As this week’s reading notes state, Patagonia gives us the opportunity to examine a company that made a formal adoption of the stakeholder theory of the firm as Patagonia operates as both a B-Corp and benefit corporation.
The former, B-Corp, is a certification, like fair trade or organic. The latter requires, benefit corporation, a change to a company’s charter to allow a company to consider non-financial interests and all stakeholders, as opposed to the traditional corporate charter, which prioritizes shareholders. The change is legal in 36 states. I added links for info about both in the postscript should you have an interest in more info. In the news this past year, we’ve seen activist investors, whose intent includes insisting that organizations recognize their needs as stakeholders (and in the case of EXXON, to recognize the environment as a stakeholder on its own). Such investors also a ask boards to consider business from the stakeholder view, rather than just the shareholder view of the firm, a tough path without changing a corporate charter.
1. What effects, negative and positive, do the founder’s activism have on Patagonia and its strategy? How might these affect revenues? (2 pages)
2. Patagonia shares elements of its Product Lifecycle initiative (PLI) with other organizations in other industries and its own. Is this helpful or harmful? What effect(s) might doing so have on strategy? (1 Page)
3. Do you think a differentiation model based on environmentalism, such as Patagonia’s is sustainable in the long term (five years of more)? Why or why not? Can including environmental sustainability in business strategy improve competitive advantage? (1 Page)
4. How might Patagonia’s business model be different if it were a publicly-held entity? (1 Page)