At this week’s ComCap17 Conference in Monterey, CA, one of the sessions that I participated in dealt with the roles of financial, legal, and business professionals as it relates to community capital.
Our panel was moderated by my old friend, Michael Shuman, and we were joined by other professionals who provide technology (Amy Wan), platforms (Youngro Lee), regulatory oversight (Faith Anderson from the state of Washington), and a refreshing and much-needed approach to community investment advisory services, which Angela Barbash of Michigan’s Revalue Investing provides.
Revalue Investing is a great example of an advisor leading this movement of new professionals who are willing to work with individuals to help them understand the risks and rewards when contemplating local, unlisted investments in companies that the large advisors refuse to consider. Revalue overcomes the large advisors’ risk aversion and limitation of liability by deploying smart disclosure methods. They know that by remaining agile, nimble and sized-right for communities, they can navigate through those risks without laying down heavy-handed restrictive practices.
My contribution to the session was that for community capital to be successful, we need professionals to participate with a different mindset and approach compared to what otherwise happens in a globalized and anonymous hyper-capitalist system that has almost nothing in common with community capital. Today’s uber-financialized economy does, however, have one essential connection back to communities – it needs to plug in everywhere so that it can extract far more than it contributes. That is one of the essential ingredients behind the myth of shareholder primacy.
Many of today’s professionals like to boast about their ability to charge as high of fees as whatever the market will bear. And because that approach mirrors how their clients behave, there is a built-in circular support system that gives no outward thought to how their actions directly contribute to our accelerating global crises, including the depletion of essential resources, climate change and state failures.
One important antidote to this flat-world mentality is the work happening on the ground, in communities, all over the world. Work by people who understand the value of strengthening community bonds, and fostering the recognition that without each other’s support, we end up as weak as our weakest link in the community chain.
Successful community capital markets are going to require professionals to operate under a new paradigm, and businesses in turn need to self select out of the professional system that contributes to damages to their communities by utilizing those professionals that have committed to work for fair and reasonable wages. This new paradigm no longer tests the limits of what businesses can bear, but instead adopts a reformed service model that does not force those companies to have to pass on the higher costs to their customers, and their community.
With few exceptions, community support relies on its own members, not from those extracting wealth from the community and into the out-of-town bank accounts of a very small group of exceedingly wealthy families. That kind of extraction leaves in its wake an ever increasing income and wealth gap that multiplies the damages to the health and well-being of a community, and professionals who don’t work to counter this impact are in turn contributors to it, and partly responsible for the effects.
We need a new breed of professionals who come to work each day with a different kind of commitment, and a revised expectation of compensation. These professionals must help the rest of the community to understand that for a community capital market to thrive, we have to think about a different way of investing in ourselves, where “returns” and “exits” are not the primary reason to support businesses, and where people primacy takes the place of the old shareholder primacy myth. As Michael Shuman added, this may call for the adoption a professional’s fiduciary responsibility to the community itself, not just to any one client.
This kind of self-imposed fiduciary responsibility to the community would mean curtailing work that is at odds with the needs of the community. It would call on professionals to select out of providing services that contribute to the extraction, and to bring their fees into alignment with those that need their help. It would call on professionals to challenge the myths, like shareholder-primacy – myths that foster the continued support of the extractive economy, and to examine and build practices around a more fair and just society.
These approaches by no means require taking a vow of poverty. For professionals to be truly effective for their community, they should align their mission and their compensation with the same expectations as those community members they serve.
Doing well by doing good may not go as far as community needs it to go. Doing well enough and doing good may be more to the point.