#207 – Integrity Idea 037: Take Steps To “PPP”

You may be very confused right now.  The Covid pandemic has trained us all to think of “PPP” as a thing rather than an action.  PPP was the “Paycheck Protection Program”.  Our PPP, however, is an action, and it stands for Protect your Purpose from Profiteers.

Integrity Ideas are specific actions a leader can consider during the Re-Align step of Integriosity®–actions that will begin to Re-Align the organization with Biblical beliefs, principles and priorities.  You can find more Integrity Ideas at Integrous | Integrity Ideas (integriosity.com)

Integrity Ideas are practical actions toward implementing a bigger WHY for the organization.  We believe some are critical (and necessary) steps in the RENEW/RE-ALIGN/RE-IMAGINE/RESTORE process.  Others are just ideas to be considered if they feel like a good fit based on what leaders prayerfully discern is best for stewarding the organization toward its WHY.

“Take Steps to PPP” falls into the necessary category because an unprotected purpose is likely to be a victim of drift if not sabotage; however, the extent of the steps needed to protect a bigger WHY will vary greatly depending on the nature of the ownership and governance structure of the organization.

INTEGRITY IDEA: Take Steps To “PPP”

“Take Steps To PPP” is about taking steps to Protect your Purpose from Profiteers.

This post was inspired by a recent Wall Street Journal article entitled “Startup Founders Fret Over Getting Fired Like Sam Altman“.   The article talked about “hurdles founders can set up that would make it harder for a board to move against a company’s mission or management” (emphasis added).  Although the focus was more on how founders can protect their jobs, we were drawn to the protection of “mission”.

A faithful leader wanting to lead with faithful integrity through business a better way toward Biblical flourishing must understand their role as the steward of an organization ultimately owned by God.  The Bible is full of passages reminding us that God owns everything. For example, Psalm 50:12 (“For the world and its fullness are mine“) and Deuteronomy 10:14 (“Behold, to the Lord your God belong heaven and the heaven of heavens, the earth with all that is in it“). Perhaps the most direct when it comes to wealth is Haggai 2:8:  “The silver is mine, and the gold is mine, declares the Lord of hosts.

The Creation Mandate (the commandment about our purpose on earth) in Genesis 1:28 charges us with stewarding God’s creation.  That means the leader of a business has the responsibility to steward that business faithfully on God’s behalf.

Even if a leader acknowledges that God is the ultimate spiritual owner of the organization, the organization will have temporal “owners” with legal rights under the world’s system of governance.  These might be employees, partners, private financial owners or public shareholders.  Public ownership of an organization presents the greatest challenges to “Take Steps To PPP”.

Private financial owners are investing for an “exit” and are focused on medium-term financial returns.  Public owners generally care about stock price and rarely have a long-term view, and a faithful leader will face tremendous market pressure to maximize profits and short-term stock price (including threats by activist shareholders).  At best, the faithful leader of a company with private financial owners or of a public company may need to pursue a bigger WHY through the most covert approaches and be prepared, in Seth Godin’s words “to do a sort of dance, explaining to shareholders why, after all, really and truly, what they’re actually doing is serving the shareholders.”

(N.B. Many proponents of the “shareholder primacy” view of governance argue that the board of a public corporation has a legal duty to maximize profits for shareholders, but we believe that is a misunderstanding.  In fact, in 2016 the Modern Corporation Project issued a Statement on Company Law signed by dozens of legal experts refuting the misconception that corporate law requires the maximization of profits for shareholders.  We also recommend The Shareholder Value Myth by Lynn Stout for an excellent legal analysis of the issue.)

Stewardship of an organization requires decisions, and decisions are driven by the governance vision, model and practices of the organization that are embedded in its culture as well as by its temporal “ownership”The governance and ownership structure of an organization can facilitate, impede or completely block the pursuit of a bigger WHY.

Part of implementing a bigger WHY in an organization as a faithful steward is putting in place safeguards and avoiding missteps to ensure that it is not undermined or eliminated by stakeholders with a Profit as Purpose agenda–we’ll call them “Profiteers”.  By Profiteer, we do not mean just someone who seeks profit–it is someone for whom making the most profit is the whole point.  Remember, all faithful leaders of businesses must recognize the importance of profit as a necessary means to the bigger WHY–profit is necessary for sustainability, and it is necessary for the flourishing of the stakeholders who are organization’s temporal owners.

(N.B. The Cambridge Dictionary defines “profiteer” in a business context as “a person or organization that takes unfair advantage of a situation to make a large profit.”  You can quibble with how well the definition fits business as usual, but as we have said many times, if maximization of profit is the end to which the business is managed, people are by definition reduced to tools of production to be manipulated and managed toward that end.  Reducing people to tools is dehumanizing, which certainly sounds like taking “unfair advantage”, and the purpose of Profit as Purpose is to manipulate and manage people to make the largest possible profit.)

Profit as Purpose is the WHY of business as usual–business in in accordance with the kingdom of the world–and the world will exert constant and increasing pressure on an organization to conform to its ways. Profiteers might emerge as officers or directors, but they are most likely to show up in the form of owners or their agents.

For example, founders who have taken steps to ensure their continued control through a class of super-voting shares have faced unrelenting pressure from stock exchanges, institutional investors, proxy firms, academics and some lawyers to give all shareholders an equal vote.  One need only read the website of the Council of Institutional Investors to get a flavor of the efforts just one industry organization has taken to stop founders of public companies from retaining control, including lobbying stock exchanges to impose mandatory seven-year sunset provisions on the dual-class structures of listed companies.  CII also publishes a list of “dual-class enablers”–directors involved in decisions to go public with dual-class structures–presumably to shame or frighten these directors into submission.

Internal “governance” is made up of the organization’s formal and informal decision-making, reporting and accountability structures, communication lines and policies governing how people inside and outside the organization are treated.

Back in post #164 (The Brokenness of “Business as Usual”), we talked about ways in which work relationships reflect brokenness from the “fall”.  One of those is that work has become hierarchical.  While some hierarchy is needed in an organization to keep it “organized”, a leader Taking Steps To PPPneeds to look at how the organization’s internal structures might be creating conditions that undermine or impede pursuing its bigger WHY and even push people toward prioritizing Profit as Purpose.

Organizations often have many pages, if not volumes, of formal policies governing how people in the organization relate to each other and to the outside world.  On top of those are untold “informal” policies that govern working relationships (e.g., open-door vs. closed-door “policies”).  They form part of, and help create, the “real” Culture of the organization, but they are rarely conceived or written with a bigger WHY in mind.  They too can undermine or impede pursuing the bigger WHY and even push people toward prioritizing Profit as Purpose.

CONTINUUM: Practices

The Integriosity model organizes “heart change” along six Covert-Overt Continuums.  There is nothing magic about these categories, but we believe they are helpful in thinking about practical execution of a Re-Imagined Purpose, Re-Imagined Values and a Re-Imagined Culture.  The Continuums are Prayer, Proclamation, Policies, Practices, Products, People.

Each Continuum represents an area in which leaders can begin to think about, plan and institute Re-Alignment changes to the heart of the organization.

“Take Steps To PPP” is on the Practices Continuum. It involves practices the organization can adopt to affirm and protect its commitment to prioritizing its bigger WHY and recognizing profit as a necessary means to that end rather than the end to which the business is managed.

COVERT-OVERT RATING: Highly Covert

The Integriosity model breaks the Covert-Overt Continuums into six gradations–from Highly Covert to Highly Overt–that we believe are helpful in beginning to pray and think about what is most appropriate for an organization at a particular moment in time.

Most Integrity Ideas will have one place on the scale.  Some can vary depending on how they are implemented.  We identify “Take Steps To PPP” as Highly Covert (An action that would be taken by a secular company) because even secular businesses declare missions they care about in addition to profit, and their founders take steps to retain control in order to preserve the mission (and their jobs).

“Take Steps To PPP” can also be Highly Overt (An overtly faith-based action involving community, website, sales/marketing materials) if the leaders of the organization choose to explain the steps as faithful stewardship of a bigger WHY aligned with Biblical beliefs, principles and priorities.

STAKEHOLDERS SERVED: Kingdom

When we categorize faith-based actions, we also consider the stakeholders principally impacted by the action: Employees, Customers/Clients, Owners, Suppliers/Vendors, Community and Kingdom.

“Take Steps To PPP” ultimately benefits all stakeholders (although profiteers may not be happy, particularly about short-term profit), because the bigger WHY of business a better way should be the maximization of Biblical flourishing; however, preserving that bigger WHY is about continuing to be able to do business in alignment with the Kingdom of God rather than the kingdom of the world.

If you want to run an organization you’re proud of, choose your ownership as carefully as you choose your employees. (Seth Godin)

IMPLEMENTATION

Implementing “Take Steps To PPP” will look very different depending on the nature of the organization and its ownership.  A faithful leader seeking to protect a bigger WHY needs to think about protecting “up” and protecting “down”.  By “up”, we mean ensuring the purpose is not undermined by the legal owners of the organization.  By “down”, we mean ensuring that the “internal” governance is structured to support and protect the bigger WHY.

Protecting Up.

The simplest way for a faithful founder to protect the organization’s bigger WHY is for the founder to remain private and retain ownership of voting stock, either personally, among family members or in a trust.  This is the approach taken by even large faith-based companies such as Chick-fil-A and Hobby Lobby.  Patagonia’s founder was recently in the press for putting all his shares into a purpose trust (something Hobby Lobby pointed out they had done years ago).

Of course, financing and employee compensation needs of the organization may mean retaining 100% ownership is not consistent with faithful stewardship.  If sharing ownership, Seth Godin said it very simply:

If you want to run an organization you’re proud of, choose your ownership as carefully as you choose your employees.

The Bible sums it up in 2 Corinthians 6:14:

Do not be unequally yoked with unbelievers. For what partnership has righteousness with lawlessness? Or what fellowship has light with darkness?

If faithful leaders determine that the best stewardship of an organization requires sharing ownership in order to access financial capital, pay vendors or compensate employees, the following are some “Take Steps To PPP” alternatives to consider in order to protect the organization’s bigger WHY:

Retain Control.  If a faithful founder can’t retain full ownership, the next way to protect a bigger WHY is to retain control.  The difficulty of retaining control will depend on how and why the faithful founder is sharing ownership.

Employee/Vendor Ownership. Loss of control is not a practical risk when ownership is being shared with employees or some initial vendors.  Control and protection of a bigger WHY can be retained even when transferring all ownership to an ESOP.

Private Equity/Venture Capital Ownership. “Private” financial owners, such as private equity and venture capital investors, are not as fickle and short-term as public owners, but with rare exception, they are motivated by Profit as Purpose (because their investors are similarly motivated and holding them accountable) and expect their portfolio organizations to be similarly motivated.  A sale to a private equity firm is almost always a sale of control.  Financial owners are investing for the “exit”–whether a public offering or a sale to another private owner in a medium-term time-frame (a few years).  A faithful founder will likely have difficulty pursuing a bigger WHY with financial owners except in the most covert ways unless they find one of the few funds committed to preserving culture (and even they generally only hold that commitment during the 3-5-year period after which their commitment shifts to exiting the investment at the best price for their investors).

Public Ownership. A bigger WHY can be protected even in a public company by creating a dual-class structure, with the founder retaining super-voting shares.  Ideally, such a structure can be put in place before shares or options are offered to any third parties such as employees or advisors.

The Council of Institutional Investors declares “‘One share, one vote’ is a bedrock principle of good corporate governance,” which may well be the case for business as usual, but we do not believe it is the case for business a better way.   Many very well-known organizations have dual-class share structures (e.g., Google, Meta, Ford, Berkshire Hathaway, and LinkedIn).  It was common in media companies and in recent years has become increasingly popular with technology companies.  A few years ago, Snap Inc. pushed the dual-class structure to its limits by offering the public a non-voting class of shares in an IPO.  Coca-Cola Bottling Co. Consolidated, the largest independent Coke bottler in the United States, is an overtly faith-driven public company that uses a dual-class structure to maintain control within the founding family.

Set Expectations.  Although disclosure of an organization’s focus on a bigger WHY does not protect that focus without taking other steps (e.g., dual-class shares), it is important for leading with faithful integrity, because faithful integrity requires “authenticity”, as we described in post #043 (Need for Authenticity).  When Google went public, its offering documents included a letter from the founders setting expectations.  Here is an excerpt:

Google is not a conventional company. We do not intend to become one. . . . But the standard structure of public ownership may jeopardize the independence and focused objectivity that have been most important in Google’s past success and
that we consider most fundamental for its future. Therefore, we have designed a corporate structure that will protect Google’s ability to innovate and retain its most distinctive characteristics. We are confident that, in the long run, this will bring Google and its shareholders, old and new, the greatest economic returns. . . . If opportunities arise that might cause us to sacrifice short term results but are in the best long term interest of our shareholders, we will take those opportunities. . . . We will not shy away from high-risk, high-reward projects because of short term earnings pressure. . . . In the transition to public ownership, we have set up a corporate structure that will make it harder for outside parties to take over or influence Google. . . . This structure, called a dual class voting structure, is described elsewhere in this prospectus. The main effect of this structure is likely to leave our team, especially Sergey and me, with significant control over the
company’s decisions and fate, as Google shares change hands. . . . Google has prospered as a private company. As a public company, we believe a dual class voting structure will enable us to retain many of the positive aspects of being private. . . . We provide many unusual benefits for our employees, including meals free of charge, doctors and washing machines. We are careful to consider the long term advantages to the company of these benefits. Expect us to add benefits rather than pare them down over time. We believe it is easy to be penny wise and pound foolish with respect to benefits that can save employees considerable time and improve their health and productivity. . . . We aspire to make Google an institution that makes the world a better place. . . . By releasing services for free, we hope to help bridge the digital divide. . . . Last year we created Google Grants—a growing program in which hundreds of non-profits addressing issues, including the environment, poverty and human rights, receive free advertising. And now, we are in the process of establishing the Google Foundation. We intend to contribute significant resources to the foundation, including employee time and approximately 1% of Google’s equity and profits in some form.

Whether or not you like Google, they let investors know the founders’ priorities.

Form a B-Corp.  Some people are advocating the “B-Corp” (“benefit corporation”) model as a way to protect a mission other than Profit as Purpose.  The B-Corp model (“benefit corporation”) requires a company to organize, or convert into, a special type of corporate entity that must articulate in its governing documents a specific social purpose it will pursue along with profit and then subjects its pursuit of the social purpose to government accountability and even shareholder lawsuits.  There is even an organization that, for a fee (and at the expense of additional reporting), will “certify” a B-Corp, but certification is based on meeting its standards of governance, transparency and social and environmental impact apart from the organization’s mission.

We actually believe the B-Corp model is counterproductive to business a better way because it involves the government (and possibly the certifying body) in overseeing the pursuit of a company’s broader goals, and, more importantly, reinforces the faulty claim that other organizations can legally only pursue the maximization of profit.  In our view, the problem with the B-Corp model is (at least) three-fold.  First, it tries to create a “two-masters” model, which Matthew 6:24 tells us doesn’t work.  Second, in an effort to ensure that the social purpose is not ignored, it “motivates” through regulation and fear, which is unhealthy.  Third, and most importantly, it sends the message to regular businesses that they can (and are supposed to) just pursue Profit as Purpose.  A B-Corp structure may be useful to “legalize” the changed heart of an organization, but a B-Corp structure doesn’t change an organization’s heart and isn’t necessary for a business with a changed heart. Moreover, while it may be straightforward to measure.

If a faithful leader who has shaped the purpose, values and culture of an organization no longer wants, or is no longer able, to continue to lead the organization, there are two basic choices for its bigger WHY–succession or secession.  We have devoted an entire post to ways in which a bigger WHY can be lost or preserved upon the “exit” of a faithful founder (post #152–Leading Faithfully by Leaving Faithfully)

Protecting Down.

An exercise in Protecting Up may be a futile endeavor if there is not a review of internal structures and formal policies and an honest discovery and appraisal of “informal” policies to ensure that they are not undermining or impeding pursuit of the bigger WHY or even pushing people toward prioritizing Profit as Purpose.

In Protecting Down, it is helpful to consider things such as:

• Are there leaders (including the Board) who do not understand and support the bigger WHY and the reordering of profit as a means to that end?

• Are there safeguards in place to prevent the Board from abandoning the bigger WHY?

• Does the internal structure permit the “buy-in” at all levels needed for successfully implementing the bigger WHY?

• Do the internal structure and policies ensure that employees are rewarded (or at least not punished) for pursuing the bigger WHY (even at the expense of profit)?

• Do the internal structure and policies ensure that corrective action is taken when employees are undermining the bigger WHY (even if it means reprimanding or terminating a highly productive but highly disruptive employee)?

Non-Profits

Although our focus is PPP for-profit companies, non-profit organizations also need to protect their mission.  In our increasingly secular U.S. culture, this is particularly true for faith-based organizations.  Rather than the enemy being “Profiteers”, it can be large donors who like the “do-good” aspect of an organization’s mission but not its faith foundation.  It may also be directors who either do not understand the importance of the faith aspect or see the potential for broader fundraising if the faith aspect is “toned down” or eliminated.

These challenges for faith-based non-profits are handled well in the book Mission Drift: The Unspoken Crisis Facing Leaders, Charities, and Churches by Peter Greer and Chris Horst, which we recommend.  They provide the example of an organization that put in place a creative governance policy to protect its Christian mission.  The Board could not abandon the Christian aspect of their mission unless it was approved by 100% of the Board members in face-to-face meetings in each of three consecutive years.

One clear Biblical priority is receiving wise counsel:  “Without counsel plans fail, but with advisors they succeed.” (Proverbs 15:22)   A faithful leader pursuing faithful integrity through business a better way toward a bigger WHY should consider those in the organization they rely upon for counsel (including Board members and other internal leaders) to ensure that they are receiving “wisdom” and “direction” from people who understand and support pursuing and protecting that bigger WHY.

While a leader may not want to (or be able to) change the people surrounding them in the organization, they can be wise about the advice they receive and can seek out advise from trusted sources.  In fact, Integrous was created to help meet that need for a trusted and disinterested extra set of eyes to help a leader evaluate a situation in order to process what path or response is most in line with the leader’s Biblical beliefs, principles and priorities and the organization’s bigger WHY.

PERSONAL NOTE (from PM):  I recall an illuminating conversation with a venture capital investor who shared what he called the “dirty little secret” of venture capital (“VC”).  He told me that VC firms often determine early on that the visionary founder is not the person they want to take an organization to the next stage in its growth, but they can’t tell that to the visionary founder because then they would not be selected to invest.  Instead, they express confidence in the founder and devise hurdles and milestones that they know can’t be met, with the consequence of missing those targets being that they gain greater and greater control until they are in a position to remove the founder.    He wanted to start a fund that was committed to being authentic and transparent with founders upfront about his recommended path to success.  I hope he succeeded.

The particular plight of the faithful entrepreneur came into focus more clearly for me in 2011 when I first met Henry Kaestner at a meeting in Chicago.  Henry shared his frustration with a phenomenon he had seen occur over and over with young faithful entrepreneurs.  They have a vision of starting an organization that embodies their faith–creating something that matters, doing the right thing and caring for people.  And then they need financing.  Traditional venture capital funds care only about the bottom line, and the result is that the vision of business a better way erodes into business as usual because it is not encouraged, valued or supported by those who now hold the purse strings.  Henry’s frustration led to the founding of Sovereign’s Capital (I was honored to be one of their original “advisors”), which has gone on to provide supportive funding and mentorship to many “values-motivated” entrepreneurs.

ESSENCE:  Integrity Ideas are specific actions a faithful leader can consider in leading faithfully through business a better way.

INTEGRITY IDEA: Take Steps to PPP

COVERT-OVERT CONTINUUM (six Continuums for action):  Practices

COVERT-OVERT RATING (several levels from Highly Covert to Highly Overt): Highly Covert

STAKEHOLDERS SERVED: Kingdom

Most Integrity Ideas are practical actions toward implementing a bigger WHY for the organization.  “Take Steps To PPP” is about taking steps to Protect your Purpose from Profiteers.  Part of implementing a bigger WHY is putting in place safeguards and avoiding missteps to ensure that it is not undermined or eliminated by stakeholders with a Profit as Purpose agenda–we’ll call them “Profiteers”.  Profit as Purpose is the WHY of business as usual–business in in accordance with the kingdom of the world–and the world will exert constant and increasing pressure on an organization to conform to its ways.  Profiteers might emerge as officers or directors, but they are most likely to show up in the form of owners or their agents.  A faithful leader wanting to lead with faithful integrity through business a better way toward Biblical flourishing must understand their role as the steward of an organization owned by God.  Stewardship of an organization requires decisions, and decisions are driven by the governance vision, model and practices of the organization that are embedded in its culture as well as by its temporal “ownership”The governance and ownership structure of an organization can facilitate, protect, impede or completely block the pursuit of a bigger WHY.  

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Photo credit: Original photo by Shane Rounce on Unsplash
(photo cropped)