Ice Cream Social: The Struggle for the Soul of Ben & Jerry’s

By Brad Edmondson, book author

 

Ice Cream Social: The Struggle for the Soul of Ben & Jerry’sIce Cream Social is the first book to tell the hidden story of a beloved company. Ben & Jerry’s ice cream has millions of customers who are passionate about its unusual flavors with unusual names, like Cherry Garcia and Americone Dream. What many of its fans do not know, however, is that Ben & Jerry’s has struggled valiantly for 35 years to live up to a vision its employees call “linked prosperity.” This is the simple but radical idea that the owners of the company should share their success with all of their stakeholders – everybody – including employees, suppliers, distributors, customers, cows, and even the people who own stock in the company.

In the 1980s, co-founder Ben Cohen and a fellow board member, Jeff Furman, pushed Ben & Jerry’s to set a course that a generation of socially responsible entrepreneurs would follow. In 1991, Ben & Jerry’s was probably the first publicly traded American company to offer health and other benefits to same-sex partners of employees. It was also the first American company to produce a transparent audit of the impacts it had on society, positive and negative. It took unusually aggressive steps to limit its environmental impact, and it set a level of charitable giving that was four times higher than the average for US corporations.

Ben & Jerry’s took radical, crazy-sounding ideas and proved they could work. They showed that optimizing a business for linked prosperity is fun when you’re doing it right, and that this approach creates amazingly loyal suppliers, employees, and customers. Their efforts made it easier for the socially conscious entrepreneurs who followed them. But breaking these trails wasn’t easy.

The company has a three-part mission statement, and the three parts are equal and interrelated. It wants to make the world’s best ice cream, to pursue progressive social change, and to provide fair compensation to employees and shareholders alike. Ben & Jerry’s stuck to these principles as it became an international brand. But the company eventually grew beyond the managerial abilities of its board, and after years of struggling, they were forced to sell to Unilever, the world’s second-largest food company. Co-founder Ben Cohen walked away from the deal with $41 million, and Jerry Greenfield got $9.5 million. Yet both of them have also said that losing control of their company was one of the worst experiences of their lives, and they still don’t want to talk about it.

The three-part mission did survive the sale, however. The founders and the board accepted Unilever’s offer only after negotiating a detailed agreement that guaranteed them a continuing role in the company and gave them legally enforceable powers.

Under the agreement, Ben & Jerry’s continues to exist as a corporation chartered in Vermont. But it is a “close corporation.” Howard Fuguet, the company’s lawyer during the negotiations, defines this legal term as “basically a corporation that has only one stockholder. And in the case of Ben & Jerry’s, the stockholder grants certain powers to the board. One of the board’s powers is to appoint new members without the shareholder’s approval. This means that the shareholder can never fire the board.” These non-Unilever directors control nine of the board’s eleven seats.

The guiding principles of the contract are set out in a four-page Shareholders Agreement and parts of a sixty-five-page Agreement and Plan of Merger, along with several attachments. They are public documents, on file and available through the federal Securities and Exchange Commission, and fourteen years after the sale, they are still in use. The agreements exist in perpetuity, which means they won’t ever expire. And this is the crucial difference between Ben & Jerry’s and other socially responsible businesses that sold themselves to multinational corporations. The folks in Vermont aren’t going anywhere.

The sale agreements give the Ben & Jerry’s board of directors primary responsibility for “preserving and enhancing the objectives of the historical social mission of the company as they may evolve,” and for “safeguarding the integrity of the essential elements of the brand.” Unilever has primary responsibility for the financial and operational aspects of the business, and it also retains all powers not expressly given to the board.

“The idea was to follow the historical pattern of the three-part mission,” says Howard Fuguet. The agreements captured the tension that had always existed between the product quality, economic, and social parts of Ben & Jerry’s and set up a system of checks and balances so the three parts could keep moving forward together. “The important thing, historically, was that no part of the mission should be more important than any other part,” he said. “They are supposed to be equal.”

The sale agreements also describe the job of the CEO in detail. They require the board of Ben & Jerry’s to agree with Unilever on an annual business plan and delegation of authority to the CEO, with Unilever having the final decision on both counts. They also allow Unilever to hire and fire the CEO after “good faith consultation” with the board. But the board has the express power to prevent the CEO from changing product standards, introducing new products, or changing marketing materials or any use of the Ben & Jerry’s trademark. Some of the CEO’s compensation is pegged to the company’s social performance, and this part of the compensation package is decided by the board of Ben & Jerry’s.

The agreements require Unilever to pay a “living wage” to all Ben & Jerry’s employees, based on local calculations of the cost of what the board calls “a decent life.” The agreements also require Unilever to contribute $1.1 million a year to the Ben & Jerry’s Foundation, plus adjustments to ensure that its contribution will increase in step with inflation and increased sales. They require Unilever to fund an independently audited annual report of Ben & Jerry’s social performance, and they call upon Unilever to develop its own system of social assessments.

These points were negotiated in marathon sessions between Ben Cohen and Richard Goldstein, the chief of Unilever’s North American operations. “It was by far the most unique deal I have ever been involved in,” said Goldstein, who negotiated dozens of acquisitions for Unilever. “When we were getting toward the end of it, Ben used to call me at home at all hours. My wife would answer the phone and he’d say ‘Yo, it’s Ben.’ She’d say, ‘Ben, he’s traveling. I’m going back to sleep.’ And after we signed the deal, Jerry and his wife asked my wife and me to come to their house for dinner. I can’t remember ever doing something like that. I was flattered.”

Ben Cohen’s public image is that of a happy-go-lucky hippie, but he is actually a shrewd businessman who is capable of driving a hard bargain. He negotiated the sale agreements under incredible pressure, as a bidding war for the company heated up, lawsuits were filed, and friendships were frayed. “He was disciplined,” said Pierre Ferrari, another board member who went through the sale. “He pushed the process. The sale agreements have precise numbers in them. That was Ben.”

Cohen is also a perfectionist. After the sale, he left the board of directors and never returned, citing irreconcilable differences with Unilever. Today he and Jerry are paid to represent the brand, but he keeps his distance from the company and has, at times, been sharply critical of Ben & Jerry’s multinational parent. But his old partner in the social mission, Jeff Furman, stayed on. Jeff is currently Chair of the Board of Ben & Jerry’s.

The story of the company’s endless pursuit of linked prosperity offers answers to the questions Ben and Jeff first posted in the 1980s: What would the world look like if businesses got serious about pursuing social and environmental justice? What if a business was directed toward several equally important goals, with profit being only one of them? And what would happen if social justice activists controlled the boards of directors of a large, global enterprise? Could that work?

There’s a second, related question. It’s the question of legacy. Thousands of business owners do value their employees, the natural environment, and the community at least as highly as their own bank accounts. But investing in these areas rarely produces an immediate financial return, and many investors see social investments as unnecessary costs. So how can socially responsible businesses retain their progressive values after the founding generations retire? Or, to put it another way, how can someone give up control of a successful enterprise without throwing away its purpose?

Jeff Furman doesn’t know the answers to these questions, and, like Ben, he would also prefer that Unilever did not own Ben & Jerry’s. He stayed to protect the vision of linked prosperity and pass it on to the next generation.  And, he says, he knows that the struggle to reconcile profit making with social justice will never end. At Ben & Jerry’s, however, the struggle has a permanent seat in the boardroom.

Article by Brad Edmondson is an award-winning journalist and the former editor of American Demographics magazine.  He is regularly posting new material about Ben & Jerry’s at the site–  www.icecreamsocialbook.com

 

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