BEN & JERRY’S SUPER AUDIT CRUNCH

Organization’s annual reports typically consist of a combination of SEC filings

and glossy photographs. Numbers audits, footnotes, 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
maybe experiencing. Moreover, annual reports tend to focus on only one aspect
of the 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 DC-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 side 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 norm. Since 1988, Ben & Jerry’s has published two
types of bottom lines in its annual reports: 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 for 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 a co-founder Jerry Greenfield. “For
most businesses, their bottom line is just for profits, how much money is left over
at the end of the year. We said we’re going to have a two-part bottom line. We’ll
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 conduct of the review.

“It’s all in keeping with our two-part bottom line,” noted Mitch Curren, P. R. 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.
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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 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 farmers,
Moskowitz criticized 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 somewhat chafing, it did alert all of Ben & Jerry’s
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 because that is what they measure, commented
Greenfield. “We said, if we’re 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, executive 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 that does not
cover up its problems is apt to be admired by stockholders and consumers alike.

Still the inclusion of an uncensored social in an annual report is still a rare

practice. “It’s difficult for a company to allow that kind of criticism,” commented
Moskowitz. In his opinion, even Ben & Jerry’s has not yet demonstrated that it is
fully committed to public scrutiny. “The real test would come if Ben & Jerry’s had
a bad year, if sales were down or they had to significantly reduce their workforce”
Moskowitz speculated. “It’s a different game then.”
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Case Questions

1. Discuss what types of control process seems to be a part of the Ben & Jerry’s
way of doing business?
2. What are the benefits of Ben & Jerry’s method of control?
3. What are its drawbacks?
4. In what other types of companies would Ben & Jerry’s system work well?
5. In what types of companies would Ben & Jerry’s system not work well?