Reconfigure Your Board to Boost Cooperative Advantage

Given that many organizations are failing the stakeholder capitalism test, bold steps are needed to turn capitalism into a more compassionate economic system. In 2019, signatories of the Business Roundtable’s Statement on the Purpose of a Corporation committed to serve all of their stakeholders, not just shareholders, by investing in employees and compensating them fairly, fostering dignity and respect, and supporting the communities in which they work. But a recent study found that these companies have done no better than nonsignatory organizations at protecting jobs, supporting labor rights, and ensuring workplace safety during the global pandemic.

To genuinely support employees and other stakeholders, corporations need to reconceptualize their purpose and focus on obtaining cooperative advantage. An approach rooted in African traditions of cooperation such as ubuntu (which translates to “I am because we are”), cooperative advantage describes the benefits that an organization possesses and accrues due to its people-centered approach to development and sustainability. This encompasses engendering a spirit of care and meaningful dialogue among employees, customers, and community.1

One approach to gaining cooperative advantage is to appoint community development and sustainability advocates to a company’s board of directors. Ideally, these individuals will have genuine interest and experience in fighting against social injustices, with consistent records of passion for and dedication to solving big problems. In order to meet the Business Roundtable priority of promoting “an economy that serves all Americans,” traditional board members must be challenged by colleagues who bring new perspectives on community advancement, social justice, and sustainability. Highlighting accountability in this way may compel other members to deliver on their still unmet commitments to all stakeholders.

A recent PwC survey found that 41% of U.S. board members cite a lack of “qualified” candidates to increase board diversity — a finding that necessitates a reconsideration of a member’s ideal qualifications. Certain steps to diversify boards are in progress — for instance, a new California law requires publicly traded corporations based in the state to include corporate board members from underrepresented communities, and Nasdaq recently proposed a rule that would require most companies listed on the exchange to have at least two diverse directors. But corporations should go further. To build sustainable communities, their boards must be both diverse and passionate.

Fortunately, we can look to the past for solutions, such as General Motors’ appointment of the Rev. Leon Sullivan, an African American Baptist minister, to its board in 1971.

Lessons From Leon Sullivan and GM

Leon Sullivan was a Philadelphia-based minister, civil rights leader, and human rights activist who was passionate about workforce development, job creation, and income equity for Black communities. A firm believer in the power of cooperation, in 1958 Sullivan rallied 400 Black ministers and their congregants in Philadelphia for a united boycott of banks, corporations, and retail stores that failed to hire African Americans and other minority workers.2 These economic boycotts, known as “selected patronage programs,” supported only businesses deemed nondiscriminatory. By garnering the support and purchasing power of the Black community against companies engaging in discriminatory behavior, Sullivan’s campaign helped mitigate employment barriers in Philadelphia.3 These programs would serve as a blueprint for Martin Luther King Jr.’s Operation Breadbasket.

As career opportunities grew after the boycott, a new challenge arose: to fill those jobs with qualified candidates. Sullivan rose to the challenge in 1964 by creating a program to train individuals for meaningful work that would improve their livelihoods and communities. He received financial support from businesses, federal government, local governments, and the general public for these training centers, known as Opportunities Industrialization Centers (OICs). By 1980, OIC programs had been established in more than 100 U.S. cities and in eight African nations.4

James Roche, then chairman and CEO of General Motors, offered Sullivan a seat on the GM board in 1971. Roche had faced pressure from the Project on Corporate Responsibility, an organization backed by Ralph Nader that was instrumental in the modern shareholder responsibility movement. The Project on Corporate Responsibility demanded that GM restrict operations that were detrimental to the health, safety, and welfare of citizens and vocally objected to GM’s lack of diversity in top management and on its board.5

Sullivan felt strongly about the role corporations should play in society, stating that “multinational corporations have, historically, been unresponsive to the needs of the poor. … They have disregarded the human and social needs in the communities and environments where their plants and businesses exist.”6 At his very first GM shareholder meeting, Sullivan spoke boldly on the issue of apartheid, telling his fellow directors that he planned to vote against them in favor of a resolution brought by the Episcopal Church that called on GM to close its plants in South Africa.7 GM’s subsidiary in South Africa consisted of an engine manufacturing plant located in Port Elizabeth, plus a nearby assembly plant and a manufacturing plant located 10 miles away, which together employed about 4,800 people.8 Sullivan’s dissent marked the first public disagreement on the 23-member GM board.

Six years after that first landmark vote, Sullivan collaborated with fellow GM board members, along with board members from 11 other companies, including Ford and IBM, in writing a set of principles to increase the quality of life for Black South Africans.9 What became known as the Sullivan principles demonstrated the power corporations can wield in the fight for social justice by taking a cooperative, collaborative approach in challenging an oppressive status quo.

Identifying Community Development and Sustainability Advocates

Corporations, especially signatories of the Business Roundtable’s Statement on the Purpose of a Corporation, must appoint community development and sustainability advocates in order to abide by their collective pledge to serve all stakeholders. While no potential appointment or individual board member is a panacea, adding those individuals to the board is a critical step for a company to develop a more cooperative system. Those individuals may be identified as follows:

Critics. According to Doris Kearns Goodwin’s bestselling book Team of Rivals, President Abraham Lincoln appointed cabinet members who had previously campaigned against him, because he wanted a wide range of viewpoints to sharpen his own thinking about various issues.10 Similarly, to depart from the status quo and refocus on embodying a spirit of care and community, companies should embrace coalition building with individuals and groups focused on developing sustainable cities and communities — even those that may challenge the organization’s practices.

For example, Robert D. Bullard, often described as the father of environmental justice, has argued that environmental racism — the disproportionate impact of environmental hazards on minority groups — has placed communities of color at a greater risk than the general population.11 He has also emphatically criticized petrochemical companies that have committed environmental injustices against minorities. Companies condemned for committing such injustices can especially benefit from the contributions of individuals like Bullard — who may challenge them to think differently about the harm they cause, and help them build a better way forward to engender community well-being. To identify critics whose passion may serve the interests of the wider community, companies should consider holding a series of virtual town hall meetings to hear the opinions of their stakeholders and identify potential board candidates.

The appointment of a critic can generate criticism and conflict, both internally and externally. A company should not appoint such a critic as an underhanded technique to silence them but as an authentic opportunity to amplify diverse voices. Worth noting, too, is that despite the progress they make, some community development and sustainability advocates appointed to boards may be criticized by their own communities for “selling out” or doing too little to persuade businesses to tackle societal problems. (Leading up to GM’s plant closures in South Africa in 1986, Sullivan and GM were criticized by anti-apartheid activists for not going far enough to challenge apartheid or fully divest from South Africa.)

Grassroots sustainability advocates. Courageous yet uncomfortable conversations are often necessary to bring forth positive changes, and having community development and sustainability advocates on the board — whose backgrounds serve grassroots sustainability movements — will no doubt spark these essential discussions. One such sustainability movement is the Indigenous Environmental Network, a group well known for its fight against fossil fuel pipelines.

Board members with more traditional backgrounds may object to the costs of tackling issues like climate change, but dialogue refreshed by the presence of advocates may prompt more open-mindedness and even spark innovative ideas to solve societal dilemmas. For example, a new board appointee who is particularly passionate about mitigating climate injustice — such as poor air quality, increased water pollution, or substandard waste management — may face off against fellow board members who argue that these issues are not their responsibility. However, these difficult exchanges are necessary to engender a more compassionate form of stakeholder capitalism. Sustainability advocates should thus be welcomed on boards, and other members should be prepared to engage in challenging conversations about tackling tough problems.

Worker-owned cooperative advocates. Worker-owned cooperatives have the potential to promote economic and racial justice and thus are a rich source for potential board members with distinguished track records of supporting values-driven businesses. One way to identify these board candidates is to seek out individuals affiliated with organizations such as the U.S. Federation of Worker Cooperatives, whose cofounder, Jessica Gordon Nembhard, outlined the rich history of African American engagement with the cooperative movement in her book Collective Courage: A History of African American Cooperative Economic Thought and Practice (Pennsylvania State University Press, 2014). The cooperative model has been shown to help communities become sustainable and achieve more equitable wealth distribution.12

Companies can serve as strategic partners with worker-owned cooperatives that serve as integral parts of their global supply chains. One recent example is U.S. fashion brand Kate Spade, which partnered with Rwandan artisans to create a for-profit worker-owned cooperative called Abahizi Rwanda. Abahizi offers employment opportunities to empower female employees and improve local communities.

A worker-owned cooperative advocate on the board can play a role in persuading fellow members to support this unique type of business model — a social enterprise supplier model — to encourage economic revitalization both locally and internationally.

In order to attain cooperative advantage, corporations need to appoint bold individuals who will challenge them. The relationship between new board members and incumbents may be fraught or complex at first, but that is a small price to pay for a more compassionate approach to capitalism. Companies should consider appointing three categories of new board members: advocates who have criticized their inertia, in order to push them toward humanistic values; colleagues with backgrounds in grassroots environmental movements, to engage them in courageous conversations to advance social innovation; and experts with backgrounds in worker-owned cooperatives, who can help facilitate strategic partnerships.

As Sullivan once said, “Humanistic interest had better be the concern of companies if, under the banner of free enterprise, they expect to survive.”13 Community development and sustainability advocates serving on boards can help ensure that companies consider humanistic interests and make decisions with all stakeholders in mind.