Ben & Jerry Super audit crunch – A case

Organizations’ annual reports typically consist of a combination of SEC filings and glossy photographs. Numbers, audits, foot notes, and portraits of smiling executives all come together to produce an organization’s “best side”, then presented to stockholders as the actual status of the company. Failures, financial or otherwise are often sugar coated or ignored altogether. Promises of growth and improvements abound with little attention to troubles the company may be experiencing. Moreover, annual reports tend to focus on only one aspect of an organization’s well being; the financials. One of the problems is that annual reports only tell part of the story and they only talk to one audience – the financial community, noted Robert Rosen, president of Health Companies, a not-for- profit, Washington D C based group that strives to redefine how businesses are organized and run. Companies do not report how well they are doing in terms of managing the human capital of the business or whether they are building a health company.

Then there is Ben & Jerry’s Homemade, Inc., the Waterbury, Vermont based super premium ice cream maker renowned for its innovative and exceptionally tasty flavors such as “Chocolate Chip Cookie Dough” and “Cherry Garcia” (named after Jerry Garcia of the Grateful Dead). Ben & Jerry’s annual reports fall somewhere outside the norms. Since 1988, Ben & Jerry’s has published two types of bottom lines in its annual report: one financial the other social.

At Ben & Jerry’s management believes that a company should be evaluated not only on its financial performance but on its social performance as well. To be profitable or its shareholders and to be socially responsible, inside and outside the organization is an assertion boldly made in the company’s mission statement. “We decided that we wanted to measure our success by changing the definition of our bottom line,” explained co-founder Jerry Greenfield. For most businesses, their bottom line is just their profits, how much money is left over at the end of the year. We said we are going to have a two part bottom line. We will measure our success both by how we do financially and how we do with our social mission.

The Ben & Jerry’s social audit rates the company in areas such as employee benefits, plant safety ecology, community involvement, and customer service. In order to make sure that no stone is left unturned, the auditor, an outside expert not employed with Ben &Jerry’s, is given access to all employee and corporate documents during the conducting of the review.

It’s all in keeping with our two part bottom line, noted Mitch Curren, PR Info Queen at Ben & Jerry’s (yes, that is her real title). The findings of the audit, positive or negative, are then published unedited so as to guarantee complete candor.

As a result, Ben & Jerry’s annual reports tend toward brutal honesty. The 1992 social audit, for example, openly criticized the company for poor plant safety. At two plants, the number of injuries suffered had increased from 52 in 1991 to 75 in 1992. According to Paul Hawken, noted author and speaker on social responsibility and conductor of the 1992 audit, the number of days lost as a result of injuries or accidents during this period showed an 87% increase, far in excess of increased sales and production. Hawken also examined Ben & Jerry’s unique “7:1 (RATIO) salary ratio”, which prevented the highest paid employee from making more than 7 times the salary of the lowest paid employee. While Hawken admired the willingness of Ben &Jerry’s board of directors to set such a cap on executive salaries ($100,000 as of 1992), he pointed out that the policy left a number of key positions vacant since many qualified applicants were able to find much higher salaries elsewhere. All of these criticisms found their way into Ben & Jerry’s annual report, intact and unedited.

Even Ben & Jerry’s charitable efforts have been attacked in the social audits. One of the year’s [1991] unmitigated flops was the ‘Save the family Farm’ campaign, said Milton Moskowitz author of the social audit in Ben & Jerry’s 1991 annual report. Originally designed to rally support for independent framers, Moskowitz the campaign’s vague directives such as “write your Senators and Representatives to tell them to support a dairy program that provides farmers with a decent living. Moskowitz likened the “Save the family Farm” effort to “a drive for motherhood: everyone’s for it but what do you do about it? While this review was some what chafing, it did alert all of Ben & Jerry’ stakeholders to the presence of a problem in need of correction – a problem, like plant safety and the salary cap, that might have remained unnoticed and neglected had it not been for the published social audit. One reason business is so good at making money is because that is what they measure, commented Greenfield. Wes aid, if we are ever going to get our social mission to be an important thing to the company, we have to be able to measure it.

While many people might criticize the practice of publishing corporate failures for the world to see, Curren argues that accountability is important particularly in a business context. We try to be up front to show whether we’ve walked the talk, Curren asserted. According to Dixie Watterson executives vice president of The Investors relations Company in Northbrook, Illinois publicly acknowledging its own shortcomings also serves to enhance Ben & Jerry’s credibility. Investors may perceive such openness as something that sets the company apart from the pack, and a company that does not cover up its problems is apt to be admired by stockholders and consumers alike.