Roger Babson’s Founding Principles: Key to Sustaining into a Second Century

Written with the encouragement and endorsement of Prof. JB Kassarjian.

This Founder’s Day, with just three years to go before Babson College’s Centennial, it is appropriate to consider Roger Babson’s convictions and motivations for founding our school, as summarized in a profile published in a 1930 issue of The New Yorker magazine.

Short version: (1) the Seer of Wellesley Hills likely would have endorsed our current undergraduate learning goals and graduate learning goals, (2) his founding motivation – his belief in the dire need for infusing business leaders with a sense of ethics and societal responsibility – resonates now, as does (3) his observation that measurement and reporting data can play a role in saving the world. The whole 3-page article is worth a read. Here are quotes and gleanings to prove our points:

Babson College was “his greatest enthusiasm” – on par, the author suggests, to having a son.

Why did he found our school? “What America needed, he decided… was men trained for the responsibility of wealth, and so he founded a school like no other in the country.” His father Nathaniel had judged Harvard, Amherst, and Williams to have been “breeding-places for idleness” (Roger had been allowed to attend that other Boston area school with a beaver for a mascot, MIT).

What were the roots of his values, and what were they? “He comes of New England stock, and is a sternly religious person who makes a clear distinction between investment and speculation. His forebears, knowing that the Lord would frown if profits came too quickly, found satisfaction in toiling for a living. Mr. Babson feels the same way. This leads him to make rigid distinctions between speculation and investment, and to exhort his clients against purchases on margin.”

Given these strong religious feelings (he said “there is an excess of everything except religion” in the United States, and several of his authored books concerned religion or morality), it is especially interesting that Roger Babson founded an educational institution for scions of “Captains of Industry, of millionaires. They will control the destinies of thousands of employees.”

What was his vision for the world? “Roger Babson has often dreamed of a world in which there would be no war, no bitter contrast between affluence and poverty, no labor disputes.” He also had a theory as to whom to blame for disputes with employees. “He felt that labor disputes were the result of bad management on the part of capital, and he pondered several solutions. One was to prevent the ownership of great industries from passing by inheritance to sons utterly unqualified to run them. He went so far as to question all inheritances.”

The author of the profile, Henry F. Pringle, allows himself to editorialize at one point, writing that “Roger Babson has often been strangely radical in his utterances on capital and labor,” and (presumably) Pringle imagines that “[t]here was a sulphurous odor of socialism in the air” when Babson testified before a federal industrial commission. “He said bluntly that too many industries were controlled by bankers indifferent to the needs of the wage-earner. They were interested only in dividends. Finally, one nervous commissioner asked him whether this was not sheer socialism.”

Babson’s answer to the question of whether his concerns for societal and employee well-being smacked of socialism are worth remembering: “‘When a man is asked for a definition of a gentleman,’ Mr. Babson replied, ‘he gives one that will include himself. When asked for a definition of socialism he gives one that will exclude himself.’”

Roger Babson felt sympathy for investors; he “pride[d] himself that he represents the buyer of securities, while the vast machinery of Wall Street is organized for the benefit of those who sell.” He also warned that “bank mergers may be carried too far and subject America to new perils.”

Especially interesting for those of who are fans of data, birds, and conservation, Roger Babson was convinced that “statistics could prevent international complications” (indeed, he started earning his fortune by providing statistical services to investors) and was an ornithologist in later years who created two bird sanctuaries.

A final two quotes about Roger Babson seem worthy of highlighting. First, “[u]tility, rather than form, interests him,” and, finally, “in his late twenties, he became a salesman, and traces of the art still linger. Thus he is never at a loss for words. Thus he is not unwilling to look back across the years and relate the story of his achievements.”

May we, as we look past the finish line of 100 years and plan for sustaining Babson’s legacy into a second century, likewise celebrate our successes in living up to our founder’s aspirations for “his greatest enthusiasm.”

The author wishes to thank our colleagues in the Economics Division for leaving a photocopy of the quoted profile pinned on a bulletin board in their cozy retreat in the woods. The full article may be found on pages 23-25 of the February 15, 1930 issue of The New Yorker magazine.

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City Sustainability Reporting: An Essential Best Practice

U.S. and Chinese mayors are discussing climate action this week. One idea sure to come up: sustainability reporting. In fact, cities should disclose sustainability data as a minimum legal expectati…

Source: City Sustainability Reporting: An Essential Best Practice

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City Sustainability Reporting: An Essential Best Practice

U.S. and Chinese mayors are discussing climate action this week. One idea sure to come up: sustainability reporting. In fact, cities should disclose sustainability data as a minimum legal expectation if they want to be part of the roughly $3.7 trillion U.S. market in municipal securities.

Boston, Massachusetts and Warsaw, Poland are among the many cities making a wide range of city data very accessible – including statistics on energy and water use and recycling. Whether you care about efficiency, education, prosperity, safety, or health, isn’t it desirable to be able to check your community’s stats and trends?

This is especially true when it comes to environmental impacts. The idea of getting to #NetZero harm – the practically self-evident idea that humanity has to neutralize its negative effects on the climate and ecosystems – is finally getting traction. Eliminating environmental harms requires better efficiency and begets innovation, and can lead to prosperity and improvement in well-being. Cities – foremost among them coastal cities – have much to lose and much to gain from unmitigated climate chaos, and therefore have to be champions for better measurement and tracking of environmental data. “If you can’t measure it, you can’t manage it and you can’t fix it,” as former New York City mayor Michael Bloomberg has summarized.

Even for the most strictly short-sighted, financially-motivated, and narrowly self-interested among us, awareness of the long-term viability of a city is something that a reasonable investor should expect when purchasing municipal securities, as explained in City Sustainability Reporting: An Emerging & Desirable Legal Necessity (soon to be published by Pace Environmental Law Review).

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Scalia: big gov’t liberal interpreter of Constitution gone; real conservative pragmatism now may have a chance.

Unusual and unnecessary written commentary issued prior to hearing arguments in landmark cases. Alleged vulgar gesticulations on the steps of a church. “Quack quack” as a closing comment when defending his controversial refusal to recuse himself from a case involving his duck-hunting buddy, Dick Cheney, and transparency and corruption. By all accounts Antonin Scalia enjoyed riling folks with different views.

There was plenty with which to disagree. First, he supported using federal power to override state power. Example: Bush v. Gore exposed Scalia’s willingness to flip-flop on his long-professed commitment to federalism and to, from the bench in DC, override a state supreme court ruling on a matter of state law – a clear violation of the U.S. Constitution (Art II, Sec 1, Cl 2). Remember? 585 law professors signed a full-page denunciation of Bush v. Gore in the New York Times.

Next, he was a liberal interpreter of the U.S. Constitution. In a 2008 Second Amendment case his rationale for disregarding text of the Constitution prevailed. He was not a strict constructionist. Well, few USSC justices ever have been, really: the power of the Supreme Court to tell elected representatives when they are out-of-bounds is based on the Court’s own decision in Marbury v. Madison). Yes, the power to interpret the Constitution is based on an interpretation of the Constitution. “Strict constructionist Supreme Court justice” is a therefore a bit of an oxymoron. They all interpret. Scalia interpreted a lot.

Finally, as explained in this journal article, Scalia did not favor devolving power from big federal government bureaucracy to citizens. Congress passed environmental protection laws specifically allowing citizens to sue – not to collect damages, but to fight for their health and security by upholding the law. Scalia’s open and visceral anti-environmental emotions drove him to write an article imagining – and when in power, to implement – a creative new vision of standing requirements. This created roadblocks to citizens enforcing environmental laws that are a matter of life-and-death. The irony? Citizen enforcement is cheaper (to the taxpayer), more democratic, and allows for LESS pervasive and permanent federal bureaucracy to monitor, regulate, and enforce environmental, health, and safety rules.

To sum-up: do you want to breathe? Drink water? Pay lower taxes and have more power as a citizen to fight for your health, safety, and security, within a predictable system, consistent with the U.S. Constitution? Then Scalia’s legacy is not one to embrace.
What will come next? Among other things, a major decision – an unprecedented attempted interference by the Court – involving obsolete 18th Century technology and mass death, suffering, disease, and national security. Now is the time for traditional American pragmatism, not ideology, from whomever is nominated and confirmed as a replacement. The new SCOTUS justice will help decide the safety of the air we breathe, among other weighty cases affecting generations to come.

It’s a time for real conservatism in a Supreme Court nominee: conserving democratic functioning, conserving Constitutional structures, conserving constructive federalism, and, in the spirit of (old-school) Republican Teddy Roosevelt, conserving environmental life-and-spiritual support systems. Disrupting these traditions is not pro-life, pro-Constitution, nor pro-business.

It’s also a time for conserving decorum and dignity. It used to be uncontroversial to suggest that a justice on the highest court have a consensus-building and calming disposition and cool predictability in the application of the law to disputes. In two decades of working with businesspeople and entrepreneurs, I’ve never met one (of any party) who would dispute that these are virtues they value from someone adjudicating a dispute of any kind.

To sum-up, a big government liberal interpreter of our laws (who clearly delighted in antagonizing others) is gone. It’s a chance for pragmatism and cool-headedness to prevail on upcoming decisions. Not to delight in the passing of a fellow being, but if you’re also fairly traditional in that you are pro-prosperity, pro-predictability, and pro-law-and-order, we should look with optimism to what comes next.

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Warsaw’s Latest Sustainability Report: thanks to those who made it happen (and why every city should do something like this)

Warsaw – capital of Poland and home to +1.7 million residents – recently published its latest sustainability report (a press release, executive summary, and the entire Warsaw Sustainability Report are available in English and in Polish / po Polsku).

The significance of this in the greater global trend of city sustainability reporting was explained in Cities Today. Benefits of such reports have been summarized well by the ISO. Warsaw’s report is intended as a pragmatic, apolitical summary of economic, societal, and environmental health and related goals, policies, and the areas of stakeholders concern as measured in surveys and open fora. Ahead of the COP21 summit in Paris, we should be asking why every city is not doing something so imminently reasonable? How can we manage well what we don’t measure?

fot. Michał Ozdoba - Photographer http://www.facebook.com/michalozdobaphotographer

Members of Warsaw’s most recent sustainability reporting team, clockwise from top left: Adam Sulkowski, Joanna Wakulinska, Magdalena Obłoza, Leszek Drogosz, Joanna Gajda, Liliana Anam, Magdalena Kraszewska. Photo credit: Michał Ozdoba

Huge congratulations are due to a fantastic team of graduate students: Joanna Gajda, Alicja Marcinek, Magdalena Obłoza, Magda Skrocka-Kołodziejska, and Joanna Wakulińska taking a course in CSR management at Collegium Civitas with Liliana Anam, manager at CSRInfo. They worked tirelessly with a team at Warsaw City Hall led by Director of Infrastructure Leszek Drogosz to research, condense, format, and verify data about material concerns of residents. Thanks to Magdalena Kraszewska as well for her coordination. Finally, I’d be remiss not to thank the Warsaw University of Life Sciences and the Polish-American Fulbright Commission for their making my participation possible!

Warsaw’s latest sustainability report cross-references both the predominant global standard, the Global Reporting Initiative, and the new ISO standard for city sustainability reporting.

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“Taking the blinders off our beasts”

Since about 2005 I’ve kicked around this phrase: “Sustainability reporting is like taking the blinders off our great beasts – helping our institutions see that eliminating harms and improving societal and environmental conditions is actually in their own interest.” It took (what I perceived to be) a positive reaction from one of the respected authorities at the Boston Security Analysts Society‘s recent conference on sustainable investing to get me to “put this out there.”

This analogy is an apt one. Maybe it’s even useful. Consider using it the next time we’re asked: “what, really, is the ultimate goal you hope to achieve with sustainability reporting?” Here’s why you might like it:

Under law, an old and accepted idea is that an organization is treated as a single person – a concept that dates back at least to Roman times and facilitates things like contracting (i.e., an agreement can be made with an organization that may outlast any single human representative; of course, treating a corporation as a person in every context – e.g., constitutional or campaign finance law in the U.S. – may not be desirable).

Yet clearly, whether we consider public entities or private corporations, due to their vast size and power and durability, and despite management’s best efforts to steer them well, they can have an unwieldy tendency to sometimes trample over other interests and do harm – the analogy of an enormously industrious (but potentially lumbering and damaging) beast therefore comes to mind as a more appropriate metaphor.

The blinders in our analogy above – especially in the case of for-profit corporations – is the legal mandate of “putting the interests of the corporation and shareholders first” and the duty to report financial results quarterly and annually. Disciplined focus is a virtue. But it can make the best of us (willfully or unintentionally) blind to side effects of our actions, especially if negative side effects are diffuse and felt over longer periods of time.

When we consider Enron, Lehman Brothers, BP, Monsanto, or VW, or any of the plethora of examples of harmful and costly corporate malfeasance or negligence, it’s clear that actually what you don’t know (or fail to monitor and control) can kill. Or at least cost billions of dollars. Or lead to your own organization’s collapse. Or to creating an enormous economic, environmental, or societal hazard.

Sustainability reporting functions as “taking the blinders off the beast” because the practice encourages an organization and its leaders to find out what matters to all those upon whom it has an effect and to consider the environmental, societal, and economic side effects of its functioning, in addition to evaluating and describing its governance.

By systematically and regularly quantifying those side effects and publishing performance metrics and plans for their improvement, the ultimate aim is to help the organization eliminate negative side effects, and ultimately to even see that its best profit-making opportunities may be related to solving problems.

So, to paraphrase the quote above and re-cap: sustainability reporting is like “taking the blinders off our beasts to help them see their long-term success as aligned with solving problems and improving societal and environmental conditions.” Please feel free to comment if you agree, disagree, or would restate this. Thanks!

 

 

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5 questions to ask when leaving a secure job for a fresh challenge: thanks UMass, hello Babson!

First: THANKS for a great decade, UMass Dartmouth! The mission of providing accessible higher education is a great one. Thank you students, alumni, colleagues, and those who gave the freedom to work on meaningful projects that involved students and research in sustainability on campus and in local communities.

Next: THANKS to my new colleagues at Babson College – it’s been inspiring to start to get to know you! I can’t say enough about the kindness and consideration shown to us new arrivals.

Friends have asked: “why leave the security of a tenured and comfortable job?” Below are factors I considered and the answers. For those ever similarly considering a career change, these may be questions that are helpful to ask yourself:

(1) do your values and vision align with those of the new group of people that you are considering joining? It’s been great to realize that Babson’s approach to education 100% aligns with what I believe to be optimal – to paraphrase the core aspects: (a) inform students about societal, environmental, and sustainability challenges in the world (b) help students appreciate who they are and their context and (c) challenge students to imagine and realize “win-win-win” solutions that solve problems while allowing themselves and others to prosper. 

(2) is there external validation of the approach of your potential new teammates? In this case, there are many: not just #1 rankings in entrepreneurship and return-on-investment and other accolades from multiple sources including US News & World Report, Financial Times, PayScale, The Princeton Review, and Entrepreneur magazine, but also the only “A” rating for “value added” out of the best 5 – and #2 ranking overall – out of about 1,500 colleges and universities by Money magazine in 2015 (which rated Babson #1 in 2014). Sure, rating methodologies and the value of rankings are disputed, but when multiple sources consistently say a team is delivering a superlative service, that suggests one may learn a thing or two by joining it.

(3) think about what brought you joy and inspiration in the past, and ask whether your new context is likely to deliver more of those rewards. The greatest gratification during a decade of teaching is watching students flourish as alumni – to name just a few: Cassie, Jacob, Jason, JonathanJosh, Kevin, Marven-rhode (running for City Council in Lynn already, partially on a sustainability platform!), and Natika – especially when they innovate and even start-up booming new companies that solve big problems, like Waste Hub. These people inspire me as much (or more) than I might have influenced them – here’s hoping for many more similarly inspiring friendships at Babson – that seems likely with a list of notable alumni like this one.

(4) if you think, in some small way, that you make the world better through your career, does the switch have the potential to magnify your impact? Specifically, (a) are you likely to grow and improve as a result of contact with this new circle of acquaintances, and (b) conversely, are you likely to impact a wider circle of people and bigger slice of reality in the new context that you are considering? In both respects, I think the answer is yes, considering Babson’s faculty, Babson’s multiple centers, and Babson’s mission.

(5) finally, emotionally, are you (and those closest to you) ready for some excitement? A fresh challenge can be invigorating and new colleagues and a new culture can be stimulating.  It felt like the right time for a new adventure.

So, again, many thanks to all those at UMass for support and inspiration during the past decade, and looking forward with much excitement to a new chapter with those of you at Babson!

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2 Recent Huffington Post items

In case you missed them, here are links to two of my recent opinion pieces in the Huffington Post:

Does Pope Francis and his “Eco-Encyclical” matter? My answer: maybe. As illustrated by the example of Pope John Paul II inspiring the Solidarity movement in the 1980s, when a movement has been building a long time, even against a massive and entrenched power, a charismatic leader’s words can play a vital role as a catalyst.

Why even strictly self-interested businesspeople should oppose the investor-state dispute settlement mechanism in many trade treaties, including the leaked draft of the Trans-Pacific Partnership.

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Trans-Pacific Partnership (TPP), Trans-Atlantic Trade and Investment Partnership (T-TIP), and the original intent of Investor-State Dispurte Settlement (ISDS)

Alarm and criticism has been published about the Trans-Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (T-TIP). Among other well-founded concerns about the process of negotiating the trade treaties, what they may include, and their impacts, is the fact that they are likely to include some form of Investor-State Dispute Settlement (ISDS) mechanism.

These kinds of mechanisms allow foreign investors and companies to seek, through a supra-national arbitration, compensation from governments for actions that interfere with the profitability of business ventures, including, for example, instances where legislatures or agencies enact laws or rules to protect human health and the environment.

It’s interesting to look back on the early days of ISDS. One of my first articles – NAFTA’s Indirect Expropriation Protections: Will Compensation Be Required When Ecological Protections Are Applied? Mealey’s International Arbitration Report, Vol.15, No.2 (2000) – explained the original motivation for such provisions: to provide a means of redress in cases of nationalization of assets, especially when foreign investors are restricted in how they may seek compensation in the host nation’s courts.

The recent trend toward increased use of ISDS procedures by foreign businesses to (1) effectively veto (or discourage a government from even trying to pass) rules to protect citizens or the environment and (2) seek compensation for losses arising from the passage of laws and rules should therefore be seen as beyond what was originally intended when ISDS was initially imagined.

As U.S. Senator Elizabeth Warren succinctly summarized, the recent increase in use of ISDS and its likely inclusion in the TPP should disturb conservatives because of the undermining of state sovereignty, libertarians because it forces taxpayers to pay for non-market risks, and progressives because of resulting discouragement of policies that protect human health and ecology. The article linked above on the roots of ISDS in NAFTA’s indirect expropriation provisions should further give pause and help us realize that ISDS procedures are being exploited in a way that less than two decades ago was deemed surprising, novel, and unintended. This should further contribute to a consensus that, if there are to be free trade pacts, and must be ISDS procedures included, that common sense safeguards against their abuse should be included.

As the author of the article linked above, I need to thank Professor David A. Wirth of Boston College, for whom I worked as a research assistant, for having me research issues of trade and the environment in law school (his publications are linked here).

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Flipping Pyramids: anyone else think these ought to be inverted?

This post is a long time coming. There are at least two conceptual pyramids involved in our research and teaching in business schools that, while very useful, may be overdue for turning on their heads. Here they are, top-to-bottom: Carroll’s Corporate Social Responsibility (CSR) Pyramid and Prahalad’s Fortune at the Base of the Pyramid:

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A pyramid is a powerful symbol. Generally, being at the top implies being in a position of privilege in a hierarchy. On the other hand, it can be interpreted to mean that the base is more essential than the top, a good foundation being essential in supporting the upper tiers (Maslow’s hierarchy of needs illustrates this point). This brings us to the first obvious problem with the CSR Pyramid: being profitable is portrayed as more essential than following the law. Similarly and perhaps most disturbingly, being profitable is designated as more important than not harming people or the environment – bettering environmental or societal conditions is “discretionary.” We all agree we would not want this kind of enterprise – that puts profits ahead of lawfulness and our safety – as a neighbor, right? And that short-term profit-chasing has led to current, real, and severe societal and ecological crises?

Would we be better off if we provoked business leaders to see the CSR pyramid precisely the other way around? That your ideal future (of your enterprise and yourself) is to find problems and solve them – to restore or improve conditions in terms of ecological systems and society? That the next obligation is not to harm? Next, that in solving problems and avoiding harms, you should follow the rules of society? That, if you can do all of this and cover all your costs and compensate yourself and your people, the final and most discretionary aspect of running an enterprise should be seeking ways to extract more money from all transactions than needed?

There is no shortage of books and instructional case studies about companies finding sustainable profits by effectively flipping this pyramid: figuring out how to provide water, sanitation, energy, transportation, food, and shelter in ways that save lives, improve lifestyles, harm no one, and, like an oyster farm or composting waste, restore or improve ecological conditions. Paul Hawken, Gunter Pauli, Ray Anderson… there are plenty of thought leaders who have advocated for Blue Economy thinking or Restorative Economics. So why have we not flipped the CSR pyramid to reflect this thinking and these enterprises as the ideal to which to aspire? Is it time to take this valuable conceptual tool and to flip it?

For the next pyramid flipping thought, I need to credit John Fobanjong, a colleague at UMass Dartmouth in the department of political science, for an insightful question that he asked a few years ago. At a brief seminar highlighting a few key big ideas from the world of sustainable business and examples in South Asia, especially India and Bangladesh, we covered Prahalad’s Fortune at the Base of the pyramid and micro-credit (Grameen Bank) and life-saving soap (Lifebuoy) as examples of making money by solving the needs of global society’s poorest. John asked a poignant question: could the pyramid be upside-down – why are the world’s monetarily poorest few billion human souls at the bottom, and a few hundred billionaires at the pinnacle?

The top of the pyramid does seem to convey a position of privilege in this context – we routinely refer to the hyper-wealthy as being at the top of the economic pyramid. Could we similarly leave this conceptual diagram as it is (meaning that the largest area of the pyramid accurately reflects the larger number of poor people in the world than the wealthy) – but, again, flip it so that we provoke the thought: start with the world’s poorest and the goods and services they need and their ecological conditions. Find solutions in that marketplace as your first priority? Just like Grameen Bank, Life Buoy, and the creators of the Peepoo bag or other waste composting enterprises, sustainable profits can follow. An inverted “pyramid of fortune” model suggests – accurately – that we (including entrepreneurs and intrapreneurs and enterprises and those trying to help them as researchers, coaches, educators, and consultants) may all be better off with such thinking as the priority.

Thanks for reading this and please contact me with questions, comments, or an FYI if you know of someone who has already written any these critiques – asulkowski@gmail.com.

Image credits:

The World Business Council for Sustainable Development (Making Good Business Sense). Diagram of Carroll’s CSR Pyramid. Citing to Carroll (1991).

Robert L. Williams, Maktoba Omar, and Ujvala Rajadhyaksha. The Value Flame at the Base of the Pyramid (VFBOP): Identifying and Creating a Valuable Market (2012).

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