Three listeners to the January 28 web seminar I did with Tom Skazy of TerraCycle wrote in with questions we didn’t have time for. Here is the third question.
Q: Do you have any advice for Tom Skazy about how his company, TerraCycle, might avoid what happened to Ben & Jerry’s? Is that even a possibility for TerraCycle?
It’s always possible for founders to lose control of their companies. In fact, it’s inevitable. The two most important questions for Tom, when his day comes, will be: Is the transfer of power fair to all stakeholders? And,will the spirit of social activism that powered TerraCycle survive the sale?
Ben Cohen and most other members of the Ben & Jerry’s board of directors did not get what they wanted when they gave up control of their company. Their sale happened for several reasons, some of which were completely out of their control. It was such a traumatic episode that thirteen years after the sale happened, several board members choked up when they remembered it. But had the board not sold Ben & Jerry’s to Unilever, the company might not have survived. If it had survived, it would almost certainly have continued as a much smaller company. It probably would not have become a global brand or an international leader in corporate social responsibility.
As Ben Cohen was losing his company, he had the foresight to negotiate sale agreements that gave the social mission a good chance of surviving the sale. After the sale, board members eventually grew into their responsibilities and forced Unilever to live up to theirs. In 2014, the social mission is thriving. How long will that last? We’ll see.
I don’t know the details about TerraCycle, and I don’t know where Tom’s board of directors and other investors want to take the business. I do know that Tom is capable of acting quickly and decisively, as he did in 2009 when the business was facing a grave threat (he describes that episode here). He also has a big advantage over Ben & Jerry’s in that his company is privately held. This means it is less likely to be torn between maximizing value for shareholders and pursuing strategies that incur extra short-term costs in hopes of yielding long-term benefits, such as a social mission.
As TerraCycle grows and time goes by, it will have more and more shareholders because it uses stock options to compensate its 100 employees. But Tom has thought about that, too. He seems like a pretty smart guy.
The long-term challenges of running a mission-driven company remind me of the scene from Charlie Wilson’s War, where a CIA agent (played by the late Philip Seymour Hoffman) warns Congressman Charlie Wilson (Tom Hanks) about the long-term consequences of abandoning Afghanistan. I like the scene so much that I’ve put it at the top of this post.