck to you.”