NPR's Morning Edition did a major piece this morning about how the structure of publicly held companies prevents them from doing good in the world. The premise was the directors and officers of these companies have a legal duty to maximize shareholder profit, and therefore could be sued if they did things that impacted the profit, even if done for social good. As an ex-Wall Street corporate lawyer, I can tell you that this is utter nonsense. It reflects a lack of imagination on the part of the directors and officers (and their legal advisors) and replaces their real legal duty with the profit-oriented economic theory that has gripped our country since the late 1980s.

The truth is, officers and directors are legally required to maximize shareholder VALUE, not shareholder profit. That is or can be a very different proposition. "Value" is what the company defines it as. Profit is only part of the value equation, but there is no legal, ethical or moral requirement that it is the only definition of value. So if the highest value of a company is to serve the common good and be profitable (which we at Dean's Beans, among others, have proven is possible for almost twenty years), then when shareholders invest in that company, they will know what they are getting into. There is no shortage of investors looking to put their money where their greater values are, as proven by the billions consciously placed in socially responsible investments in the last decade.

What is required is not a new form of corporation. Rather, social entrepreneurs creating their new businesses for the common good simply have to write their foundation documents (the Bylaws and Articles of Incorporation) to enshrine their social mission into the very bones of their new company. They need to state clearly what the values of the company are that they are seeking to maximize. Thus it is a lack of imagination on the part of the company's lawyers and advisors, not a lack of legal possibility, that prevents new public companies from being organized for the common good, as they define it.

I will be happy to give free advice on this subject to any social entrepreneur who wants to insure that their new company can pursue its social mission without the fear of being sued by shareholders for not putting profit above everything else.

Most people think that Fair Trade is just about a minimum price guaranteed to the farmers. That is a critical piece of the system, but Fair Trade provides many powerful tools for social change – something that no other label or system offers. One of the most significant is the requirement that farmers organize into democratic and transparent cooperatives.

In order to understand what this is about, it is necessary to appreciate why Fair Trade was founded in the first place. In the coffee world, the vast majority of farmers are small scale and indigenous. That means they have little access to information about prices, how the market operates, the needs of northern buyers, access to credit and more. They may not even speak their own national language, but rather their indigenous language. Therefore, they need middlemen to either provide the services for them or buy their coffee outright as cherries picked earlier that day. Since most are physically far removed from the major population or processing centers, they also have to rely on middlemen to get their coffee out of the mountains and into the stream of commerce. As you can see, they are not effective participants in the world market (even though economic models assume that they are), and are at a terrible disadvantage in trying to get a good price for their products.

By organizing into cooperatives, the farmers have the joint buying power to get better prices for farm inputs, they have joint processing power and a greater ability to get information about current prices and market conditions. They get to vote and have a real say (often for the first time in their lives) on the things that impact their families’ health and well-being. The requirement of transparency means that for the first time in their lives they know what they are getting, how much goes into the coop’s coffers, how much everyone else is getting and they can see the impact of the cooperative on their personal and joint bottom lines. Further, the coops provide valuable and often nonexistent social services, such as loans and health care (or at least money to obtain care).

Fair trade coops often pool their premiums together to have a powerful joint impact on their communities. This may take the form of building wells and schools (and believe me, most farming communities are in desperate need of both!) such as we have seen and participated in in Nicaragua, Ethiopia, Peru and elsewhere. Often, it takes the form of purchasing and building upstream capacity – that’s biz talk for buying the plants that process, grade, package and export their beans, thereby keeping that entire income stream in the local community, not giving it away to layers of middlemen. In Ethiopia, our Oromia partners have even created a national bank that takes deposits from non-members, makes low cost loans to members and has creatively diversified the income of the coop.

These are the unique, important and largely unknown benefits of cooperation in the coffeelands, and tens of thousands of farming families have gained better lives as a result. These are the reasons why we have focused on cooperatives and will continue to do so.