[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
EMBRACING CORPORATE SOCIAL RESPONSIBILITY: SMALL BUSINESS BEST
PRACTICES
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
DECEMBER 4, 2019
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 116-064
Available via the GPO Website: www.govinfo.gov
___________
U.S. GOVERNMENT PUBLISHING OFFICE
38-822 WASHINGTON : 2020
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
JARED GOLDEN, Maine
ANDY KIM, New Jersey
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
JUDY CHU, California
MARC VEASEY, Texas
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANGIE CRAIG, Minnesota
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
DAN BISHOP, North Carolina
Adam Minehardt, Majority Staff Director
Melissa Jung, Majority Deputy Staff Director and Chief Counsel
Kevin Fitzpatrick, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Chrissy Houlahan............................................ 1
Hon. Pete Stauber................................................ 2
WITNESSES
Dr. Robert Strand, Executive Director, Center for Responsible
Business, University of California-Berkeley Haas School of
Business, Berkeley, CA......................................... 5
Mr. Vincent Stanley, Director of Philosophy, Patagonia, Ventura,
CA............................................................. 6
Ms. Kristy Wallace, CEO, Ellevate Network, New York, NY.......... 8
Mr. Jaime Arroyo, Associate, Work Wisdom, LLC, Lancaster, PA,
testifying on behalf of Kedren Crosby, President of Work Wisdom 10
Mr. Sean McElwee, President and Chief Creative Officer, Seanese,
Viejo, CA, accompanied by Ms. Sandra McElwee, Chief Dream
Facilitator, Seanese........................................... 11
APPENDIX
Prepared Statements:
Dr. Robert Strand, Executive Director, Center for Responsible
Business, University of California-Berkeley Haas School of
Business, Berkeley, CA..................................... 25
Mr. Vincent Stanley, Director of Philosophy, Patagonia,
Ventura, CA................................................ 33
Ms. Kristy Wallace, CEO, Ellevate Network, New York, NY...... 37
Mr. Jaime Arroyo, Associate, Work Wisdom, LLC, Lancaster, PA,
testifying on behalf of Kedren Crosby, President of Work
Wisdom..................................................... 40
Mr. Sean McElwee, President and Chief Creative Officer,
Seanese, Viejo, CA, accompanied by Ms. Sandra McElwee,
Chief Dream Facilitator, Seanese........................... 42
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Article by Robert Cresanti - What Small Businesses Know About
Corporate Responsibility................................... 45
EMBRACING CORPORATE SOCIAL RESPONSIBILITY: SMALL BUSINESS BEST
PRACTICES
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WEDNESDAY, DECEMBER 4, 2019
House of Representatives,
Committee on Small Business,
Washington, DC.
The committee met, pursuant to call, at 11:30 a.m., in Room
2360, Rayburn House Office Building. Hon. Chrissy Houlahan
[member of the Committee] presiding.
Present: Representatives Finkenauer, Kim, Davids, Chu,
Evans, Schneider, Delgado, Houlahan, Craig, Radewagen,
Balderson, Hern, Hagedorn, Stauber, Burchett, and Bishop.
Ms. HOULAHAN. [Presiding] Good morning. Can you all hear
me? The Committee will come to order.
And we want to thank everyone for joining us this morning,
and I want to especially thank all of our witnesses for being
here today.
Throughout the history of industrialized economies, the
primary goal of a business was to make money and the chief
objective of corporations was to increase shareholder value
above all else. This approach has had clear benefits. Over the
last 4 decades, American-owned firms have become the largest,
most visible companies in the world, and the United States has
established itself as the world's largest and most innovative
free market.
At the same time however, this approach to corporate
governance has drawbacks. In this system, companies are
incentivized to cut costs to maximize profits. This can lead to
companies overlooking the impact that their decisions have on
the environment, the communities in which they operate, and the
personal well-being of their employees.
The global economy has reduced prices on many consumer
goods, but business practices that reward cost-cutting measures
have depressed wages, which puts home ownership, education, and
class mobility, the staples of ``The American Dream'', out of
reach for many Americans and contributes to an ever-widening
economic income inequality gap.
As the 21st century pushes on, and public opinion on issues
such as climate change and equity in the workplace continue to
evolve, the idea of shareholder primacy is not only beginning
to look at as being shortsighted, but it is also increasingly
like bad business.
Consumer preferences are shifting, and they expect
companies to practice social and environmental responsibility.
And, in fact, recent market surveys suggest that consumers are
much more likely to purchase goods and services from companies
that embrace environmentally and socially responsible business
practices, and they are willing to pay a little bit more to do
so.
Already, there is a growing community of entrepreneurs and
small business owners embracing a more socially and
environmentally responsible version of capitalism, driven by
the idea of corporate social responsibility.
Corporate social responsibility, or CSR, is an umbrella
term, used to refer to voluntary actions taken by private
businesses that enhance a company's commitment to managing the
social, environmental, and economic effects of its operations
responsibly, and in line with the public's expectations.
There is not a defined set of CSR initiatives, but actions
are generally related to creating value, both for customers and
employees, promoting diversity and inclusion, supporting the
communities in which they are located and protecting the
environment.
Companies that adopt these practices see their employees
and the environment, the communities in which they operate, and
the products and services that they provide as equally
important for long-term growth and financial success. They see
offering benefits such as health insurance, paid family leave,
and a representative voice and ownership for employees,
increases worker productivity, lower turnover, and provides a
competitive edge in talent recruitment.
Evidence suggest that firms embracing CSR are better able
to survive during market downturns. In the wake of the 2009
recession, companies engaged in CSR activities reported average
sales growth of 13 percent and profit growth of 12 percent
compared to 6 percent and 4 percent for companies that focus on
cost-cutting. And we know that over the years, many small firms
have already been engaging in some of these socially and
environmentally responsible activities. Small firms have been
building sustainable businesses, investing in their workers,
dealing fairly with suppliers and creating valuable goods and
services while also providing jobs on Main Street.
Today, we have the privilege of hearing testimony from our
expert panel, who will share with us best practices for our
small businesses as we change our perspectives of sustainable
business and capitalism. I look forward to your guidance and to
working with my colleagues on both sides of the aisle to ensure
that businesses of all sizes are created not just for jobs and
profits, but also to positively contribute to their surrounding
communities, to the environment, and to our society as a whole.
And I would like now to yield to the Ranking Member, Mr.
Stauber, for his opening statement.
Mr. STAUBER. Thank you very much, Chair Houlahan. It is a
privilege to be here with you today. Thanks for holding this
hearing. And thank you to the witnesses.
You know, today, the Committee has come together to
recognize the achievements of small businesses that have
involved themselves with a corporate social responsibility
frequently shorted to CSR. Our panel will help us understand
what small businesses can do and are doing and what this
Committee can do to support these initiatives. Examples of CSR
can be found throughout America's business history. Early
examples include factory owners providing housing for their
employees. Now, CSR has expanded to include environmental
efforts, philanthropy, and volunteerism.
Some small business owners may think that CSR is an
activity that only large corporations engage in. However, small
businesses frequently participate in activities that encompass
CSR values without recognizing or tracking them as CSR
initiatives.
Small businesses can choose an area of CSR that contributes
positively to their community and/or customer base and can
benefit from tax breaks, increased consumer and profits, and
greater employee loyalty.
I look forward to hearing from our panel about the benefits
they have experienced.
Thank you, Madam Chair, and I yield back.
Ms. HOULAHAN. Thank you, Mr. Stauber. The gentleman yields
back.
And if Committee members have an opening statement
prepared, I would ask that they be submitted for the record.
I would like to just take a couple minutes to explain the
timing and the rules. Each witness gets 5 minutes to testify
and each member get 5 minutes for questioning. There is a
lighting system to assist you. The green light will be on when
you begin, and the yellow light will come on when you have 1
minute remaining. The red light will come on when you are out
of time, and we ask that you try to stay in the timeframe to
the best of your ability.
I would now like to introduce our witnesses.
Our first witness is Dr. Robert Strand, the executive
director of the Center for Responsible Business and lecturer at
the Berkeley Haas School of Business. His research and teaching
compares U.S. and Nordic approaches to sustainable and socially
responsible businesses. He holds a Ph.D. in corporate social
responsibility from the Copenhagen Business School and an MBA
in international business from the University of Minnesota. He
was a United States Fulbright Scholar to Norway and spent a
decade in industry at IBM and at Boston Scientific. Thank you,
Dr. Strand, for being here today.
Our second witness is Mr. Vincent Stanley. Mr. Stanley is
the co-author of The Responsible Company and has served in a
variety of roles with Patagonia since its founding in 1973. He
held executive positions as the head of sales and marketing and
is now the chief storyteller for Patagonia and the director of
Patagonia Philosophy. He is also a visiting fellow at the Yale
School of Management. Thank you, Vincent, for being here today.
I would like now to introduce our third witness, Ms. Kristy
Wallace. Kristy is the CEO of Ellevate Network and is
responsible for executing their mission of changing the culture
of business from the inside out by providing professional women
with a supportive community to lean on and learn from. She is
the host of the Ellevate Podcast and is a speaker and thought
leader on leadership, diversity, social entrepreneurship, and
networking. Most recently, Kristy was recognized as a Woman of
Influence by the New York Business Journal. Welcome, Ms.
Wallace.
Our fourth witness today is Mr. Jaime Arroyo, an associate
at Work Wisdom located in Lancaster, Pennsylvania, very close
to my district. For over a decade he has worked in various
positions within banking with a mission to help clients reach
their personal and business financial goals. During this same
time, Mr. Arroyo has also built his own real estate business,
investing and managing in properties in Lancaster,
Pennsylvania. He completed his MBA at Drexel and was recently
elected curator for the Global Shapers Lancaster Hub, an
initiative of the World Economic Forum. He facilitates Review
Club for Work Wisdom where he leads discussions about relevant
business trends and leadership development. Welcome.
I would now like to yield to our Ranking Member, Mr.
Stauber, to introduce our final witness.
Mr. STAUBER. Thank you, Madam Chair.
I am very excited to introduce our final witness, Sean
McElwee. Sean is the owner and creative force behind Seanese, a
T-shirt company he started with the intent of raising awareness
and inclusion for people with Down syndrome all over the world.
He comes to us from Southern California, and you may recognize
him from the Emmy award-winning, unscripted reality series,
Born This Way. His company got its name from something Sean's
parents used to say to people when he was young. When others
struggled to understand Sean's speech, his parents would say he
spoke Seanese. Now he puts his unique sayings on shirts so that
everyone can speak Seanese. Sean has been on a mission to let
the world know, and new parents, know that having Down syndrome
is nothing to be afraid of.
To showcase this, Sean has been driven since the beginning
of his company's creation to give back. He began by donating 10
percent of his profits each month to nonprofits all over before
zeroing on his project to provide free and low-cost baby
onesies to Down syndrome organizations for new parents. One
dollar from every item purchased goes towards his ``Welcome
Baby Onesies Mission.''
Accompanying Sean today is his mother and chief dream
facilitator, Sandra McElwee. Sandra has been an advocate for
those with Down syndrome for many years. She has authored three
books on the experience of having a son with Down syndrome.
Sean and Sandra, it is a distinct pleasure to have you here
today. You are a role model.
Mr. HERN. Mr. Ranking Member, will you yield for just a
second?
Mr. STAUBER. I will. Go ahead.
Mr. HERN. I will commend you on your statement and how
important this issue is to you and your family, and you being
such a leader on these issues yourself and showing so many of
us how we should respond in Congress and to our witness I will
just say, all our witnesses, we are just so happy that you are
here and look forward to your testimony.
Mr. STAUBER. Thank you.
Mr. HERN. Whenever you are ready to resume.
Mr. STAUBER. I appreciate that.
Sean, you are a role model, especially to kids like my
Isaac, who also has Down syndrome. I cannot wait to hear more
from your story.
Thank you, Madam Chair, and I yield back.
Ms. HOULAHAN. Thank you. It is a privilege to serve with
you.
And now, Dr. Strand, you are recognized for 5 minutes.
STATEMENTS OF DR. ROBERT STRAND, EXECUTIVE DIRECTOR, CENTER FOR
RESPONSIBLE BUSINESS, UNIVERSITY OF CALIFORNIA-BERKELEY, HAAS
SCHOOL OF BUSINESS; VINCENT STANLEY, DIRECTOR OF PHILOSOPHY,
PATAGONIA; KRISTY WALLACE, CEO, ELLEVATE NETWORK; JAIME ARROYO,
ASSOCIATE, WORK WISDOM, LLC; SEAN MCELWEE, PRESIDENT AND CHIEF
CREATIVE OFFICER, SEANESE
STATEMENT OF ROBERT STRAND
Mr. STRAND. Thank you.
I am Robert Strand, executive director of the Center for
Responsible Business and faculty member at the University of
California, Berkeley. I also hold the title of associate
professor of Leadership and Sustainability with the Copenhagen
Business School in Denmark.
The 20th century was defined in large part by the
ideological battle between American capitalism and Soviet
communism. The 21st century will be defined by whether American
capitalism sufficiently meets our collective needs and tackles
our greatest challenges including climate change, growing
inequalities, decent work for all, and threats to our
democratic institutions. The 17 UN Sustainable Development
Goals (SDGs) succinctly articulate these needs and challenges.
The success of American capitalism in the 21st century will be
measured against the Sustainable Development Goals.
With this in mind, I deeply welcome the recent restatement
on the purpose of the corporation by the Business Roundtable to
embrace a stakeholder view of the firm. This represents a
pragmatic step to improve American capitalism as a stakeholder
view increases our likelihood to successfully achieve the
Sustainable Development Goals.
A stakeholder view states that the purpose of a firm is to
provide value to its stakeholders. It represents a stark shift
from the previous stated purpose known as ``shareholder
primacy'' long promoted by the American economist Milton
Friedman that prescribes a lone corporate purpose to maximize
profits.
Dr. Friedman was a central figure in the ideological battle
between American capitalism and Soviet communism. For Freidman,
anything other than a free market response was the enemy and
profit-maximizing firms were central to Friedman's view of free
markets. Friedman contended anyone suggesting firms have a
responsibility beyond profit maximization, such as avoiding
pollution or addressing discrimination, were ``preaching pure
and unadulterated socialism.'' That use of the word
``socialism'' is a Cold War ideological relic. It served its
purpose then but I cringe at its use today. The Business
Roundtable's restatement helps move us past these tired old
ideological debates.
I now turn attention to the smart policy and corporate
governance structures necessary to best ensure the Business
Roundtable's words are turned into durable action supportive of
the stakeholder view.
B Corps present great promise. In 2012, when Patagonia
became the first California company to sign up for B Corp
certification, its founder, Yvon Chouinard, stated that B Corps
created the necessary legal framework through which Patagonia
could remain committed to a stakeholder view even through
changes in ownership. B Corps has yet to be widely tested in
the domain of public corporations where I also look to examples
from elsewhere in the world for institutionalizing a
stakeholder approach en masse.
Chiefly, I look to the Nordic countries comprised of
Denmark, Finland, Iceland, Norway, and Sweden, given the
Nordics are originators of the stakeholder view of the firm and
have developed a variety of corporate governance structures
that support the stakeholder view. This includes the Danish
industrial foundation model. Leading Danish firms, like
Carlsberg and Novo Nordisk, are public corporations whose
majority of voting rights are held in perpetuity by an
associated industrial foundation. This enables the company's
management to embrace a long-term perspective supportive of the
stakeholder view. The 1969 Foundation Law prevents such a
structure in the U.S. We may want to revisit this.
A stakeholder view also comes with challenges. Patagonia is
widely heralded as a responsible company in part because it
provides a key stakeholder, its employees, with benefits like
fully paid parental leave, access to quality childcare, paid
medical leave, and sufficient healthcare coverage. I applaud
Patagonia as such offerings are widely recognized as beneficial
to society, but I have significant concerns for a capitalistic
system that pushes such responsibilities into the domain of
business. This is inefficient and can unintentionally
exasperate inequalities. Furthermore, it redirects the precious
resources of small and medium-sized companies who may not be
able to satisfy these demands. My experiences in the Nordics
have convinced me there is a much more efficient and equitable
way to handle these things. I believe small business could be
the champion of pragmatic explorations to consider what might
work better in an American context.
In closing, I would like to point out that small business
is the most trusted institution in the United States. I am
deeply concerned about mounting populist attacks on the concept
of capitalism, but I am equally concerned about inaction on the
part of our business and political leaders to go about the
pragmatic work of improving our version of American capitalism
so it best meets our needs and tackles our greatest challenges.
As representatives of the most trusted institution in the U.S.,
this congressional Committee has the opportunity, and dare I
say responsibility, to assume a leadership role to usher in a
new era of American capitalism in which the stakeholder view is
mainstreamed and the challenges represented by the Sustainable
Development Goals are met. Thank you.
Ms. HOULAHAN. Thank you, Dr. Strand.
Mr. Stanley, you are now recognized for 5 minutes.
STATEMENT OF VINCENT STANLEY
Mr. STANLEY. Thank you for inviting me to speak with you
today.
Recently, this Committee heard testimony from four of my
colleagues in the outdoor recreation industry who all spoke of
their love for their experience in the natural world. Something
changes for all of us when we get a mile from the road and
begin to experience in the presence of nature both our self-
reliance and our vulnerability. Reverence for this experience
has attracted many to the outdoor industry, not to make a
killing but a living, to put at the center of their life and
work something they care about deeply.
We in the outdoor industry are not the only ones with this
desire. The majority of America's small businesses begin with
the impulse to put at the center of work some interest,
bsession, or skill, and to engage with others of like mind,
heart and need. Small businesses are by definition rooted in
community, either a shared place or activity.
Patagonia, no longer a small business, is still rooted in
communities of sport--climbers, anglers, hikers--and of place.
For decades we have helped fund hundreds of small grassroots
organizations working to save a beloved local patch of land or
stretch of water.
Every beloved place needs help in a time of what Pope
Francis has called a ``single complex crisis, which is both
social and environmental,'' one marked by perilous inequality
and multiple existential threats to nature from a carbon-
saturated atmosphere, acidifying and plastic-choked oceans,
dwindling freshwater, lost topsoil, and a thinning of the web
of life that threatens our resilience and capacity to thrive.
We know how important it is to act locally, how much we all
need vibrant communities where most of the money stays in town,
where citizens can fully care for what they love, to improve
the vitality of the neighborhood but also of the bioregion that
makes life in a neighborhood possible, the local streams,
farms, forest and wild land.
This single, complex crisis has hit, so far, people and
places far from popular view--the poor in the desolate inner
city or hollowed out rural town, the shrinking of both polar
ice and the submerging tropical islands.
But now the crisis is coming home everywhere. Palm Beach is
not immune to sea level rise. Santa Barbara, my hometown, knows
and fears wildfire in winter.
The acceleration of this twin crisis, as well as new job-
displacing technology, is changing the way all businesses view
their future. We know there will be new rules and conditions
and we have no idea of what they will be.
But the moral imperative is clear. The crisis demands that
businesses understand our impacts, minimize the harm we do, and
generate products and services that improve the quality of
human life and communities and restore to health living
systems--water, soil and atmosphere. The young demand this as
well. The social and natural systems we elders see as declining
they taste as desert.
Business has a role play in the turnaround. Focusing on the
needs of others can be as good for businesses in society as it
is for individuals within families, to ground business strategy
and operations in the real world.
In our experience at Patagonia, the social and
environmental constraints we have placed on ourselves have led
to innovations creating business that is better in all ways.
Our customers are loyal and more numerous, our employees
engaged, our ability to make a sustainable profit has not been
hurt by the steps we have taken to do the right thing.
The B Corps movement has been a critical part of our work
and that of thousands of other values-based businesses. The
independently verified B Impact Assessment provides our
individual companies a thorough, systemic look at all our
practices that benefit or burden all stakeholders from
employees, to suppliers, to communities, to nature.
Moreover, in light of the Business Roundtable's recent
restatement of the purpose of a corporation, the Impact
Assessment can now serve as a blueprint for those in publicly
traded companies who wish to join us, who are willing to make
in the words of Alcoholics Anonymous a ``searching and fearless
inventory'' of their social and environmental responsibilities
and then act on them. Thank you.
Ms. HOULAHAN. Thank you, Mr. Stanley.
Ms. Wallace, you are now recognized for 5 minutes.
STATEMENT OF KRISTY WALLACE
Ms. WALLACE. Thank you for the invitation to testify today.
Small businesses are at the core of our Nation's economy.
From family stores on your street corners to bustling
innovative start-ups, supporting today's and tomorrow's
entrepreneurs is the responsibility of each of us in order to
ensure continued economic and social progress.
The very notion of the American Dream is built on the
opportunities we provide for individuals to dream for a
brighter future for themselves and their communities. I have
seen this firsthand during my 30 years working with small
businesses. From my dad's dental office, to waitressing for a
family-owned restaurant, to multiple start-ups in NYC, and
finally as the CEO of Ellevate Network, a community dedicated
to supporting women at work, I have seen the obstacles that
small businesses go through and the power that they are capable
of achieving. Small businesses are resilient, strong, and
innovative like no other.
Recently, the Business Roundtable released a new Statement
on the Purpose of a Corporation. Signed by 181 top CEOs,
including Accenture and Apple, this statement signified a shift
from businesses driven by shareholder primacy to businesses
driven for the benefit of all stakeholders.
This is an important step towards changing the landscape of
business and the world. But now, it needs to be backed up with
clear progress and action. Small businesses are in a unique
position to pave the way for large-scale business
transformation, and it is only fitting for our government to
support small businesses further in being drivers of social
good.
First, we have to recognize that the corporate social
responsibility landscape is changing and evolving. CSR today
lies in ensuring transparency and ethical governance; providing
training, benefits, decent compensation and flexibility to our
employees; creating quality jobs in and for our communities
that need it the most; and being intentional about our
relationships with suppliers, distributors, as well as
environmental impact. Adopting a holistic approach to corporate
social responsibility is not only important to support our
small businesses but key to supporting the future of our
economy and our Nation as a whole.
Second, we need to measure what matters. Just as businesses
have set structures around financial reporting, businesses also
need a framework for measuring social impact and
sustainability. Several years ago, Ellevate Network joined
companies such as Patagonia, Eileen Fischer, and the Honest
Company by becoming a certified B Corporation in order to
underline and measure our commitment to benefit the communities
in which we exist and operate.
In a span of 2 years, our B Corp score rose from 88 to 115
on a scale of 200. That is progress. But I would also like to
note that our business revenues doubled during that time period
illustrating that being good for society is also good for
business.
Through certifications such as this one, we are able to
clearly measure the impact our companies have on the greater
society and hold ourselves to a high standard of reporting,
transparency, and rigor. Without such standardized
requirements, it is virtually impossible to distinguish those
organizations that put social good at the heart of their
business from the others.
Once we have the measurement mechanism in place, we then
need to put it into practice. When addressing distribution of
funds, rewards, tax exemptions, and opportunities, we must
prioritize those who make it their duty to prioritize the well-
being of their communities and environments. It is time that we
harness the power of our legal and governing bodies to further
support those small businesses that make social good a
priority.
Finally, we need to address the main obstacles keeping
small businesses, particularly those of women and minorities,
from achieving sustainability. Both groups suffer from unequal
pay practices, lack of advancement opportunities, and implicit
and explicit bias at work. Working caregivers face additional
disadvantages due to insufficient paid leave funding. And even
though entrepreneurship amongst these groups is on the rise,
female founders still receive only 2 percent of VC funds
available. Given the disparities in funding and access to
opportunities, it is crucial that we support women and
minorities financially in starting and sustaining their small
businesses.
Creating the future of entrepreneurship is no easy task,
and I am grateful for the work that your Committee is doing and
has done in the past to both empower and further support the
groups that need it most. As small businesses continue to be
change makers, we must address the systemic discrimination,
inequalities, and barriers that they face every day. Ellevate's
mission-driven approach, as well as B Corp certification is
just a small example of how organizations can succeed
financially while driving positive impact.
With continued innovation, improved policies and
measurement practices, and the never-ending dedication of the
entrepreneurs who go to work every day in the hopes of building
a better future, we have the unique opportunity to mold the
American Dream into one that supports the social good of our
people, our nation, and our world. Thank you.
Ms. HOULAHAN. Thank you, Ms. Wallace.
I now recognize Mr. Arroyo for 5 minutes.
STATEMENT OF JAIME ARROYO
Mr. ARROYO. Good morning. Thank you, Representative
Houlahan, and the entire Committee on small business.
My name is Jaime Arroyo. I am the managing partner at Work
Wisdom, a certified B Corp, that helps organizations
revolutionize achievement by using a variety of tools,
disciplines and evidence-based practices to instill high
performance mindsets, behaviors, habits and organizational
culture. I am a member of Global Shapers, an initiative of the
World Economic Forum where we take global issues, like climate
change, and execute on local solutions, like a Pass on Plastic
Campaign that we did locally.
I am also a graduate of Drexel University, where I earned
my MBA with a focus on entrepreneurship and innovation
management. And over the past few years I have helped over 100
entrepreneurs from underrepresented communities start and grow
their businesses in an effort to build an equitable and ethical
economy using tools such as microfinance and business plan
training.
Today, I help organizational leaders embrace corporate
social responsibility in an effort to shift the purpose of
business from increasing shareholder value to increasing
stakeholder value. This requires leadership in business to
focus on the triple bottom line--people, planet, and then
profit.
Research done by The American Federation of Labor and
Congress of Industrial Organizations shows that ?S&P 500 firm
CEOs were paid 361 times as much as average U.S. workers in
2017. Despite promises from over 200 nations to address climate
change, a recent report from the United Nations states that we
are no closer to slowing rising temperatures and we will need
to take drastic action in order to reach climate action goals.
Through business, embracing corporate social responsibility
means empowering, caring for, and improving the quality of life
for our most important asset, our people, and our most
important resource, our planet. While we can spend hours
discussing the troubles that our society faces today, the fight
against inequality, and the war against climate change, we
understand that our country was not built by being against
something, but rather standing for a just cause.
The American Dream that so many have sacrificed for
includes the very powerful tool of entrepreneurship. Here lies
not only the backbone of our economy, but the power to create a
future that is sustainable and prosperous for all. It is
through embracing corporate social responsibility in business
that we can solve many of our challenges.
In Lancaster, Pennsylvania, we have embraced business for
good. As a growing part of the B Corp movement, many
businesses, such as Work Wisdom, have used the B Impact
Assessment by B Lab, creators of the B Corp Certification, to
measure and improve social and environmental performance.
Our business community understands that you cannot improve
what you do not measure. After meeting the rigorous standards
of the assessment, you are eligible for the B Corp
certification. A stamp of approval that consumers in Lancaster
have become familiar with and now use to make purchasing
decisions to make sure that every dollar that they spend is
adding value in more than just one way.
Certified B Corps are taking corporate social
responsibility a step further by voluntarily meeting high
standards of transparency, accountability, and performance.
These businesses do not look like Tesla and these entrepreneurs
do not look like Mark Zuckerberg. They look like Passenger
Coffee, a woman-owned coffee shop and roaster that has
employee-friendly policies and environmentally sustainable
business practices. They look like the Stroopie Company that
not only makes delicious stroopwafels in Lancaster but also
provides meaningful employment to refugees who are starting
over in Lancaster, Pennsylvania.
There is an opportunity for us to do more. Our leaders in
government have the opportunity to encourage business to think
long-term rather than short-term by encouraging states to adopt
and promote Benefit Corporation legislation that would legally
allow the ``best interest of the corporation'' to include
positive impact on society, workers, the community, and the
environment instead of only profit. Currently, only 35 states
and Washington, D.C., have passed this legislation. Our leaders
in business can challenge their peers to shift from a mindset
of competition to a mindset of collaboration. Larry Fink, CEO
of one of the world's largest asset managers, Blackrock, wrote
a letter to CEOs in 2018 explaining that companies must be able
to state their strategies for long-term growth that not only
benefit shareholders, but all stakeholders using purpose to
drive results and positive impact.
Embracing corporate social responsibility does not mean
sacrificing profits, but rather elevating the value of our
employees and our planet. Thank you.
Ms. HOULAHAN. Thank you, Mr. Arroyo.
I now recognize Mr. McElwee, for 5 minutes.
STATEMENT OF SEAN MCELWEE
Ms. MCELWEE. My name is Sandra McElwee, and I am the chief
dream facilitator for Seanese, a T-shirt company founded by my
son, Sean.
Mr. MCELWEE. Hi. My name is Sean McElwee. I am the
president and chief creative officer of Seanese, a T-shirt
company I founded in 2017 and my business in Southern
California. Seanese is a micro-enterprise with profits in the
past 2.5 years totaling $32,000.
I am on a mission to show the world that people with Down
syndrome can have a business and give back.
My mom is going to tell you the rest of the story.
Ms. MCELWEE. So Sean is the creative genius between over
130 designs on 12 different styles of shirts available on his
website, and I assist him with the accounting and
administration of his business. I am a volunteer employee, and
Sean has threatened to fire me a few times.
Sean is best known for his role on the Emmy-winning
television show Born this Way on the A&E network. This
unscripted show followed the lives of seven adults with Down
syndrome and created many opportunities for Sean. Because of
the show, Sean was invited to deliver keynote speeches, and
while writing his speech, he had the idea to put his own words
onto T-shirts.
While I encouraged Sean's entrepreneurial spirit in hopes
it can be a solution for long-term meaningful employment, many
people with disabilities find their best option for employment
is starting their own business. In fact, 1 in 10 employed
persons with disabilities are self-employed. While Sean has had
some jobs in the community, sadly, they did not work out on a
long-term basis.
As Sean's business conceptualized, there was never a
question that Sean would give back in a way to promote social
good. Sean initially made a list of 12 organizations that have
provided him with support and advocacy and donated to one of
each organization each month the first year of his business.
Today, representatives from three of those organizations are
present to support him--RespectAbility, The National Down
Syndrome Congress, and the National Down Syndrome Society.
Each month his first year, Sean donated a minimum of $100
to each organization. And his first year donations totaled
$1,690, which was 16 percent of his first year's profit.
At Seanese, we measure success differently than most
businesses. Seanese has not realized enough profit to live off
of, but the creative outlet for Sean and impact he is making by
showing the world that people with Down syndrome can contribute
to their community is where we measure the success.
Sean's donation program then evolved when he was contacted
by the Down Syndrome Connection of the Bay Area in Northern
California for a bulk order of his baby onesies for their new
parent gifts. At the same time the disturbing news that Iceland
had achieved a 100 percent abortion rate for babies with Down
syndrome broke. Sean knew he wanted to inspire new parents and
help their babies and he changed his program from cash
donations to----
Mr. MCELWEE.--to donate baby onesies.
Ms. MCELWEE. So, to date, Sean has had 37 Down syndrome
organizations in 22 states apply for 2,410 baby onesies.
Sean donates $1 from every shirt sold towards the purchase
of the onesies. He also includes a letter to the new parents
encouraging them to never give up on their dreams for their
babies. This program also shows the new parents that someone
with Down syndrome is capable of owning his own business, as
well as giving back with part of his profits. The remainder of
the profits fund his ABLE Account.
Thank you for allowing Sean and myself to tell the story of
how a microbusiness with very low profits is still able to make
a difference and give back to the community.
Mr. MCELWEE. Thank you.
Ms. HOULAHAN. Excellent. Excellent job, and right on time.
Literally, right on time.
So I now recognize myself for 5 minutes to ask a few
questions.
My first question is for Mr. Stanley, please.
Market research indicates that over the last decade,
consumer demand has shifted towards companies that market goods
and services as more sustainable. How has this trend impacted
Patagonia's profitability, marketability, and long-term outlook
in your opinion?
Mr. STANLEY. We have had a considerable amount of growth
since 2007, which is I think the first year that you started to
see studies that showed that people were willing to pay for
sustainability. I think what we are hoping for is that the
Sustainable Apparel Coalition, which is a coalition of all the
major apparel and footwear companies that sell half of the
clothing and footwear on the planet, will come up with a
consumer-facing index this year that will give an environmental
and social rating for every product in the store. You hold your
cellphone up against a hang tag, see that rating, and we are
hoping that with better information consumers will care even
more about what goes into their clothes and what they will buy.
Ms. HOULAHAN. Thank you. That was a terrific answer.
Ms. Wallace, can you talk a little bit about how valuable
it is for women entrepreneurs to have a network of similarly
situated peers and what they can learn from one another?
Ms. WALLACE. I love this question. Thank you.
Yeah. I mean, it is all about your community and who
supports you. If you are starting a business, it is an
overwhelming time. You are thinking about legal structures,
finance, accounting, building products and services. You do not
have all of those skillsets. Being able to tap into a community
that is there to support you is critical for small businesses
to grow and grow quickly. It is also having the community's
support, not just as customers. Those that are there to provide
guidance and peer mentorship have been incredibly valuable for
me as it is for all of the small business owners in our
community.
I think finally, there is a big connection between small
businesses and bigger businesses and how we best support each
other, learn from each other, and leverage those relationships
to grow. And that is very important to Ellevate: it is how we
really look at the diversity of our community and how we lift
each other up as a community to see the greatest impact.
Ms. HOULAHAN. Thank you.
And with the remaining 2-1/2 minutes of my time I am going
to try to get to everybody.
Mr. Arroyo, we talked about CSR as having an important
element which is diversity and inclusion, but we do not focus
necessarily on this as being a positive thing. Can you explain
why companies that get a competitive edge who have a diversity
inclusion angle to them?
Mr. ARROYO. Definitely. I mean, research studies have shown
that companies that are more inclusive and have more equitable
workplaces actually outperform their competition. And when you
have a more inclusive workforce at all levels, not just at the
frontline which we start to see a lot of diversity in the
frontline, but once you started to get to management and
executive levels it starts to look a certain way.
The more inclusive an environment can be, the more
different perspectives a business can have. And with those
different perspectives come innovation and creativity to come
up with problems and different challenges.
Ms. HOULAHAN. Mr. McElwee and Mom, I would love to know
what you found in your journey so far that would help enable
more people like you to be able to create businesses. How can
we be helpful?
Ms. MCELWEE. Well, that is a very difficult question
because there is so much that goes into a business in general
that a lot of people do not have. I happen to have a business
degree so I was able to help Sean with setting up his business.
One thing I think that is very helpful is the small business
associations that are in each city that help--SCORE I believe
is what it is--that help people get started. And maybe to
encourage them to reach out more to the community of people
with disabilities, to help them start their businesses when
their family does not have the expertise needed.
Ms. HOULAHAN. That is a terrific idea, and we will
definitely take that one back.
And my last question for Dr. Strand, your focus and your
research has been primarily on how other nations are handling
this particular issue and challenge of evolving capitalism.
What have we learned from them that we could possibly apply to
our Nation as we are increasingly understanding the power of
purpose in business? Five seconds.
Mr. STRAND. The primary thing I take from the Nordic region
is that they have drawn from the American economist, Arthur
Okun that in a capitalistic society, the markets need a place
and the markets need to be kept in their place. They
pragmatically figure out where do markets work well and then
use them. And where they do not, then we need different
solutions.
Ms. HOULAHAN. Thank you. Thank you.
I now yield to the Ranking Member, Mr. Stauber, for his
time.
Mr. STAUBER. Thank you, Chair Houlahan. And thanks for the
testimony from the witnesses. Everything, or much you said was
very relevant to today. And Dr. Strand, coming from the
University of Minnesota, we do a lot of great things in
Minnesota as you can testify.
My question is to Sean and Mom. In your testimony you
discussed a few areas that helped lead you to the decision to
donate to new parent baskets. Can you tell us why this specific
mission was so important to you?
Ms. MCELWEE. Do you want to answer that?
Well, when Sean was born we learned that many people choose
to not continue their pregnancies when they have a prenatal
diagnosis of Down syndrome. And unfortunately, doctors do not
always give the current facts on people with Down syndrome's
abilities and possibilities. So we have worked for many years
to try to correct that. And so it just kind of worked that, you
know, Sean donating the baby onesies to encourage the new
parents would be his mission.
Mr. STAUBER. Sean, do you want to answer a little bit?
Mr. MCELWEE. Oh, yes. I was advised by my people to listen
to your advice because I manage to hold on to it because I love
you.
Mr. STAUBER. Oh, wonderful. Thank you, Sean. You know, you
are an inspiration to us here today. Your abilities far
outshine your disabilities.
I appreciate you all being here today. Thank you.
Madam Chair, I yield back.
Ms. HOULAHAN. Thank you.
I now recognize Representative Dwight Evans for 5 minutes.
Mr. EVANS. Thank you, Madam Chair.
I think Dr. Strand, I want to ask you this question.
I am a member of the Ways and Means Committee, and trade
has been an important issue recently. When trading with foreign
countries, it is important to make sure that the countries we
are trading with have fair labor practices and are not
violating human rights.
Many small businesses participate in international trade.
To any member, particularly starting off with you, how can the
owners of small businesses make sure the goods they are
importing are not coming from companies with harsh working
conditions using unfair labor practices?
Mr. STRAND. Thank you very much for the question. Such an
important question. And I would suggest a real challenge for
small businesses that have limited resources to necessarily get
out in their supply chains. Some of the larger companies that
have resources, there is an imperative on them to actually go
visit suppliers to be engaged. I would point to associations
like what Mr. Stanley alluded to, the Sustainable Apparel
Coalition, the SAC. Small businesses can join this and through
that there is a wait. Fifty percent of apparel in the world
produced by the SAC, that can help small businesses understand
their supply chains where they could not do it alone. So they
need to join in a cross-industry collaboration to do this.
Mr. EVANS. Okay. Does anyone else on the panel like to
comment on that question?
Mr. STANLEY. Yes. I think for companies of any size, I
think from the time we were doing about $50 million, we audited
conditions in the factories that sell our clothes. That
auditing has been going on for 25 years, and as you know, with
limited success. And right now, companies are just beginning to
audit conditions in the mills and finding very serious
problems.
What we do at Patagonia is we have a fairly large social
environmental responsibility team that actually has veto power
over our sourcing team if they determine that a factory or a
mill is not ready or needs to meet certain conditions before we
will do business with them, what they say has veto power over
sourcing. So I think that would be a good policy for other
companies to adopt.
Mr. EVANS. Anybody else on the panel?
Mr. ARROYO. Yeah. In Lancaster, there is a small business
called Imagine Goods, which is a locally-owned and woman-owned
business for apparel clothing. The makers of the clothing are
survivors of human sex trafficking in Cambodia. And one of the
things that they do I think is they actually travel to Cambodia
and meet the women that are making the clothing. So the
auditing of their supply chain is probably the biggest way to
prevent, you know, unethical sources coming into the United
States, actually physically going there and auditing these
factories is a good step.
Mr. EVANS. I would like to follow, diversity in businesses
link to profitability. Currently, women earn 82 cents for every
dollar that a man makes. Women of color, the gap is even more
substantial. African-American women earn 62 cents. Native-
American women earn 58. Latino women earn 54 compared to white
men.
To any of the panel, what can small business owners do to
make sure there is no gender or racial wage gap for their
employees?
Yes, Ms. Wallace?
Ms. WALLACE. So there are a number of things that you can
do. One is being very intentional in your hiring and hiring
practices, ensuring that you have a diverse employee base and a
base that is reflective of your customers and your local
communities and society. It takes intent to make that happen.
The second is creating hiring and pay structures. So what
is the framework of your business? Who are you hiring? At what
level? What level of experience? What department? If you create
a databased framework for what the pay scale is at each level
and use it as you are hiring people, it is a great way to just
continue to keep yourself in check around those practices.
Mr. EVANS. I yield back the balance of my time. Thank you,
Madam Chair.
Ms. HOULAHAN. Thank you.
The gentleman, Representative Kevin Hern, is now recognized
for 5 minutes.
Mr. HERN. Thank you, Madam Chair.
Sean, I especially want to thank you for being here, a
fellow entrepreneur. It is great to see you here. Thanks to all
the rest of the witnesses for being here as well.
You know, as a small business owner for over 34 years, I
have created a lot of jobs. Like many of you, if you are in
business, you have had a lot of successes and a lot of failures
and you remember your failures much more so than you do your
successes.
What I have found over the years, the successful
businesspeople in the world are the ones who give back to their
communities. They do this on a regular basis without any
outside influence. They learn very quickly as part of the
education process, which is much greater than any B school
could ever teach you, or any government could ever impose on
you.
In fact, I would say that small businesses paly an
instrumental role in the success of communities and have the
ability to impact their cities and towns in ways that go way
beyond job creation.
As referenced by an article that our Ranking Member
submitted for the record, a good example of this is Sonic's
Limeades for Learning, a restaurant group. It is based on
Oklahoma City. It has a large presence in my home state. I
think over 3,500 restaurants around certainly the United
States. It works with the branch franchisees and teachers to
support educational programs or products for teachers. Through
this program, customers at local Sonic locations are encouraged
to vote online in support of educational materials which Sonic
then delivers to classrooms. This type of investment is
something that every member of this Committee should agree with
and should support.
However, we have a lot of colleagues that think government
intervention and government mandates are the way that will make
businesses be involved in hiring and inclusion, and I totally
disagree. In fact, I remind us what I consider a person who
really promoted free markets, President Reagan once said, ``The
most terrifying words in the English language are, I quote, `I
am from the government and I am here to help.'''
As a small business owner I can tell you over 34 years, I
ran on the notion in Congress for the first time, never been in
politics before, was get government out of the way, let
entrepreneurs create jobs and put Americans to work.
Patagonia did not need the government to be involved to be
where they are at today. In fact, they probably took business
away from those who did not see what you all saw and found a
lane to run in. And I think that is what free markets do; they
give people with entrepreneurial spirit, willing to take risk,
and when they get knocked down, they get back up again. That is
the true definition of the American Dream. It is not having
some outside force dictate to you how you are going to run your
business.
It is clear that small businesses will make a real
difference in the communities without government. The
government's involvement in this area will only further
convolute this issue and scare the businesses involved. And so
because of this I would like to focus on the great work that
has been so far. And as I started earlier, there is a lengthy
history of companies investing in their local communities,
something the public needs to be better educated on.
So Mr. Strand, Dr. Strand, I would like to start with you
and kind of move down if we could quickly because I would
certainly love to hear from Sean on this. In your opinions, how
can we continue to grow public education regarding corporate
social responsibility and message this great work which has
been done by so many small businesses across America?
Mr. STRAND. Thank you very much for the question. And I
could not agree more.
Small businesses has created such goods for the American
society in terms of jobs, the products and services, and
government did not create that. But I would say we need smart
policy. We need good rules that make good sense and incentivize
for the long term. And this is something where I think that an
organization, this particular Committee, to look at small
business and all the good that it has done and to figure out
from a stewardship perspective, as opposed to an extractive
perspective of ownership, how do we encourage stewardship? That
is a long-term view. It is exactly what you are describing with
the small business that you started. I would suggest that we
need some policy frameworks, those legal frameworks like what B
Corps presents, and we should encourage that to be more
mainstream rather than on the fringe.
Mr. HERN. Or possibly recognizes those who achieve certain
standards in communities, that there is a place to be rewarded
for those----
Mr. STRAND. Absolutely.
Mr. HERN.--successes they have.
Mr. Stanley?
Mr. STANLEY. You know, one thought I would have is a lot of
the industries that are producing some of the greatest
environmental harm are getting the greatest amount of
government support. So if you want to equal the playing field,
I would remove subsidies from some of those industries. And I
agree with, I do not have a prescription for you but I agree
with you that it is really important at this time to build up
the capacity of communities to have a strong local economy. And
whatever you can do on this Committee to support that I think--
--
Mr. HERN. So that could be including making the small
business tax cuts permanent beyond 2025 for small business men
and women in America.
Sean, could you wrap up? What could we do better to help
educate folks on what you are doing in giving back to society?
Ms. MCELWEE. You do not want to answer that question?
I think simply, you know, letting people know, like today,
giving us the opportunity to let people know the impact that is
being made when people do give back to the community.
Mr. HERN. We certainly thank you for being here. Thank you
so much. Thanks to the witnesses.
Ms. HOULAHAN. Thank you.
I now recognize the gentlelady from Kansas, Ms. Davis,
Davids.
Ms. DAVIDS. Thank you, Chairwoman.
Well, first of all, thank you to all of the witnesses for
being here today and sharing some of your expertise with us.
I sit on this Committee because the district that I
represent, the 3rd District in Kansas, which is the Kansas City
Metro Area, I often say we have entrepreneurship baked into the
DNA of our community. And so getting the chance to sit here
today and hear specifically about B Corps is a particular
highlight because just last week I got the chance to
participate with my colleague, Congressman Emanuel Cleaver in
presenting and honoring a B Corp in our area, Travois, for all
the work they have been doing in Native American communities,
Alaska Native communities. And this concept of the triple
bottom line--people, planet, profit--is something that I think
a lot of businesses are moving toward. And in that vein, I
think with Seanese, it is really awesome to hear that in
practice where we have got what is an amazing example of a
company that really it sounds like has defined success and what
does success mean in your own way.
So the first thing I would love to hear from you, Mr.--
well, I want to say Sean but I also want to give you the
respect you deserve as an entrepreneur and someone who is
testifying before Congress today, can you tell us what you
think of as success for Seanese?
Ms. MCELWEE. No, go ahead. You know what success is.
Mr. MCELWEE. Success is like--my mom knows the answer. I am
sorry.
Ms. MCELWEE. Success would be, what, if Target and Walmart
licensed your designs?
Mr. MCELWEE. Oh, yes.
Ms. MCELWEE. Is that not one of your dreams?
Mr. MCELWEE. It does. Like a shopaholic.
Ms. MCELWEE. A shopaholic. Yeah.
Mr. MCELWEE. Right?
Ms. MCELWEE. That is not one of your designs. But you would
like that; right? For somebody to license your designs and take
it into big stores?
Mr. MCELWEE. Yes. I need a store like to go to Walmart,
Target, GameStop, and those other things. I could go my own but
if you guys help me out.
Ms. DAVIDS. Well, thank you for being here today and for
sharing. Some of the numbers that you have in your testimony is
very enlightening. And I have had the chance to meet with folks
in my district. In fact, one of the first meetings I had was
with Jawanda Mast, and her daughter, Rachel Mast came in and
told me all about her ABLE account and her about to embark on
her college journey. And so I just really appreciate you taking
the time to come and testify today.
I guess the only other thing I would like to hear, maybe
from the rest of the panel, is with B Corps, can you talk a
little bit about how some of the existing SBA programs or those
sorts of things that fall within the jurisdiction of this
Committee, how we can help support that model moving forward?
Mr. ARROYO. Actually, an organization, a nonprofit
organization that was my former employer, called Assets, one of
the things that I did there was start a microloan program using
SBA funds for that that was meant for minority-owned businesses
and women-owned businesses. One of the things that we did was
pair that loan with the B Impact Assessment. So in order for
small business owners to receiving financing, they also had to
take the B Impact assessment so that way they can start to
measure their social and environmental performance. And then
along the way, we would actually incentivize them through rate
discounts as they made improvements along that assessment. So
it was a great pairing of finance and this measurement tool and
assessment as a way to encourage folks to not just grow their
own business but also impact their community.
Ms. DAVIDS. Thank you. I see my time has expired. I yield
back. Thank you, Madam Chair.
Ms. HOULAHAN. Thank you.
I now recognize Representative Bishop for 5 minutes.
Mr. BISHOP. Thank you, Madam Chairman.
I complement everyone on the panel, and I submit that Mr.
McElwee in particular and all the folks who are entrepreneurs,
you are actually great examples of capitalism. That is to say,
individuals under no compunction or constraint of some outside
force, acting in their own enlightened self-interest.
In January 2012, Governor Mitch Daniels in Indiana made an
important point regarding corporate social responsibility in
his State of the Union response. He said that out here in
Indiana, when a business person asks me what he can do for our
state, I say, first, make money, be successful. If you make a
profit, you will have something left to hire someone else and
some to donate to the good causes we love.
Jobs and philanthropy are only possible when businesses are
successful. And a business can only be successful when it
creates a good or service that provides value to its customers.
In its essence, capitalism is a mechanism that is amoral in
character but it produces outcomes that have broad social
utility. It is capitalism that has reduced world poverty by 80
percent just since 1970. In Asia, it is capitalism that reduced
the number of people living in extreme poverty from almost 60
percent to just 1.7 percent.
As Arthur Brooks often notes, that is one of the most
remarkable and compassionate achievements in human history. One
could even say this is the most successful example in history
of corporate social responsibility. It is clearly important for
businesses to be good corporate citizens, but I think it is
important that we, as policymakers, not mistakenly impugn
capitalism and thereby lose sight of the most effective proven
way in history to improve the lives of our constituents.
Capitalism and successful business have, and will continue
to provide the greatest benefit to the needy and those of most
modest means.
I have a question in particular I think for Professor
Strand if I might. Would you agree that capitalism has been the
most successful economic system in the world's history for
reducing human suffering and making the world a better place?
Mr. STRAND. There has been no greater poverty alleviating
program in the history of humankind than the concept of
capitalism and the application of it. Absolutely. So I think
that it is imperative on us to ensure that this system broadly
defined as capitalism survives and thrives. And with that then
to recognize that capitalism is a very broad construct that can
be applied in different places in different ways, so let's go
about the pragmatic work of improving it to ensure that it
lives on.
Mr. BISHOP. And so if I could follow that up, Professor
Strand, is it not also the heart of capitalism that individual
decision-makers, individual entrepreneurs might subordinate
narrow or short-term profit hearing goals in order to maximize
profits in the longer term? For example, Henry Ford in 1914
massively increased, doubled, prevailing assembly line wages in
order to both produce a reliable workforce and create customers
for his mass-produced Model T. Is that not an example of what
capitalists may do, in fact, do every day, everywhere, every
hour?
Mr. STRAND. I think capitalism at its best is when the
capital owners behave as stewards. That is a long-term view. I
have some concerns about pressures in an American context on
short termism. And in my past experience in corporate America,
particularly when I was in investor relations, I felt at times
the owners had a more extractive view of their ownership role.
And I think we need good policy and mechanisms to ensure a
stewardship model.
Mr. BISHOP. Would you agree that the best way to do that is
to increase the ability of individual actors to make decisions,
or do you think they need to be compelled to make decisions by
government policy?
Mr. STRAND. I think we need smart policy. And within smart
policy framework, then individuals can maximize their own self-
interests and it benefits society.
Mr. BISHOP. I thank the Chairman, and I yield back.
Ms. HOULAHAN. Thank you.
I now recognize Representative Hagedorn for his 5 minutes.
Mr. HAGEDORN. Madam Chair, thank you for yielding. I
appreciate all the witnesses' testimony. I first off would like
to associate myself with the remarks of Representative Bishop.
I thought he was absolutely on point. That was just terrific.
And we will talk just a little bit about that in a second.
But first, Mr. McElwee. Do I have that right? Ms. McElwee.
Thank you for being here. Your mere presence today you can tell
has made a profound impact on this panel, on our Committee. And
Ranking Member Stauber, other members of the Committee, my
family and others have folk with special needs, and you being
here helps in a number of ways. And I just would say the most
basic fundamental way, you have demonstrated that every life
has value. And we appreciate you bringing your story to the
Committee and to explain to us how you have a small business
interest and how you are using that to help other people
realize that every life has value. So it is very important.
As an entrepreneur and a philanthropist, you are way ahead
of the game. You are ahead of about 97 percent of Americans who
have never had that luxury to be in that position. What do you
think is the future of your business? And then, also, have you
heard from some of the people, for instance, that you have sent
some of your wares to and back from the families? What has
their reaction been to your products and to your business line?
Ms. MCELWEE. You are deferring to me again?
We receive, well, Sean has his own social media accounts
and he gets pictures of the new babies wearing his baby
onesies. Even though Sean cannot pronounce onesies.
Mr. MCELWEE. It is onesies.
Ms. MCELWEE. He gets pictures of the adorable babies.
One of the goals of the letter that he sends, and the goal
of us being on the TV show Born This Way, our family being on
there, is to help parents move through the grief process of
having a child with Down syndrome quicker because, you know,
with lack of information at the beginning after they have
received a diagnosis, many people go into the grief process.
And our goal is to help them get to the point of acceptance
quicker so they can enjoy their babies and then help them with
their development from then.
So Sean has received quite a few letters from parents who
have received them, and the Down syndrome associations that he
has donated to have been very grateful.
Mr. MCELWEE. Thank you.
Mr. HAGEDORN. Thank you. I will be sure to try to log on
and like some of your social media sites and follow you from
now on. So I appreciate that.
So Mr. Strand, to kind of follow up, I wanted to talk with
you just a little bit about your testimony because I was
concerned that it was a bit of kind of a, you know, going
against capitalism and almost undercutting some of the things
that we have proven in the United States with our free
enterprise capitalist system that really there is no better
system. And when you look around the world, almost every
breakthrough technology, everything that helps improve the
standard of living way of life, where was it developed and
perfected? Right here in the United States. And it was through
our system of free enterprise that that was possible.
I mean, look at abundant, reliable, low-cost energy. That
is the United States. That is the stuff that we did. All the
things now where we are able to go find that energy and deliver
natural gas at historic low prices, abundance, that is all
because of our technology and what we have done here. And
transportation. The world thrives on that. Communications.
Agriculture. In my district, we lead the world in how to go out
and produce with higher yields and using even less land if we
had to. You can go on through the list. Medical devices,
medical therapies. You know, the world piggybacks on what the
United States does. We subsidize them in many ways and the rest
of the world steals our technology. China and Russia and
others. If it were not for the United States, which I would
subscribe that we have done more for the world than the world
has done for us, where would we be? And I think it is most all
because of our system of free enterprise capitalism that gives
people the incentive and allows the markets and individuals as
Mr. Bishop said to go out and work their magic. And that is a
lot better system than having a bunch of academics,
politicians, bureaucrats or whoever from the top down telling
us how to do it. That would be my position.
If you would like to respond, I am sorry, you only have 16
seconds. I do apologize. I did not do that on purpose.
Mr. STRAND. That is great, but America is not the only
place in the world that has practiced capitalism. So I look to
the Nordics and, I mean, the pacemaker was invented in the
Nordic region. You have got Spotify. You have got Skype and all
these other things. So they do quite well on the innovation
scale, and it is because of capitalism. But they have also put
in very smart policy and they recognize where do markets work
well and where do they not. And they have pragmatically, rather
than ideologically, pragmatically developed their version of
capitalism. And I think we can draw inspiration. Just like they
have drawn inspiration from America, I think that maybe we can
look outside of our walls also and draw inspiration from
elsewhere, too.
Mr. HAGEDORN. All right. Thank you for your testimony.
Ms. HOULAHAN. Thank you.
The gentlelady, Representative Radewagen is now recognized
for 5 minutes.
Mrs. RADEWAGEN. Thank you, Chairwoman.
And I want to welcome all of you here today. Special
welcome to Sean.
Let's see. So some may think CSR means only one
philanthropy or environmental sustainability, and some may
think companies do not do enough in all areas of CSR. How can
we recognize all efforts in a way that encourages people to
follow their conscience towards what is most needed?
Dr. Strand?
Mr. STRAND. You know, purpose is such a strong motivator.
And I think each and every one of us, we can connect on
purpose. And it might mean different things to different people
what that purpose is. But I think this is something that a
reason I welcome the Business Roundtable's expression is I
think it opens up the door for us to be able to actually talk
about things that historically were not allowed in the rough
and tumble sort of financially-oriented model of capitalism
that we have here in the States. And I think that purpose is
such a strong motivator, and I have the privilege to work with
these wonderful students every single day. They want to work
for firms that are purpose driven. They want to work for a firm
like yours that is so fundamentally oriented to purpose. So I
think that that is something that we need to encourage and
foster.
Mrs. RADEWAGEN. Mr. Arroyo?
Mr. ARROYO. Yeah, I would like to second that. I think
having a purpose-driven organization or small business is a
great way to make sure that, you know, we are not seeking
profit for profit's sake but a tool to allow us to solve
problems. And one of the things I do want to comment on is we
can think of capitalism and government almost as a mentor for a
lot of us; right? Setting guidelines for small business owners
to think about how can we do this better? And a lot of times
people, entrepreneurs enter the small business world with no
barriers or not understanding how they can do this better. So
we can provide that framework for them to do things in a good
way.
Mrs. RADEWAGEN. Ms. Wallace?
Ms. WALLACE. So, the majority of entrepreneurs are creating
businesses to solve their problems and the problems that are
meaningful to them that need to be solved. So, they are laser
focused on that aspect of it. But there is a greater framework
that ties into not just solving the problem but building a
business that is sustainable and long term. There are
resources. There is funding, of which there is a great lack of
when it comes to women and minorities, but there is also the
framework for success.
So, as the CEO of Ellevate, when we took our B Corp
assessment, we received our score and through that assessment
saw a number of ways in which we could improve our workforce
policies, our impact on the world. We made those improvements.
We saw not only an increase in our profits, but also an
increase in the retention of our employees, in their focus and
productivity, in their satisfaction with the business. So,
having the tools and the framework to not just solve the
problems that you care about but to do it successfully and
sustainably is a key aspect that I think is important to
cultivate.
Mrs. RADEWAGEN. Mr. Stanley?
Mr. STANLEY. I would echo what Ms. Wallace says. And I do
think that the B Corp movement is a significant asset in
building businesses that are governed well, that are
successful, and that are serving some kind of common good. It
is interesting with the assessment that has been referred to.
The assessment allows 200 points for businesses. And what
happens is you create a kind of virtual competition.
So Patagonia has been lauded by a number of people because
we have a score of 152, which is very high for a B Corp. But we
are looking at Dr. Bronner's Soap Company which has a score of
175 and wondering what we can do in order to improve our
practices to reach a level like that. And I think that that is
the kind of framework that would help a number of small
businesses be successful in all ways.
Mrs. RADEWAGEN. Thank you, Madam Chairwoman. I yield back
the balance of my time.
Ms. HOULAHAN. Thank you very much.
And I appreciate all the time that we have all taken out of
our schedules to be with us today. We have heard today that
there is a value generated by companies that is broader than
just financial return. They provide jobs, develop communities,
produce valuable goods that benefit consumers. For businesses
to act in a responsible way towards their employees, suppliers,
communities, and environments is not only the right thing to do
but it is good business as well. Small firms already know that
being socially and environmentally responsible by treating
customers and employees fairly leads to more sales, happier
employees, and a stronger Main Street. I look forward very much
to working with my colleagues on both sides of the aisle to
craft policy that encourages large and small businesses to see
the value of acting in a socially and environmentally
responsible way that benefits our society and economy.
I would ask unanimous consent that members have 5
legislative days to submit statements and supporting materials
for the record.
Without objection, so ordered.
And if there is no further business to come before the
Committee, we are adjourned. Thank you.
[Whereupon, at 12:46 p.m., the committee was adjourned.]
A P P E N D I X
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