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Is TOMS “selling out” for profit? And why does this bother us?

By September 4, 2014 8 Comments

It’s time to question our assumption that profit and philanthropy should be mutually exclusive.
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Business publications were abuzz last week with the news that Bain Capital bought a 50-percent stake in TOMS Shoes. The reports are various, but I’ll give you a paraphrase of the most common headline: Private equity giant Bain Capital has purchased the philanthropic company, and founder Blake Mycoskie is now getting his payday after years of charitable work.

You can palpably feel the snark dripping from the journalists’ fingers as they type these articles. “Yet another do-gooder sells out for money!” they assume, shaking their heads in smug satisfaction at finding yet another juicy story about corporate greed and the evils of big business.

Then I found a single article that included a description (though buried in the last paragraph) of Mycoskie’s plans with his part of the profit. He has pledged to give away “at least half” of his profit from the sale, part of which will go toward starting a fund to support social entrepreneurship around the world. And Bain has pledged to match his investment in the fund.

Blake MycoskieBlake Mycoskie founded TOMS in 2006; since launching the One for One model,
his company has donated more than 10 million pairs of shoes to people in need.

I work with social entrepreneurs, and this is big news for them. It means that under-equipped small businesses dedicated to social causes might actually get some real support in their battle against the giants of poverty and injustice. And sustainably run business, according to the UN, lies at the core of poverty eradication in the developing world.

So really, the headline could be written a different way: TOMS Shoes expands efforts in its mission to help other social entrepreneurs, and a big investor has pledged to help its cause.

But no, those aren’t the headlines. Why not?

Listen, I’m not going to make a value judgment on the wisdom of Blake Mycoskie’s decision. Time will tell whether TOMS’ partnership with Bain will work the way he clearly hopes that it will. I don’t write this to defend TOMS or its founder, but to question why our culture is so skeptical of businesses that claim a humanitarian mission, businesses that set out to use profit for good.

JOYN IndiaJOYN India’s founder Melody Murray with one of her artisans. Lali would normally be outcast from society
as a result of her leprosy, so she is thrilled to have the dignified work of hand weaving. JOYN has enjoyed a
two-year partnership with TOMS Shoes, which sells JOYN product in its online Marketplace and has created
an exclusive line of shoes using the very fabric that artisans like Lali weave by hand.

The comments underneath the news articles make it clear that journalists aren’t the only skeptics. Americans in general like to keep a three-foot-thick wall in place between business and philanthropy. Among the numerous comments that say, “Well, I’ve purchased my last pair of TOMS!” are those who write things along the lines of, “Why is a profit-making entity buying stock in a charitable enterprise?” and “I prefer that my charitable purchases not be a front to make rich people richer.”

For one thing, TOMS is not a charity. It is a business. It has always been a business. And yet it has been a business built on the ideals of sustainability and social justice. People can’t seem to wrap their minds around this, probably because we have created a dichotomy in our culture between “doing good” and “doing business.”

This dichotomy goes back nearly 200 years to the Industrial Revolution, when simple greed led business owners to build massive empires on the backs of the poor. Some of these industry giants spent their later years doing a form of penance through philanthropy. So we got this idea that in order to help people, one had to make a U-turn from business. The belief that remains popular even today is that charities have a “people” motive and businesses have a “profit” motive, and never the twain shall meet.

This dichotomy has not always existed. Arthur Guinness, born in 1724, became the poster child for modern corporate philanthropy by living according to the motto, “Earn all you can. Save all you can. Give all you can.” He saw business success as a calling to help mankind and believed that abundant prosperity demanded massive generosity.

Not only did Guinness pay his employees higher wages than any other employer in Ireland, but his company became one of the first to provide pensions and healthcare for its employees and their families. This legacy continued well into the twentieth century: “A Guinness worker during the 1920s enjoyed full medical and dental care, massage services, reading rooms, subsidized meals, a company funded pension, subsidies for funeral expenses, educational benefits, sports facilities, free concerts, lectures and entertainment, and a guaranteed two pints of Guinness beer a day.” (See more here.) Medical and dental benefits applied not just to workers, but to their families, to widows, and to retirees.

The Guinness family itself lived a simple life despite the enormous success of their business. You see, Guinness and his descendants found that it was far more fulfilling to use their resources to better the lives of their employees than to indulge themselves. In such a business model, justice is the motivator, not greed.

Rein BaseraBusinesses in north India support a local program for street children. When they grow up, these children will have the opportunity to enter a vocational training program to learn valuable work skills so they are not forced into lives of begging.

Examples go back even farther. In the Jewish Torah, written around 600 BC, property owners (the business owners of the day) were prevented by law from taking full profits out of their fields. The book of Leviticus instructs them—in two separate passages to make sure they get the point—to leave the corners of the fields for the poor and the foreigner to harvest, so that such people could support their families through dignified labor. Notice the property owners weren’t instructed to glean the entire field and give a portion of the profits to charity; they were required to limit their personal profit for the benefit of others. (See here and here.)

Historically, then, the work of earning profit has not always been separated from the work of compassion and justice (what we now call “philanthropy”). So why do we insist on divorcing them?

It’s true that many business owners have not done this and probably deserve our skepticism. And too many of today’s corporate giants are driven by the same oppressive greed that compelled their nineteenth-century predecessors to favor profit margins over people. This is wrong, and we should say so. But it’s much easier for us to vilify them than it is to accept our own culpability. When we purchase products that support oppression, slavery, trafficking—you name it, there are big companies that do it—we are using our profits to oppress rather than to redeem.

DGCDavid Murray, the founder of Dehradun Guitar Company, trains Surendher in the art of handmade guitar building. Surendher’s past includes addiction, abuse, depression, and poverty, but his life has changed since coming to work
for a socially minded business owner who has provided sustainable employment and community support.

So my point is threefold:

  1. Let’s agree that business can and should be a force for good in this world. Let’s correct the assumption that social justice is an afterthought, a tax break, or the penance paid after years spent worshipping profit for the sake of personal indulgence. Social justice should be a crucial ingredient in our life’s work. We should have this expectation for ourselves and for the businesses we support with our money.
  2. Let’s give socially minded business owners a chance. We can (and should) be cautious, but let’s table the snarky skepticism. Personally, I am thrilled by the recent “cause craze” among millennials (a movement Mycoskie himself helped to start). We cannot expect these business owners to shun profit as evil. They need profit to be sustainable, but it’s how they earn it, and what they do with it, that matters. Let’s commend them for what they’re trying to do, encourage them to use their profits to improve the lives of the poor, and avoid the temptation to criticize them for not doing it exactly the way we would. Blake Mycoskie and his colleagues have just shouldered a huge responsibility: social entrepreneurs from all over the world will come knocking, wanting a piece of the millions. More than criticism, they need support.
  3. Finally, let’s accept our part of the blame and our share of the responsibility. We have contributed to the working conditions that most people in the world are forced to endure, and to the huge (and growing) gap between the poor and the wealthy. We cannot continue buying masses of cheap stuff without caring about who made it and how. Let’s use our purchasing power to support work that brings dignity, livelihood, and opportunity. Like Arthur Guinness, let’s choose to live below our own potential lifestyle levels in order to spend our money on compassionate purposes. Finally, let’s keep cause-based businesses accountable to their mission and, just maybe, start more (and more) businesses like them.

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Rachel Meisel is the executive director of JoyCorps, a 501c3 dedicated to supporting two social entrepreneurs that operate in north India: Dehradun Guitar Company and JOYN, a fashion company that has partnered with TOMS for the past two years. JoyCorps and its sister businesses are passionate about creating sustainable jobs and fostering a healthy community among some of the most marginalized artisans in the world.

 
 

Join the discussion 8 Comments

  • Rian Dean says:

    Bain Capital has zero (0) history of building anything. They profit from destruction, destruction of the businesses they purchase, destruction of jobs and the utter destruction of Hope for a better future for all but the very few at the top. While this is a well written article that makes many good points it belies the facts surrounding Bain’s history of acquisition, liquidation and most of all ‘Profits over People’.

  • Please do a critical check of our website to discover the “GOOD” we have been doing. You will be convinced of the sustainability of its poverty alleviation program.
    An ever-increasing demand for our unique “Micro forward” program where the poor entrepreneur is not charged any interest, but returns the capital in installments to be given to another in the community, made us post this comment.

    This appeal was made on behalf of the above nonprofit org. created by the spouse of this writer.
    Anura Samaraweera, MD

  • Joe says:

    There are many good points here, but I’d like to offer another angle from a more communal, conservation ethos. The Torah example of not taking (all profits) in the first place is much more preferable to Guinness’ “earn and give” model. The other dichotomy not addressed here – “us” the givers and “them” the needy – is really at the root of the problem of injustice. A cause craze is great, but all of those deals must add up. More importantly, they must first do no harm.

    • JoyCorps says:

      Joe, I see what you’re saying, but I do think Guinness’s decision to live a modest life so that he could pay more to his employees (and address injustice in the city of Dublin) is pretty close to a modern-day Torah example. His method of “giving” was not charity; it was paying living wages.

      I could not really get into the us/them dichotomy in this short article, but you’re right. The historical model of donating to charities that provide handouts to “the poor” does indeed foster the us/them dichotomy (“us” the rescuers with god complexes, “them” the victims with inferiority complexes). Starting small businesses that offer dignified work and self-empowerment is the better answer.

  • Dawn Clark says:

    Thank you for this well written article! I will share this in hopes that others will spread this message!

  • Ben Block says:

    Great post! I am a big fan of the TOMS model and am currently reading “Start Something That Matters” (Blake Mycoskie’s book). I am a big believer in social entrepreneurship and whole-heartedly agree with your three closing points.

    I would recommend Blake’s book to anyone interested in bringing a social purpose into their business. But buy it through JoyCorp’s Amazon program! 😉

  • […] Check out this great article from JoyCorps for more thoughts on the recent TOMS 50% buy-out by Bain Capital. Leave a comment here letting me know what you think!  http://joycorps.org/is-toms-selling-out/ […]

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