Berrett-Koehler: Connecting People and Ideas to Make a Company that Works for All

A Multistakeholder Ownership Design Protects Company Values

By Sarah Stranahan

Berrett-Koehler Publishers (BK), an Oakland, California -based independent publisher, created a Constitution in 2016 that begins with the words, “We are embarked together on a journey to do the seemingly impossible — to create a world that works for all. No road map exists for this journey, so we are drawing one as we go, marker-by-marker.” BK, which has four publishing programs — BK Life, which focuses on helping individuals align their actions with their values and aspirations; BK Business, which focuses on organizations; BK Currents, which focuses on society; and BK Professional, which focuses on serving the information needs of selected professional fields — has indeed been making it up as it goes along. Over 27 years, the company has evolved a form of multi-stakeholder enterprise design uniquely capable of stewarding the firm’s social and environmental mission. As part of its sustainability series, Fifty by Fifty spoke with Steve Piersanti, the president of Berrett-Koehler, to learn more about the company’s journey.

The Origin Story

Berrett-Koehler has dared to be different in many ways, beginning with its origin. In 1989 when Steve Piersanti was a top leader of Jossey-Bass Publishers in San Francisco, the founder sold the company to international media mogul Robert Maxwell, who had just acquired Macmillan Publishers. Jossey-Bass became a division of Macmillan, with Piersanti as CEO.

Two years after the sale, Piersanti received a call from corporate headquarters in New York saying that all Macmillan units had to reduce their staff by 10 percent. Jossey-Bass had just finished a record-breaking year with profits up 46 percent, was growing rapidly, and had previously received approval to add needed employees. Piersanti refused to comply. He explained to his corporate superiors why laying off eight employees as demanded would harm the company and its staff, but he was soon fired for his refusal. After receiving a flood of support from authors, suppliers, and employees who urged him to start a new company, Piersanti started a new publishing enterprise, Berrett-Koehler.

Multi-Stakeholder Ownership Design
“My vision from day one was to create a company that valued all of its stakeholders,” said Piersanti. “With the traditional ownership model, nothing mattered except the decree from the corporate owner. Without adding any real value, one stakeholder was calling all the shots.”

Piersanti was familiar with multi-stakeholder design from his experience publishing business and management titles. Although few companies had ever fully incorporated these principles into ownership, governance, and culture, Piersanti decided to build the company from its inception around a multi-stakeholder design.

“My vision from day one was to create a company that valued all of its stakeholders. With the traditional ownership model, nothing mattered except the decree from the corporate owner. Without adding any real value, one stakeholder was calling all the shots.”

He says, “The first thing you do is figure out who your stakeholders are.” For BK, this included authors, employees, customers, service providers, sales partners, suppliers, investors, and community representatives. The company has held a number of multi-stakeholder strategic planning sessions over the years to bring all these groups together.

“We got them in the same room to hammer out our mission and our values — stewardship, quality, partnership, inclusion, and sustainability — our signposts for what we mean by ‘a world that works for all’ and our guides for how to get there,” said Piersanti. Today, all of these stakeholder groups are among the owners of BK and are represented on the board. Employees are also included in all levels of decision making through an open-book management style.

“From the beginning our multi-stakeholder model included ownership,” Piersanti explained. “In 1996 we created an ESOP, which has grown to own approximately 12 percent of the company.” In 2005, BK conducted a direct public offering of stock, which allows small businesses to solicit investment directly from individuals without an intermediary or a public trading platform. Berrett-Koehler expanded its ownership to other stakeholders, especially customers, by offering them a minimum investment of $800. Today BK — which has 33 employees and $10 million in annual revenues — has 230 shareholders, with ownership divided among authors, employees, customers, sales partners, suppliers, and other stakeholders. A 10 percent ownership share is held by the Berret­­t-Koehler Foundation, which was added in 2012 to broaden BK’s community connections, especially its impact in supporting emerging leaders, and to ensure the “independence and continuity of BK’s mission.”

Berrett-Koehler aims to respect and nurture all of its stakeholders through such means as its unique Bill of Rights for authors. BK’s publication agreement gives authors more decision-making power over their work than standard publishing contracts. As Piersanti put it, “We don’t lock our authors into bringing their next book to us through ‘first option’ clauses. We know that if we do a good job helping them, they will come back to us.”

Sustainability Practices Integral to Mission
BK was the second book publisher to become a certified B Corporation, and in 2015 they became the first book publisher to become both a B Corp and a benefit corporation. (B Corporations are certified by a nonprofit group; benefit corporations adopt an incorporation framework in state law. Both models are about embedding commitment to public benefit in company governance.) “Becoming a benefit corporation provides legal grounding for key elements of BK’s mission, values, goals, stakeholder focus, and innovative practices,” said Piersanti. “BK’s Articles of Incorporation now include BK’s mission and values as ‘specific public benefits’ to which BK is legally committed.”

Those values include environmental sustainability, which is essential to “a world that works for all.” BK has worked closely with its printers to offer sustainably sourced paper for printing its books. And BK has reduced its use of paper by being an early e-book publisher as well as being aggressive in expanding digital distribution and audio publishing.

“BK tries to procure materials like paper from responsible suppliers,” explained Piersanti, but he acknowledged that finding and keeping sustainable suppliers has been difficult. “There was a sustainable paper company we learned about at Social Venture Network. We lobbied our printers hard to start using them, but it turned out they faltered in filling the orders.” Berrett-Koehler also did a lot of business with Edwards Brothers Malloy, an Ann Arbor-based printing company that had an employee-driven zero landfill recycling program and other environmentally friendly practices, but that company recently folded.

Enterprise Design Lessons

The publishing business has been through multiple disruptive shocks during BK’s short life. The rising cost of paper, the shift by consumers to digital formats, and the consolidation of distributors have driven many independent publishers out of business. But BK’s multi-stakeholder model has proven resilient and adaptive. A quick comparison of BK to Piersanti’s original firm, Jossey-Bass, illustrates the difference BK’s ownership mission and values have made. While BK worked to preserve and protect its mission, Jossey-Bass has been passed from owner to owner like a hot potato. In 1989 Maxwell bought Jossey-Bass and placed it under the management of Macmillan; in 1994, Jossey-Bass was acquired by Paramount and became a unit of Simon & Schuster; in 1998, Simon & Schuster sold Jossey-Bass to Pearson PLC; in 1999, John Wiley & Sons, Inc., announced their agreement to purchase Jossey-Bass from Pearson. Finally, in recent years, Wiley has closed down or consolidated many of the operations of Jossey-Bass, thereby eliminating many of its valuable dimensions.

Berrett-Koehler’s independence, integrity, and ability to pursue and preserve a clear mission have been protected by an ownership structure that includes of all of its stakeholders, and by innovative moral leadership that connects people and ideas to make a company that works for all.

Sarah Stranahan is senior editorial associate at The Democracy Collaborative and a leading member of its Fifty by Fifty employee ownership team.

Fifty by Fifty is working to transform the U.S. economy by growing employee ownership. Join our campaign, and we’ll send our monthly newsletter, filled with great company stories, right to your inbox.

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Working to grow employee ownership in the U.S. to 50 million by 2050. Learn more at http://fiftybyfifty.org and http://medium.com/fifty-by-fifty