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Seth Goldman
Entrepreneur

Seth Goldman

Seth Goldman co-founded Honest Tea in 1998 with Barry Nalebuff, his professor at the Yale School of Management. The Bethesda, Md.-based company has been continuously recognized for its growth and business practices.

The biggest dollars

In response to this week's On Leadership question: In an era when business leaders are retooling their mission and methods to be more socially responsible, and social entrepreneurs are using market mechanisms to solve social problems, is corporate philanthropy still relevant?

Of course there's nothing wrong with charity, but the best way for companies to become good citizens is through the way they operate their business. Rather than focusing a small percentage of revenue toward philanthropy, companies should be examining the impact of their product and how they spend the bigger dollars.

Switching from Styrofoam to post-consumer waste might help a packaging company make a more meaningful contribution to sustainability than a token donation to a environmental non-profit. Investing in a local production facility or even a community bank could help support a local economy more effectively than a donation to a nearby jobs program.

At Honest Tea our largest expenditures are on payroll, bottles and ingredients, so even though we support several wonderful non-profits, our biggest impact comes from creating quality jobs with great benefits, finding ways to make our bottles lighter and with more recycled content and developing relationships with organic and fair-trade suppliers.

By Seth Goldman

 |  November 17, 2009; 6:50 AM ET
Category:  Corporate leadership Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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The business of business, to finish Cool Cal Coolidge's epigram on the business of America, is profits. It's not even market share. And Wall Street analysts crack the whip and the execs gallop on. Show them that contributing to non-profits makes money for the company, and they will probably donate, even if they are plundering the company at the same time (to which no Wall Street analyst will never object until the did is done and beyond repair). But you can't show them that doing a good job of running their businesses in an ethical manner will improve the bottom line, because it won't. Sometimes, Sir, you do better to preach to the choir: they at least will listen and even sing-along.

Posted by: morphex | November 19, 2009 12:59 AM
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Seth: Great short, and to the point, good advice article. I lost many jobs in the management area of charity organizations due to the fact I wanted quality for the 'customers' the agencies served. The staus quo never wanted to work or change. Lots of my former private clients complain about the work place being just demeaning. It has gotten very bad out there in the last 20 years.
I went into private practice and did very well. Your right to promote healthy work environments that are effective!

Keep up the good examplary work!

Posted by: crrobin | November 18, 2009 7:10 PM
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America Leader In Exports

The business plan of American companies to export American jobs overseas began in 2002 and over 2 millions jobs have now been exported.

No other country in the world comes close to our lead in this area of exporting.

With every job in America that involves sitting in an office and using a computer and a telephone as a candidate for export overseas, America will remain a leader for many years in this new area of exporting.

Nothing will stop this new American leadership and dominance in the global economy.

Posted by: bsallamack | November 18, 2009 6:47 PM
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Of course companies can do a few good works as part of their public relations effort. But the decision to spend serious amounts of money on charity belongs to private individuals. Public companies are supposed to be run in the interest of their shareholders and return profits to them. Neither the board of directors of a public company nor its executive leadership have any legitimate right to donate the shareholders profits to charity. Those running the company are doing well if they can do a good job of producing the goods and services that return a profit. Those individuals who share in that profit are the ones in a position to make the choice of donating some of their share to charity.

Posted by: dnjake | November 18, 2009 6:24 PM
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Every company is morally obligated to pay its employees--every one--a living wage. A LIVING WAGE. Not the minimum, and not a few dollars above the minimum, but a wage that allows the employee to live in decent housing in a safe neighborhood; purchase adequate health care and healthful good; have access to transportation; receive a solid education and educate his/her children; enjoy recreational activities (the arts, sports, etc.) and have vacation time each year. If companies were doing this, we wouldn't need so much so-called corporate philanthropy. Paying a living wage is good business; people can only spend money if they can earn it. We cannot remain a debtor nation where our economic growth is fueled by debt incurred by the underpaid and over-consuming. So let's hear it for a national jobs policy that calls for a LIVING WAGE for everyone. And let's be honest when we decide what a living wage is; can anyone really live in DC on less that $20-$25 an hour?

Posted by: farhorizons | November 18, 2009 6:19 PM
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I like Mr. Goldman's comments. It prompted me to think of the ills of society being loosely analogous to pollution and that it's typically more efficient to not pollute (run a company responsibly) than to clean up pollution after the fact (donate to charity). In practice, both prevention & remediation are necessary, but ideally there would be no need for the latter.

Posted by: wednai | November 18, 2009 6:18 PM
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The comments that Mr Goldman makes are mostly good but I think that social responsiblity still requires that a portion of profits should be given to non-profits. People do not realize that those who are not insured in terms of health insurance or do not have housing or other basic needs DO NEED the support and without the many corporate donations these people would go without and many social supports would breakdown. Many also do not realize that those who eat or work at fast food restaurants don't have health insurance but create the profits of the managers/owners and the stock holders who do have health insurance. Many of the homeless eat from convenience stores and fast food restaurants which both tax the foods they eat; but how much of those taxes do they receive in return in city, state or federal services? Tangent, sorry- anyhow, every company should have a social responsibiliy and give a portion of profits to non-profits.

Posted by: shopgrlz | November 18, 2009 5:46 PM
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IMHO Honest Tea brews their tea too strong. It has the slight bitterness of tea that was just overbrewed.

Otherwise they are doing a great job.

Posted by: khripin | November 18, 2009 5:19 PM
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Hey nitad1953

You probably don't like the tea because it doesn't contain corn syrup or contain massive amounts of sugar, sweeteners many Americans are used to consuming in mass quantities. Also, you should do your research before you just assume that Honest Tea's plastic bottles are pose health hazards. The plastic they use is BPA free and non-leaching.

Posted by: lmm72 | November 18, 2009 4:39 PM
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I don't understand how Honest Tea makes any money. The product tastes terrible (and I'm a big fan of unsweetened iced tea), does anyone actually buy this?

Something is strange here.

Posted by: june3 | November 18, 2009 4:34 PM
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So, Honest Tea uses glass bottles, as stated in the original posting. PolyBisphenols are not part of the equation with Honest Tea.
NO HFCS either. Pay attention! You're dissing based on incorrect information. Honest Tea is clean enough to sell in Natural Foods Stores, where they got their start. The only bad thing about Coke's new involvement (not parenting) is that the growth of the company has made it difficult for Natural Foods Stores to get in on the new distribution channels. A good company gets in influx of capital, where's the problem...?

Posted by: williamnaylor1 | November 18, 2009 4:21 PM
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spamsux1

Who are we to criticize him? We wont give a bum in the park a dollar. But we will pay five bucks for coffee. But its our choice right?

Posted by: ged0386 | November 18, 2009 3:15 PM
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Mr. Goldman,

Your Teas don't really have a pleasant taste. Not only that, why aren't you using American made glass bottles, which are far better than plastic ones. Glass is better, environmentally speaking. Are you using sugar or corn syrup? It's been a while since I drank that first and last tea of yours. Have you read about the BPA chemical in plastic which is tied to cancers. You and your co-founder are no better than the rest of the American companies that don't think about the health risks behind your products and containers. As the other commentator says, charitable contributions are about your bottom-line tax deductions.

Posted by: nitad1953 | November 18, 2009 2:37 PM
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If more companies invested more in their employees, through health care, education, family support, etc., maybe we wouldn't need so many charities to pick up the slack. Many companies are contributing to organizations in other countries or states while their own employees struggle to cover the basic necessities.

Posted by: mickiwg | November 18, 2009 2:29 PM
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Softdrink and water bottlers could do the world a great favor by conceiving a scheme to retrieve and recycle all the billions and billions of plastic containers their customers have discarded all over creation. If they offered $0.05 for every plastic container deposited, even if it meant raising the prices, they would clean up the planet and create work for perhaps millions of unemployed. Since there are several firms whose waste abounds everywhere, they could pool the funding. It would cost perhaps XX / share if unit sales fell.

Oh, but wait. We can't impair EPS. Better to force the employees to pony up more to United Way each year. Maybe some will also volunteer for periodic cleanup campaigns. Davos is also a nice place for CEOs to hobnob each year and do "good work."

Posted by: jkoch2 | November 18, 2009 2:26 PM
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maggots

Yes, the CEO of Honest Tea is the problem in our world. He wants to make his business more profitable instead of feeding all the starving poor people thus he has created the poverty problem or made it worse. You people can find something negative to say about anything. Just because the internet blog was invented does not mean it was invented to be your shrink. If you have issues regarding the world how about YOU doing something about it rather than sitting on your fat assssses and talking negatively about someone else.

Posted by: ged0386 | November 18, 2009 1:57 PM
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Seth, there are plenty of companies who create good jobs, follow responsible practices, and give to charity - why can't you?

Posted by: maggots | November 18, 2009 1:44 PM
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That's all we in the nonprofit sector need, less charitable giving on the part of supposedly "caring" corporations. We're struggling to feed and provide basic health care to the ranks of the newly unemployed as it is. Most of us are seeing a reduction in all types of giving and an increased demand for services. Thanks a lot for the vote of confidence, Seth.

Posted by: swmuva | November 18, 2009 1:09 PM
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These comments crack me up.

Apparently some of you live in a world where pure good is distinct and separate from absolute bad.

Last I checked, most everything is pretty mixed up.

The Schindlers of the world are sometimes Nazis.

The CocaColas of the world that create millions of jobs, base their products in corn syrup.

The gasoline that fuels our cars comes out of war zones where soldiers die, releases pollutants into that air, that at high enough levels, cause respiratory ailments.

I applaud anyone like the CEO of Honest Tea that attempts to do what's right in a complex, impossibly inter-related web of a world.

PS Your name is Goldman, you aren't by chance related to that Wall Street firm that heisted the 700B in taxpayer money.

Posted by: blindspots | November 18, 2009 12:58 PM
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individual, you don't get it, do you? Corporations donate as a way to help their bottom line - that's there sole motivation. For a paltry donation, they build good will towards their company while further publicizing their brand and building respect for it. It's free marketing.

Posted by: jrzwrld | November 18, 2009 12:53 PM
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The monies in a stock held corporation don't belong to the officers or the employees. Belongs to the shareholders. Therefore not one stock held corporation should donate one red cent to the most worthy charity in the world. Now any individual is free to donate all they want of their own monies to even the most unworthy charity. The wise investor supports honesty and penalizes the dishonest corporation who seems to use political correctness in their decision-making. By the way, the Church is the most worthy charity in the world.

Posted by: individual | November 18, 2009

#####################################

Speaking of "church", what did Jesus say on this topic:

...I tell you the truth, it is hard for a rich man to enter the kingdom of heaven. Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.

Jesus doesn't tell you go give to a church; He tells you to help the poor, whether you are a Pharasee, CEO, or stockholder.

Posted by: maggots | November 18, 2009 12:36 PM
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Seth Goldman is right. The only sad part about what he posted is that it's considered controversial -- what he said is so obviously correct that it should not have needed saying at all.

Posted by: sakeneko | November 18, 2009 12:31 PM
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Yes, please focus on making more money for your business. After all, the poor already have ecologically-sound workhouses to go to. Furthermore, if they die, it will only decrease the excess population and relieve stress on the environment.

Posted by: maggots | November 18, 2009 12:29 PM
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Actually, I think it's freaking hilarious. Honest tea's pitch has always been what you'd expect of Yale educated soft drink slingers. Savvy and annoying yet not too overbearing. But, this latest. It's like High Fructose pontification. Coke's got them jacked up on that cash. Spouting nonsense on the merits of Trickle Down charity.

Posted by: tb33 | November 18, 2009 11:52 AM
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What a self-serving bit of tripe.

Honest Tea is basically a subsidiary of Coca Cola and the sanctimonious Seth Goldman sits back and pronounces "Investing in a local production facility or even a community bank could help support a local economy more effectively than a donation to a nearby jobs program."

Yes, just like Coke invested $40 million in your company last year?

Posted by: spamsux1 | November 18, 2009 11:35 AM
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Charity begins at home. In my view, a real philanthropist is one who shares by way of paycheck or dividend with his/her company's workers, to the extent that they have a bit of money and energy to 'philanthropize' themselves - to take care of their own families, plus the neighbor or cause they care about.

Posted by: marie_reinsdorf | November 18, 2009 11:13 AM
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Hey MBinDC1 and TB33, just so's ya know... in 2008 the Coca-Cola Company purchased 40 percent of Honest Tea, but the company had been around for 10 years prior. It doesn't seem like buying a 40% share now makes Coca Cola the "parent company." Using the vast reach of a company like Coke to increase the scope of a business that really does try to conduct itself ethically isn't the worst thing ever. Would it be better if companies like Honest Tea remained small and allowed megalithic, less scrupulous companies to retain broader swaths of consumer revenue?

Posted by: mcbrideka | November 18, 2009 11:11 AM
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The monies in a stock held corporation don't belong to the officers or the employees. Belongs to the shareholders. Therefore not one stock held corporation should donate one red cent to the most worthy charity in the world. Now any individual is free to donate all they want of their own monies to even the most unworthy charity. The wise investor supports honesty and penalizes the dishonest corporation who seems to use political correctness in their decision-making. By the way, the Church is the most worthy charity in the world.

Posted by: individual | November 18, 2009 11:10 AM
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I wish the financial sector could hear you. Their corporate leaders are under the mistaken impression that it's okay to take 20-30% from customers off the contract on credit card and other short term financing agreements during an economic depression with 10-20% of the country unemployed and probably half the nation just getting by. All the while they pay themselves billions in salary and bonuses.

Just because you gambled away trillions in bad bets with your customers' capital does not justify your stealing from them now to make your books balance.

The unethical ruderless nature of today's corporate "leadership" in the financial sector may run us aground yet.

Posted by: secretscribe | November 18, 2009 11:07 AM
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Yes, we need more, better run soda companies like Coca Cola supersizing charity and smaller, deeply ethical companies like Honest Tea. Corn Syrup for All!

Posted by: tb33 | November 18, 2009 10:38 AM
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How does is Coca Cola, your new parent company, applying this advice?

Posted by: MBinDC1 | November 18, 2009 10:37 AM
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Reading this is so refreshing in more ways than one! Thank you for sharing. In the small ways I can promote this outlook and action, I will.

Posted by: bkshane | November 18, 2009 10:35 AM
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Seth, your comments are right on. Too bad there are not more corporate leaders with your common sense running companies.

Let's hope your advice is taken to heart.

Posted by: Girl1 | November 18, 2009 10:21 AM
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