At the Social Enterprise Conference on October 7, Joan Bavara, founding president and CEO of Trillium Asset Management, received the 2005 Botwinick Prize in Business Ethics. In introductory remarks, Dean Glenn Hubbard noted that the prize "is not an isolated event in the life of the School, but is rather a cornerstone of the School’s broad commitment to ethics in the teaching of business."
Ray Horton, the Frank R. Lautenberg Professor of Ethics and Corporate Governance and director of the Social Enterprise Program, praised Bavaria’s contributions to the field of business and ethics. "Through the great success of Trillium Asset Management, the company that she founded in 1982, Joan has demonstrated that business objectives are served by ethical commitments," Horton said. "The relationship between business and ethics is really complicated. I think at one point in time the thinking was that you made your money first and then you gave it away and that was how you practiced business ethics. I think what is clearly emerging more recently is that you do the two together. I don’t know anyone who has done that better than Joan Bavaria."
An excerpt of Bavaria’s acceptance speech follows.
Thanks, Ray and Glenn. I really want to emphasize how incredible this is. For those of us who are in the trenches, it’s a great encouragement to be acknowledged this way and to talk to all of you. What I’d like to do here is to describe what I do and why I do it. Trillium Asset Management is a regular asset management firm that takes money from individuals and institutions and manages it. We are about to become a billion dollar company. We have about 600 individual and institutional clients, every one of which cares about social and environmental outcomes as well as financial outcomes.We would get fired if we didn’t produce financial outcomes. But these clients want something more. We really have to be competent advisers, and that goes for anything in any piece of business called ethical or social. You have to be competent. That’s number one. But what we also do on behalf of our clients is we’re shareholders in stocks. We’re bondholders. We own community loan funds where we can. Community loan funds are great vehicles to get right at some social issues for our clients, but when we’re owners of securities or holders of funds we act as active owners. This is something that got lost in the last 100 years, where owners of companies are actually involved in the management of those companies. Our owners could be religious organizations or pension funds or concerned individuals, but every one of them has some kind of social mission either in their fund charter or corporate charter, or as individuals they care about these issues.We know we don’t know how to run companies. We understand that, but what we believe passionately is that the companies benefit from input from various stockholders. It’s not just about watching that short-term bottom line — it’s about looking at social impacts. We do this very often by calling the company and talking. In fact, we do file shareholder resolutions, but most of the actions and good dialogue that we have are never filed in a shareholder resolution. We work with companies to try to develop and change policies. But sometimes we’ll file a shareholder resolution asking the company to disclose issues like the right of the workers or reports on environmental impact.
We are concerned about fair media. In other words, how do people in communities get fair access to the media and how do they get fair news coverage? We care about how the companies relate to lobbying. We place a very high premium on dialogue. What we’ve learned over time is that you once you open up dialogue with a company, it’s like a dam bursting. Everybody really wants to talk to each other, but people have barriers and they don’t know how.
One of the most important things we do at Trillium is we try to run our company like we ask companies to run themselves. And around that issue, there are issues of executive compensation. In this country, the ratio of the average CEO compensation to the average employee compensation is something like 360 times or more. In our company, it’s between three and four times. It’s a services company, so we don’t have unions. And I’m not poor. I’m not suffering. This is how we believe we should run the company. If we ask a company to do something, we want to be able to do it ourselves.From the beginning, one of the missions of the company was to create a more scientific, powerful industry around socially responsible investing. We’ve tried to broaden our networks and create new liaisons, experts in various fields. So I gather some of you are probably heading for nonprofit work. I actually have a foot in both worlds. It teaches you a lot to be on the side of the nonprofit. When I first started Ceres, the executive director said, "Joan, this is one lesson you’ve got to learn and you’ve got to learn it right now. You’ve got an income stream in Trillium. Here you’re going to have to beg for your money every single year." It’s a huge difference.
One of the most important things that we did is create the Ceres principles, which were released in 1989. They were then named the Valdez principles. There are two main concepts. We ask companies to report on their environmental success or failure and then a governance issue. We ask the board to be directly responsible for environmental outcomes in mission statements. We ask companies to sign the Ceres Principles, and even though we have about 70 big companies now who are Ceres companies directly, our big success is with companies that have aped the principles and have their own. Ceres then started the global reporting initiatives out of that reporting principle, the GRI, which is now an international transparency initiative based in Amsterdam, and there are over 100 companies globally reporting on their sustainability effects.
The other thing that Ceres spawned is the Investor Network on Climate Risk, which was cosponsored by the United Nations Foundation. It includes treasurers of states, investment bankers, and many unions and foundations who are interested in defining risk in portfolios to include issues like climate change. In other words, why isn’t it a risk for an insurance portfolio to not look at climate change issues around that portfolio? Wall Street houses such as Goldman Sachs have done studies recently on climate changes, and we at Ceres take some credit for that. Companies all over are being asked at the board level to investigate their exposure to climate risk and report on it.
So this is just a cursory background on what we do. It’s a word on what motivates us. There are people who think that "business is business is business." We totally disagree with that. Even if a business is only considering its own financial future, it has a self-interested obligation to think about societal and environmental issues. We also take issue with those who think that Darwinian capitalism has a magic hand that’s going to guide it and make everything OK in the end for society and the environment. We challenge those people on Wall Street. They penalize companies and managers who are trying to look long term, who dare to think long term, and who might make a capital investment, for instance, in better environmental management, but their stock gets hit. It’s brutal. It’s Darwinian capitalism.
We’re not fixing all this, obviously, but what we’re trying to do is find avenues for policymakers and people in business to be more conscious of it and more deliberate around their environmental and social designs long term. The corporate leaders are in league with us, but they need help. We all need help. We need investors who start to think long term. We need help for corporate leaders to start to think long term. And there are tangible things you can do, like start to rethink compensation packages, so managers are rewarded for long-term planning and the sustainability of the company rather than the stock price short term. Some of these issues are somewhat contentious, to say the least, but we’ve found that when leaders get together on these issues, they come to a common objective. Nobody doesn’t want to protect the environment. Nobody wants to be brutal to employees.If people are given the space and time to negotiate, amazing things can happen. We’ve had some amazing stories. I really urge you in the Business School and those of you who are who are business leaders to push your vision beyond income statements and balance sheets. It’s really important that you do so, and it’s getting more important all the time as transnational corporations are more powerful than many countries. There are some great models in the world. I really urge you to look them up and study those companies who’ve actually modeled stakeholder group consensus building that have done a terrific job, too.
But I want to say one last word about doing good. I’m the kind of person that automatically backs away from anything that sounds trite, so we’ve never had at our company "doing well by doing good" slogans. This is not about guilt. It’s about hard science and good business. Capitalism as we know it in this country tends to put down that concept as ineffective and working against the common interest of business. In fact, my sister’s sitting in the front row — we both grew up being trucked off to Sunday School, and I couldn’t drive the car unless I went to choir. All of my life, I was taught that doing good was a good thing. And then you get to business and they’re throwing it at you like a swear word. You grow up and get immune to that.But you know what? You don’t get remembered for piling up millions of dollars. You don’t get remembered for your mansion on the hill. You get remembered for stuff that you do for humans or stuff that you do for the environment. You should also remember that you’re not just do-gooders, because I’ll tell you, you don’t survive in the securities industry for 20 years without being pretty hard-nosed and agile and tough. You have to sometimes take a deep breath and fire a person. So just in closing, I urge you all to get out there, get smart and do good.
Related Links:Trillium Asset ManagementCeres: Investors and Environmentalists for Sustainable Prosperity