WK7: Blending TOMS & Groupon, an Interview

This week’s reading is on two seemingly unrelated topics that are actually both are relative to how companies chose to convey their integrity to both stakeholders and investors. The readings from Porter & Kramer and the Economist explain the perspectives and development of corporate social responsibility (CSR) while the readings from Allen and McLean focus on the corporate and investor foresights and reactions from the downfall of Enron. As a sum total, these readings highlight the need for corporations to strategize in two key ways: 

(1) keeping stakeholders social/political/environmental itineraries satisfied and 

(2) to characterize themselves as both financially trustworthy and a good citizen in order to successfully thrive in the current market.

Founder Chava Mercado

I had the pleasure to speak with entrepreneur, Chava Mercado, who is highly influenced by the company TOMS shoes (gives one pair of shoes for every pair purchased to a child in need) and Groupon (the origniators of the collective buying power model). Like TOMS, iRockweHelp blends CSR into its business model. Like Groupon, it depends on collective buying. iRockweHelp is a classic case of successfully “doing well by doing good”. Below are highlights from our interview.

1. Can you please describe how your company blends social responsibility into the business model?

iRockweHelp.com is a for-profit organization following a self-sustainable business model with giving as the core of its mission and values. iRockweHelp does NOT depend on donations and it is not a charity, however, iRockweHelp donates a portion of its sells to numerous non-profit organizations and charities. This means, that we do not rely on other people’s donations to grow our company, and we want people to purchase the product for what it is, knowing that their purchase will help the beneficiary organization for that particular month.  

2. Companies participate in CSR actions for different reasons. CSR can be divided into four justifications: moral obligation (e.g. “doing the right thing”), sustainability (e.g. “meeting present needs without compromising the future”), license to operate (e.g. keep stakeholders satisfied to mitigate potential problems; or “risk management”), and for reputation (e.g. improving company image). How would you describe which reason(s) concern your company?

I would consider it to be a combination of moral obligation and reputation. This company did not begin as a company, but more as a “word of mouth” effort between friends and family. It started a few months ago with a simple email explaining my idea to close friends and family….and now we have over 13,000 followers on Twitter.  I started iRockweHelp because it felt like the “right thing to do,” helping others in a collective way. As far as the reputation goes, I can honestly say that the giving aspect does improve our company image. And that is because people LIKE to give…it makes them feel good. When someone goes into our website and orders one of our iRocks, they know they are contributing to a good cause, and that makes them feel good, and it makes US look good also.

3. CSR is an expression that has been redefined by corporations in recent years because the terms have been deemed too narrow.  Some call it corporate social responsibility (http://csr.cisco.com), but others don’t call it social because their initiatives may not necessarily fall into one category so they use corporate responsibility (http://corporate.mattel.com/about-us/corporate-responsibility.aspx). Other umbrella terms used by corporation include: sustainability (http://www.toyota-global.com/sustainability/), accountability, and citizenship (http://www.ibm.com/ibm/responsibility/).
If you were to attempt to define your term, how would you define it? 

Our tagline is “Together We Can Do Much More!” …and it refers to the collective ability to help others. If we had to define a term for us, we would say Collective Social Responsibility.

4. Large scale corporations are being criticized for simply donating money because shareholders want to know that the money is being used well (after all, it’s their money to begin with). While your company donates money to a given cause, how can you show measurable outcome to shareholders (those that buy the rocks)?

iRockweHelp.com is designed to make it easy for anyone buying an iRock to know how much money is being donated to the non-profit organization. For every iRock purchased at $5, iRockweHelp donates at least 20% of that sell, or $1 per iRock sold. The main page shows how many iRocks have been purchased. So at the end of the month, the non-profit organization can simply go into our website, check how many iRocks have been sold, and expect a check for that amount from us. Simple. Clear. What the organization does with our funds, however, is up to them. This is one of the main reasons why we donate money to different charities. These organizations know best how to budget their money and where to best use it within their organization for the greater good.

5. Critics of CSR argue that if you profit from a social initiative, then it’s not CSR and the action is empty, or meaningless. How do you respond? 

Although in disagreement with those critics, iRockweHelp will not profit more than what it gives. That is, for every $1 earned, $1 is donated. Based on this model, the larger our organization gets the larger our donation will be. This means an even 50-50 profit-giving promise.  Our goal is to make $100,000 in 2013, and to donate $100,000 in 2013. Can you imagine the impact if all major companies split 50% of their profits and donate them to charity?

6.  After Enron collapsed and their scheme was transparent to the world, corporations had to act fast. The ethics of all the strong competitors were being questioned as deceptive and investors quickly turned a critical eye on the market. Alan Towers of TowerGroup made this statement regarding trust, “companies will have to earn it with behavior, communications, and leaders that inspire confidence”. How do you keep your company transparent in the eyes of stakeholders (those that invest and those that purchase)?

Our reputation will be in the hands of those non-profit organizations that we partner with. If we promise X amount of donation based on that month’s sales, and we do not deliver that exact amount, I am sure they will be the first ones to speak of our lack of ethics. We don’t want that. We want to HELP.

7. Wall Street investors Enron likened their financial strategies to the secret recipe of Coca-Cola and argued that it was pertinent to be confidential from shareholders. What’s your take on company transparency?

I believe our company is a lot simpler than Coca-Cola’s. We do not have much information to “hide.” However, there are some costs that we do not advertise, like the expenses of managing and building the website, the branding designer, and our contact and cost for our rocks. It’s pretty basic really, that’s why we believe it could make a big difference.

8. Enron made shareholders of all major companies uncomfortable. Some companies responded to Enron’s collapse as follows…

a. AIG opened an investor relations help desk – anyone could call with questions regarding AIG investor concerns.

b. GE said they are not Enron – they made a statement using Enron as a distancing example and discussed openly with investors how they are different.

c. Eli Lilly focused on articulation – if they could not clearly outline a given transaction to shareholders, they would not follow through with it.

What might you do if you were a large-scale corporate CEO to mitigate the fears of shareholders? 

I feel shareholders should know exactly how their money is being used, where it is going, and for what. Sometimes, however, shareholders will not agree with the CEO, and this is where things can get a little convoluted. I feel, as an investor and shareholder, that you should allow the CEO to run the company to the best of his/her abilities. If you are unsure of the CEO’s capabilities in running a company, then you probably shouldn’t invest in it.  

Please feel to keep up with them and/or contact them with any iquiries...
Facebook: www.facebook.com/iRockWeHelp
Twitter: @iRockweHelp 
Instagram: #iRockweHelp
Website: www.iRockweHelp.com