← James Reed: all about business
James Reed: all about business
52. Karma Capitalism: Why Being a good business IS good business | James Reed, CBE
00:54:04
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- [00:00]
A
Welcome to All About Business with me, James Reed, the podcast that covers everything about business, management and leadership.
- [00:17]
B
For more than 60 years, Reid has been helping people find jobs they love. Giving back has always been baked into the company's DNA. Through their philanthropic arm, they give. They've helped raise over £360 million for thousands of UK charities. I'm Alex Day, managing director of Big Give, and today I'll be interviewing James Reid on his new book, Karma Capitalism. The book is about how companies and philanthropy can work hand in hand and why being a good business is good business. So, James, this is all about business with a difference. This episode. You're the guest. How does it feel to be on the other side of the table?
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A
Well, Alex, thank you for inviting me as a guest on your show. I'm getting used to the experience. It's a little odd being on the left side of the T. But I'm very much looking forward to this discussion, this conversation, and I'm really pleased that you have kindly offered to host.
- [01:04]
B
Not at all. And for your regular listeners, normal service will resume on the next episode. So fear not, James will be back in the hot seat next week. James, we're here to talk about your book, Karma Capitalism. Tell us about Karma Capitalism.
- [01:16]
A
Well, anyone watching will see that it's orange. I should describe the scene. And we're surrounded by copies of Karma Capitalism here in in the studio. And it's a small orange book that contains a big idea, Alex, and I hope it's a big idea that will catch on. And I hope a lot more people will become karma capitalists and a lot more companies will become Phil Codes or philanthropy companies. But I can explain more about that in a minute. So this book is part manifesto and part how to guide, but I believe it has the potential, these ideas or this simple idea really has the potential to improve capitalism and improve society all in one short book. How about that?
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B
That's pretty impressive. And I have to congratulate you on.
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A
Have you read the book, Alex? I'm pleased to hear that.
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B
Preparation, wasn't it?
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A
Yeah, yeah, you should have done.
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B
Took a few hours to read. And I agree that it's a small book with a big idea. And so tell us about what is the big idea.
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A
Well, Karma Capitalism is a sort of business philosophy. I suppose it is a. You could call it a new variant of capitalism, but in another way it's a very old version of capitalism that's very people centric and the way it's formulated in the book is simple because we have settled upon a definition of what we call a Filco or philanthropy company. And the definition that we've settled upon is that a philanthropy company is a company in which at least 10% of the shares are owned by a charitable foundation. So a charity owns at least 10%. It can be more than that, but it can't be less than that. So the charity owns 10% plus of the shares in that company. What does that do? Well, really interestingly, we discovered this by accident at Reid. It changes the DNA of the business. And, you know, in evolution, little changes in DNA in animals and life make really big differences. Well, that's what we've discovered this did in our business and in others like us, where charities have a percent of the shares. So I, I describe it. It's not a different way of doing business, it's a different way of being a business. So it really significantly changes the nature of the business, you know, gives it a bigger heart, I believe, and it makes it more fit for purpose.
- [03:39]
B
And there's some, I mean, there's some really powerful ideas in what you've just answered there. And I'm keen to unpack all of that, I guess to take a step back. What sort of led you to write this book? I mean, you start the book with a kind of 10 years ago story about a literal cliffhanger. And whether you knew it or not, that's very much part of this.
- [03:58]
A
Well, yeah, that's interesting. So the book begins with the introduction. It's called My Wake Up Fall. And it was literally that I was climbing with my son Harry a few years ago. The Matterhorn mountain in the Alps. The Matterhorn is that really beautiful one that looks like the Toblerone toe, bro. I stole it. But it's a beautiful, beautiful mountain on the borders of Italy and Switzerland. And I'd set my heart on climbing this mountain with my son Harry. I'd turned 50, he'd turned 18. This was a father son bonding trip and it went horribly wrong. So, you know, I've been to talks in the past where mountaineers talk about overcoming all these challenges and summiting some great peak like Everest. And they get a standing ovation from the attendees. Mine was nothing like that. It was a journey that ended in pain and fear and failure because we set off on this expedition and it snowed in September, wasn't meant to snow in September, but this meant that there was a covering of snow on the mountain over ice that had hardened all summer in the heat wave, and it made it really dangerous and really slippery. And I fell not once but twice. So I had two wake up falls. As it happened the first time I very nearly killed myself and the guide I was attached to by rope when I slipped down a traverse and was a meter from falling, you know, thousands of feet to my death. And I managed to stop with an ice ax which I laid upon and it acted as a break just before we would have gone off the cliff. And the second time, you're going to realize I'm not a very good mountain. I was abseiling, went too far with a rope and ended up the end of what's called a pendulum fall. So if you imagine 90 kilos at the end of a long rope swinging and dangling with a broken leg from a rope in plein air off the Matterhorn. And Stefan, my guide, couldn't see me because I'd gone around a corner on this pendulum fool. And I remember him shouting, he said, are you okay? And I thought, well, I'm still alive. So I said, yeah, I'm okay, but I've broken my leg. I said. And he said, how do you know you've broken your leg? And I said, because my foot's pointing in the wrong direction. Then I heard him go, oh, so. So then he managed to get a rope to be pulled me. So eventually I was pulled to a ledge, rejoined, reunited, my son Harry. And they called the air ambulance. And you're high on a mountain, it's quite interesting. The air ambulance comes, the helicopter, you can see it below you, slowly ascending, coming up, coming up, coming up. And I saw this helicopter come up and then it came up above me and I saw a figure coming out of the helicopter on a cable being lowered down. And when this figure landed right on the ledge next to me, she said, my name is Roberta. Do you want to speak Italian, French, German or English?
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B
Wow, that's service, isn't it?
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A
Oh, that was. I thought Roberta was an angel. I mean, I still do. And you know what? We found Roberta and she's got a copy of this book, her picture is in it. Shout out to Roberta, she's a superhero. And, and her Italian rescue crew, they were brilliant. So they basically saved my life, pulled me off the mountain. But what happened after that is where my wake up fall really occurred because I spent quite a lot of time in hospital and then in bed recovering from my injuries from this expedition. And it gave me a lot of time to think and I really became quite sort of settled upon the fact that I wanted to have more purpose in my life, especially as it was now the second half of my life and wanted to live more purposefully. And I also became quite settled on the fact that our company and the big give the charity that with which it was associated could do a lot more. So I found it, actually, it was. It was a big wake up fool, because I found it very energizing in the end. And I saw Stefan Gatt, my mountaineering friend, just the other day, and I actually said, you know, surprised me to say it. And he looked quite surprised. He said, I'm actually glad I had that accident because it made me think again about a lot of things. And one of the really obvious things is how interconnected we all are and how interdependent we all are and why, you know, it's really important to understand that because it's so easy to become preoccupied with oneself and think, I can do it all, but we can't.
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B
Yeah. And such a profound moment and as you describe it, a moment of failure.
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A
But I think I call it my double failure. Right. Because we didn't get to the top or the bottom.
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B
But I guess, I guess for all of your listeners, you know, this is all about business and there's probably a lesson there, isn't there for. For leaders of business, for people involved, that out of failure can come some quite sort of seminal moments.
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A
And as Alec Reed said on one of our earlier podcasts, you know, failure is a signpost.
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B
Yeah.
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A
It's a signpost. Suggesting you might choose another direction.
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B
Yeah, yeah.
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A
So it was literally in this case. But what prompted me to start the book with that story was not. I mean, it's a good story. It was, for me, it was a powerful moment in my life. But what prompted it was a question I was asked by a professor from Harvard Business School, Professor Lauren Cohen. He was visiting us recently and he asked me the question, what's the most defining moment of your career so far? What's the most defining moment? And I started thinking about lots of things and then I settled upon this because. And it was sort of unexpected. Didn't happen in the office, wasn't work related, but it changed everything.
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B
Yeah.
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A
And that's what prompted this. So the big part of the karma capitalist message is, you know, having a purpose driven enterprise.
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B
Yeah.
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A
Or, you know, I call it values led, purpose driven. And a big part of it is this ownership change in the DNA.
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B
Yeah.
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A
Because the other thing that happened, another accident or sort of unexpected turn of events, happened to my father 40 years ago when he was diagnosed with cancer at the age of 52. And given a 40 chance of surviving. Yeah, and he did survive. He's now 91. But that diagnosis made him think rather seriously about what he wanted to do.
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B
This is the genesis of the Reed becoming a Filco, Right?
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A
Exactly. So we became a Filco Reed. Our business, just to explain, has 18 of its shares in the charitable foundation. We became a Filker, really, by accident, because back in 1986, when my father was diagnosed with cancer, he. He had been working incredibly hard. Business was really tough, there'd been a recession, and my mother actually said, you should lighten your load and sell a company that he had at the time, which was a drugstore called Medicare. You should sell it because you're working all hours and it's making you ill. And they did sell it quite successfully. And it. He. He ended up making 5 million in cash from the sale. I think he owned 25 of it. But because he'd been diagnosed with terminal, well, potentially terminal cancer, 40 chance of survival, he thought, well, if I die, most of that money is going to go in death duty and tax or capital gains tax, so what else could I do with it that might be more constructive or productive? And he decided to put that into a charity. He gave the 5 million to a charity he'd set up sometime before Reed Charity. But then, interestingly, that charity bought the shares in the business because, coincidentally, a competing recruitment firm had built up a stake in our business. I think they might have thought at some point they might take it over, but then they'd lost interest and he was able to buy their stake. So he went in at more than 10% and he was able to. Then the charity was able to increase its stake. So that's how Reid became a Phil Code, when the founder, the charity that he had set up, bought shares in the company.
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B
So, James, very selfishly, I'd love to talk about the Big Give, because the Reid foundation has been a huge backer of Big Give. Tell us a bit more about sort of how it all works and what the impact has been.
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A
Well, thanks for asking, Alex. I mean, you say selfishly because you're the managing director of Big Give and you run it brilliantly. Big Give is a charity platform that matches donations made by members of the public to charities they want to give to. And it does that beautifully. It makes it very easy. So you timed how long it takes me to make a donation from Apple Pay to a Big Give appeal. It's less than 15 seconds I'm at now. So, you know, it's like a formula One pit stop. And so it's a really good way to give money and it gets multiplied. And I think you said it yourself, you know, generosity is contagious. So the Big Give is a wonderful way for charities to raise money for us to donate to charities because it gets multiple light up and it's contagious. It really works well. And the way social media works, you know, we're able to spread the word and really have quite successful appeals that, you know, the next one. And our most important appeal of the year, obviously, the Christmas challenge, we raised 45 million last year in a week. Be just wonderful to beat that this year. That's what I'm really hoping we can do. But how does that sit with Philco? Well, I like the marriage here between Philco Philanthropy Company and Phil Tech Philanthropy Technology, which is the Big Give. And because the Big Give gives an outlet for our donations that multiplies up their impact. So, you know, we make more than double the difference because we double double. So we get four or five times the impact by donating through Big Give. And the fact that Big Give is there should be positive news for anyone else thinking of being a. Becoming a Philco because they can channel their donations to good causes they want to support through that route. Right. Really successfully and achieve a multiple in terms of their impact. And, you know, a Philco could choose just a single charity they want to support.
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B
Yeah.
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A
And if they did it through Big Give, they would get much more impact.
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B
Yeah.
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A
Or they could choose a sort of selection. You could choose a theme. Maybe they want to support the environment or kids education or whatever it is. And that is a really powerful way of combining Philco with Philtech to. To really maximize our impact.
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B
Yeah.
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A
So it's amazing when you use these new technologies, how it really increases our reach both in. In business, but also in philanthropy. And that's what I love about the Big Give. I mean, it's worth mentioning that it only employs 10 people and it raises tens of millions of pounds every year. So it's a really efficient way of supporting charities, and it's well married to the philanthropy company movement.
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B
And you touched upon a theme there, which is around efficiency. Right. I guess that's a topic that lots of people are concerned about when they consider charities, is how efficiently are they using the money. Now, I know for the Reed foundation that owns 18% of the reed business, they obviously have a board of trustees that are not paid, but they don't employ any staff, they don't have any overhead themselves. And so you Know, the majority of the money, save for a few administration costs, is going to, to the Big Give and, and sort of giving money away. So, you know, Big Give is doing the due diligence on behalf of the Reed Foundation. How important is that for you as a trustee of the Reed foundation, that, you know?
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A
Well, I like the fact that I know the charities that are sort of on the Big Give have been sort of invited to participate through the Big Give, have been vetted. You know, you do due diligence and, and I think that's reassuring. And so I know there's a sort of quality standard that is, is acceptable and it's good to know that other people are auditing and doing a bit of due diligence as well. I mean, some of these charities are very well known to us and some are small and I think it's really important that the smaller, less well known ones get some oxygen, get some support. And so it's good that the Big Give does that because it makes it possible for them to raise money that they so badly need. And yeah, I'm really, I feel that it's a really efficient way of channeling our funds out into the community.
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B
Thank you. And thank you for the support.
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A
So we say it Reed, one day a week we work for charity.
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B
Right.
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A
And people like that. Yeah, people are engaged and unpack.
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B
What you mean by that, James?
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A
Well, 18, roughly 20% equivalent of one fifth of the business is owned by charity. Yeah, one fifth of the week if you work five days. One day a week you work charity. I mean, if it's Fridays, probably people putting 18% on Fridays, if they're doing well, maybe, I mean, I hope so, but yeah, I'd like to get it to 20% actually. So hopefully over time we'll increase that charitable shareholding. So it's actually 20%.
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B
Amazing. And you mentioned your father that I've had the great privilege of knowing and meeting Sir Alec and tell us about the sort of, I suppose the benefits that both you and he have seen and the rest of the business in terms of Reid becoming a Filco, what's that meant for you?
- [17:07]
A
Well, I suppose we were both fortunate enough to survive near death experiences in our early 50s and I think that probably changed us both. But the Filco journey has been, well, our business lives really for the last 40 years and it's something that I've become so sort of familiar with, it's almost hard to sort of separate it from not being a Phil Co. But the key point is that our company has A different DNA. And that means I think for customers it's more appealing, more for some types of customer. So customers who care about whether businesses are good businesses or bad, you know, are responsible in their communities and societies are drawn to us because of this.
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B
You get that feedback a lot.
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A
Yeah, I mean we, your customers say I like the fact that you're partly owned by charity and and so do our co members, people coming to work for the company. We hear it a lot from them too. So I suppose, you know, if there's a decision to be made, should I pick this company or that one, whether it's to work in or whether it's to be a customer, it can tip the balance in our favor. And you know, over time if lots and lots of those decisions are being made, it makes for a better business. So our business is super competitive. I mean some people think, oh charity, probably all a bit soft headed, you know, but it's not like that at all. Charity is a shareholder. The business is run like a commercial enterprise and it's super competitive. Yeah. And you can see that interestingly with other Philcos because there are other companies around the world.
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B
Yeah. It's keen to ask you about those.
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A
Also Philcos and is interesting researching the book, how I've learned more about them. But you know, fabulous businesses, I'm talking sort of companies like Ikea, Lego, Carlsberg, Maersk, Novo Nordisk. Fabulous companies that are really market leaders in their own areas. They're all Philcos. And you know what, they lasted for years. I mean some of these Companies are nearly 200 years old and so they have much longer trajectories often than regular businesses and they're much less sort of vulnerable to sort of capture by private equity.
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B
And do you think, I mean I was surprised looking at that list how many of these well known brands are actually Phil codes. Do you think it's a story that they tell well enough?
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A
Well, part of the. What a big part of my motivation for writing this book was to get this message across was to share the philosophy of karma capitalism. The way I think about it, karma capitalism's the philosophy but the Filco Philanthropy company is the vehicle that delivers it.
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B
Yeah.
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A
So we need more Filcos for sure. Yeah, I mean they're good companies to work for, they're good corporate citizens, they pay a lot of tax and they deliver good goods and services. So we need more Filcos. And I think the, the idea is not well known. So a big reason for my putting pen to paper was to make this idea Better known. Right. And I hope, you know, I hope this book. If just one company. Just one company becomes a Phil Co as a result of this effort, for me, that will be worthwhile.
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B
Yeah.
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A
Because I know that the consequences of that decision are huge.
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B
Yeah.
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A
I know that, you know, the benefits that can accrue through the charity, you know, spinning off funds to all sorts of good causes.
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B
Yeah.
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A
Is massive.
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B
Yeah.
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A
Because I can see that from our own business. So just one company becomes a Phil Code. That's good. But if lots do. Yeah, that would be incredible.
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B
Yeah, yeah.
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A
And it would make a huge difference.
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B
Yeah.
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A
You know, I get up every morning early and listen to the radio. Morning after morning. There are people on the radio saying there's some problem, they need the government to spend more money on it. The government doesn't have any more money.
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B
Yeah, yeah.
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A
And business has shed loads of money. I mean, it's got cash up to its ears. A lot of businesses. If businesses were all set up as field codes, there'd be huge amounts of money coming out into society, in the environment, all the causes that people care about, and there'd be a huge amount of social entrepreneurs who are able to take dynamic action to make stuff happen. Stuff isn't happening at the moment. Society is all knotted up and people are fed up. So this would unleash a whole lot of energy that could be deployed usefully in all sorts of good energy capital.
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B
Right.
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A
Yeah. Real energy. Yeah. Money that makes stuff happen. But I don't mean just money. I mean the money and the desire and the will to do things. Because a lot of these charities that we've supported over the years are run by really great local social entrepreneurs. So this would give them.
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B
Yeah.
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A
The means to do more work.
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B
And one of the key themes that came out for me in the book James was around, longevity. And I just wonder if you could sort of speak to that a little bit. You've sort of. You've mentioned about your research of a lot of the.
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A
Well, I know. I know a lot of entrepreneurs, so, you know, and I love talking to them. Every entrepreneur who's come and sat in the seat I'm now sitting in has shared an idea that I thought, well, that's interesting, I'm going to go and try that or deploy that. So I think a lot of entrepreneurs, they build a business and then they. They get to a point where they wonder what to do next and. And some of them become family businesses, some of them don't, some of them get sold. I. I've met a Lot of entrepreneurs have a sort of remorse around selling the company they started because I think they feel a sort of real attachment. It's like one of their children almost that, that they feel a seller's remorse and they're sad because they've seen, you know, the new owners maybe take it in a direction they don't particularly like or mess it up or, you know, there's a lot of examples, some of them are in the book. But if they're a philanthropy company or set themselves up as a philanthropy company, they and potentially the next generation and, or their workforce are fully engaged going into the future because they've got the benefits that the philanthropy company brings to the wider society. So that gives the entrepreneur that does this a legacy.
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B
So, James, one thing I've, I've folded down the page here. One thing that really struck me in the book was this line. One study found that the probability of companies with this structure that is being a filco surviving more than 40 years is 30% compared with just 10% for other firms. Is that something that really stood out to you?
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A
Well, yes, because if you, if you analyze that, it means that a Filco is three times as likely to last 40 years than a non Filco. So if a business founder or leader is trying to build a business for the long term, that suggests that Filco status is a really good way to go. The other interesting, there's a graph in the book that shows you that Phil Co's over significant period of time, including the pandemic, have been more profitable than non Filcos. So they last longer and they make more money. And if you multiply years by profit, that's a big difference. So three times as likely to last to 40 and much more likely to make more money. So it's a really good business model, in short. So another question that the wonderful professor Lauren Cohen from Harvard Business School asked me, he said if I mention the names Carnegie and Rockefeller fella, what do you think? And I said to him, well, they're great philanthropists. He said that's interesting because at the time when they were active, they were known as robber barons. You know, these were ruthless business people in America who were making a lot of money and later in their careers, I don't know what happened, but they decided they should probably give quite a lot of it back. And that's what they remember for now. And you know, Bill Gates, amazing entrepreneur, Microsoft, the wealthiest company I think on the planet right now. But I think Bill Gates will be remembered for what he's done with this foundation and the work that it's done, you know, eradicating malaria, for instance. So for these really dynamic entrepreneurs who are building businesses, this gives them a route to a really long lasting legacy. And it also means their businesses carry on successfully for a lot longer, it seems.
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B
Right.
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A
There were some great books written when I was earlier in my career that I read zealously. You know, one was called Built to Last, another was called In Search of Excellence, another was called Good to Great. These are really good business books. And they were all looking for the sort of holy grail of what is it that makes a company successful? What is it that makes a leader effective? How can we make our businesses, you know, really spot on and, and fit for the future? And then when I, I got all these, and then McKinsey did a sort of analysis of the companies featured and, and said there was only a 52 to 48 chance that they would do better. And several of them have gone bust or been taken over. And, and then when I was researching for Karma Capitalism, these Filco companies I was looking at, I suddenly noticed they're really old, they've lasted a long time. They've actually achieved the longevity that In Search of Excellence and Built to Last were aspiring to.
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B
Yeah.
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A
So in a way, by looking from the other side, let's find some old companies. What characteristics do they share? Well, one really important one I would suggest is their Filcos.
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B
Yeah.
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A
They have a different DNA.
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B
Yeah.
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A
Like people who live a long time, the lucky ones have good DNA.
- [26:45]
B
Yeah, yeah, yeah.
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A
Same with businesses.
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B
Yeah, that's really interesting. And you, I mean, you mentioned legacy there and obviously you've talked about the accident that you had. You had time out. You obviously speak to a lot of business leaders. Do you think legacy is a topic that sort of entrepreneurs, business leaders are thinking about?
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A
Well, they told me they are.
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B
Yeah.
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A
Yeah. I mean, I think if you, if you've worked all your life, I mean, I mean, do you just want to be a rich person or do you want to do something a bit more interesting? I would challenge them. I mean, my father uses the term financial obesity. He says he would like to relieve people of this problem by helping them make donations through Big Give and other charity platforms. Well, yeah, I mean, financial obesity doesn't sound very attractive and I can't really see the point of just accumulating more and more money.
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B
Yeah.
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A
When you could be doing something much more interesting and be much more engaged and change the world in a good way.
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B
I mean, what do you hope Your legacy will be my legacy.
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A
Well, if, if, if I could write the future, I'd like to see lots and lots of companies becoming field codes and karma capitalism being the new form of capitalism. That sounds like a big ask.
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B
Yeah.
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A
And it kind of is, but I don't think socialism works.
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B
Yeah.
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A
I don't think hyper capitalism works. I don't think the way capitalism is working at the moment is attractive, appealing or. Right. So we need to find a new way.
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B
Yeah.
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A
So if I have a legacy at all, I'd like it to be this.
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B
Yeah.
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A
That karma capitalism is considered a better way of doing business and a better way of organizing society than what we currently have.
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B
Well, one of those business books you mentioned talks about big, hairy, audacious goals. And that's a big, hairy, audacious goal, isn't it?
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A
I guess so, Alex, and I know you like them because you set them for big give. The wonderful charity that you run, you've got to get to a billion by 2030. I don't want you to be distracted from that. Yeah, absolutely.
- [28:32]
B
You've talked, James, about other Phil Codes and other examples of Phil Codes, both in. In Europe and there's some in the UK as well. Is there one that you can sort of pick out that you sort of have really admired through your research that's doing things a little bit well recently?
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A
I mean, we. We had him as a guest. Phil Colligan.
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B
Yeah.
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A
Raspberry PI.
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B
Yeah.
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A
Tell us about that brilliant company that started making computers for the price of a textbook so kids who couldn't normally afford computers could access them. This was a company that began, Was founded by charity and floated recently on the London Stock Exchange at a valuation of a billion.
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B
Wow.
- [29:07]
A
And the. The charities now work? You know, I think they sold half the shares or a bit more, and charity's got a huge enough amount of equity in the company still, and it's a fabulous business. And so some people think, oh, is this just something a family can do? A private company? This is a quoted company, you know. Another one is the Western Family abf. Brilliant business. They run all sorts of companies. You know, there are lots of brands like Primark that people are familiar with. Yeah, they, they've. They're predominantly owned by charity and. And they do huge amounts of good stuff. So, yeah, these are, these are. But in the scheme of things, a relatively small number of organizations that have a disproportionate impact.
- [29:52]
B
Yeah.
- [29:53]
A
I mean, really. So if more organizations were persuaded to take this route, to become karma capitalists, the impact Would be huge.
- [30:02]
B
Yeah, absolutely. And so for, for people listening, they feel the energy, they love the idea. They've read the book, they're in. How does.
- [30:09]
A
They haven't read the book yet. It hasn't come out. Well, they've got to read the book. Yeah, please read the book. I just want people to be aware of the idea, really. I, I, so I'd urge people. The great thing about this book is it's not very long. It's written for business people. It's not very long. It's got pictures, Alex, it's got pull out quotes. You could read the book in 10 minutes if you really just wanted to get the key ideas. And there's going to be an audio book as well. So people who want to listen to it when they commute, you know, they can do that too. That will come out shortly. So it's not hard to access. Yeah, but that's, I wanted to make it something that people would absorb, think about and ideally go and do something about.
- [30:47]
B
But I'm keen to. I guess you've won the argument. Right. With a business person, they're keen to do it. Unpack. How, how does a business become a Philco?
- [30:55]
A
Well, that's the second half of the book.
- [30:56]
B
Yeah.
- [30:57]
A
So we've gone from manifesto to sort of guide, I suppose, how to guide. There are a number of different ways of doing it. I suppose the most basic commitment an owner would have to make is to pass 10% of the shares minimum to charity.
- [31:14]
B
Yeah.
- [31:15]
A
It could be a charity they create or it could be another, an existing charity actually, if they didn't mind doing that, if it was something they felt aligned with. But you would create a charity and that charity would become a shareholder.
- [31:28]
B
Okay.
- [31:29]
A
And, and they should get advice from lawyers who know about this, about the best route so that they don't trip up over some unnecessary tax charge.
- [31:38]
B
Yeah.
- [31:39]
A
Because there shouldn't be.
- [31:40]
B
Yeah.
- [31:40]
A
If you do it right. And then when they've got the charity set up, they need to find trustees for that charity. The charity is obviously independent of the business. So the trustees of the charity are not paid by the business. They have no obligations to the business. Their obligation is to the charity. And the charity would have certain goals and objectives. They can decide, you know, the person who initially sets it up.
- [32:03]
B
Yeah.
- [32:04]
A
So it might be broader, it might be narrow, might be related to what the business does or something entirely different.
- [32:08]
B
How does that work for Reid?
- [32:09]
A
The Reid foundation owns 18% of REIT and it has independent and family trustees. And the RE Foundation Receives dividends in a good year when the company does well, and then it decides the trustees how it's going to allocate the money. The RE foundation has decided that it likes to donate money through Big Give. That's for full disclosure, the organization that you run, Alex. But the great thing about Big Give is we get our donations multiplied up through the match funding mechanism that operates. So if the Reed foundation puts money in as a champion for the Big Give, it calculates it gets five times its money through the way that operates. So if we want to give a million to charity, the obvious way to do it is through big gears.
- [33:02]
B
Yeah, yeah.
- [33:03]
A
Because it becomes five. So that's our preference.
- [33:06]
B
And that's a message we hear a lot, isn't it, from other philanthropists and funders as well.
- [33:10]
A
Yeah. I'd like, I'd like more people to be aware of that though, because I think, you know, if Big Give is going to continue to grow and make a bigger impact, I mean, it's already grown quite a lot. We need more big champions.
- [33:21]
B
Yeah, yeah. And one thing I love about the book, James, is that it's. It's littered with examples of sort of from the cold face stories from charity partners that Reed foundation has. Has funded. I guess maybe this is a bit like asking you to pick one of your favorite six children, but is there, is there a sort of charity or cause that really, you know, you feel proud that the Reed foundation is supporting and making?
- [33:44]
A
Well, when my children say, who's your favorite dad? I always say you. So whoever's in the room. So it has to be Big Give, Alex, as you're in the room, thank you. So that's my favorite charity. Multiplies it up. That's genuine and I think it does amazing things. I think the great thing about karma capitalism is that it enables all sorts of different organizations, a huge diversity of organization that do all sorts of wonderful work to flourish. And we've just run a campaign for women and girls. It's very successfully raised over 2 million. And it's interesting looking at the different charities, they do services that I wouldn't have known existed often. And that's really useful and valuable. So I love the diversity it brings.
- [34:36]
B
James, this Filco idea, is this for any business? Is there examples of where becoming a Filco wouldn't work?
- [34:43]
A
Potentially, it's for every business, there are certain probably times in a business life or cycle where it might be not ideal. And it's a problem in America because the law in America doesn't permit fill Code structures currently it used to, and it, I think should do, but I'm not in a position, not in a position to change the law in America. If I was, I would. So there are very few field codes in America. In fact, the only one I can think of is Patagonia. And that only works because the founder, he gave him 100 of the shares to charity. So it's fully owned by two charitable trusts, which made it work in America. But I think the problem there is having a proportion. So I think, yeah, I mean, if. If I was starting a new business now, I'd set it up as a Filco. Reed is a Filco. I want to increase the charity holding the 20 from 18. And I would urge people to look at this actively because, you know, I'm not a. I'm. I've got a book in front of me, but it's not my business writing books.
- [35:55]
B
Right.
- [35:56]
A
And, you know, I'm on a podcast, not my business, doing media. I'm a business person and I run a company. That's what I do all day. And I've been doing that for years and years and years. And I've realized over that period of time that this works, that this has given us a sort of competitive superpower that I really value. And I suppose I'm getting to the sort of later stages of my career, so I don't mind sharing it now. I wouldn't want to share it too. So. But, you know, I don't mind sharing it now. So other companies can do the same because it's so invigorating being a Phil Coin. It's so inspiring for people in the organization and outside of it. And I find it really rewarding, you know, so I go to business events and often someone will come up and say, oh, thanks very much, your charity supported X, Y. I haven't done anything apart from run the business as best I can, which is my job. And some of the benefit of that is going off to the charity. You know, if the charity wasn't a shareholder and other individuals were, I probably wouldn't hear a dicky bird.
- [37:04]
B
Yeah.
- [37:04]
A
But as it. As it is, as it is, I get a lot more feedback that is rewarding for me. So we were a quoted company years ago and I used to joke, you know, if the share price went up, it was because the shareholder was clever when they bought it and the share price went down. It was my fault. And it kind of was like that. But with this, the benefit is ongoing and consistent.
- [37:28]
B
Absolutely. And one of the one of the sections in the book, James, is called a burning platform and it's talking about sort of capitalism in crisis. Is, is, is capitalism broken in your opinion?
- [37:38]
A
Yeah, in many ways I think it is. I, I think that too much power is, is congregated in too few companies. There are now, you see huge companies that have a lot of power and too few people are super rich. You know, wealth is very unevenly distributed. It doesn't feel like that's a sustainable situation. You know, inequality, you know, when you look at the sort of ratios of CEO pay to the rest of the workforce, it's exploded since the 1960s. It doesn't feel like a sustainable model, it doesn't feel fair. And when you see the levels of poverty that exist in developed economies, that's just not right. So the, the capitalism seems to have accumulated more and more money to the capital at the expense of labor and land. And that it needs to, needs an adjustment. And this is an adjustment.
- [38:39]
B
Yeah. And capitalism has I guess tried to answer that question with esg, which you reference in the book. Tell us your thoughts on that.
- [38:48]
A
So esg, environment, social governance has become a big deal over the last 20 years or so. I mean, brutally, I don't think it changes very much. I think it's become a bit of a box ticking exercise. Yeah. We know from our own business when we bid for contracts, we have to meet certain ESG requirements. Sometimes you have to pay consultancies or to get on some framework. And then after we've been appointed, no one at the client company ever asks about it again. Yeah, I think ESG is probably well intentioned, but I feel it's had run its course. I mean, it's been called woke capitalism. My book's called Karma Capitalism. It's a different variant.
- [39:29]
B
Yeah, yeah.
- [39:30]
A
And I want that to be really clear. This is not about esg. Yeah, I think it's a bit of a delusion. You know, we hear about green washing, blue washing, pink washing, whitewashing, it's used a lot. So one of the exercises we did when we were doing the research, I'm always sort of looking up businesses because I'm interested in them. I'm curious about how well they're doing, whether they're growing or shrinking. So I look up the accounts, which you can do here in the UK on Companies House. It's great service. I look up companies a lot and I've noticed over the years that the income statement, you think you look up at companies account, the income statements, like the page. Most people I Think want to look at maybe the balance sheet, two pages of numbers. Now these companies have hundreds of pages. So I did a little exercise and it's in the book. How many pages does it take before you get to the income statement? You have to read through this sort of really turgid stuff about carbon emissions and esg and eventually you get to the income statement which tells you what the business is actually doing. And we talk about hundreds of pages. So that, that, that sort of statement, I remember written by one, read by no one really comes to mind. Yeah, so we put a little list of the companies that, you know, had the most pages before the income statement in the book. You had to buy the book to find out. Yeah, yeah, it's interesting. I mean, it's really quite interesting.
- [40:53]
B
And I guess, I mean having, you know, this, this podcast is a year old now, I believe. And I think one of the, from listening to you interview your guests, a topic that's often comes out is around authenticity in business. And I guess this is an authentic answer to being a purpose driven business. Right. Like esg, as you said, can be a sort of tick box exercise. This is about fundamentally changing the DNA of your, your company. And if you change your DNA, you can't hide that, that's an authentic change.
- [41:24]
A
Well, what is true for sure is if a founder or found a founding family become a Filco, they've given up 10 of the shares in that business too. So that is a real economic change. I mean, that's not a tick box. Right. Real value being put into a different bucket. So that's the first thing I'd say. The second though is those that do that say it was really worth it as an investment because the business has flourished subsequently and they've had that back many times over. So it's quite interesting. It might look like a charitable gesture, but it's also a commercial gesture.
- [42:02]
B
Yeah, yeah.
- [42:03]
A
Because commercially it was good for them.
- [42:05]
B
Yeah.
- [42:05]
A
You know, Alec Reed says this himself in a little section at the end of the book. That was his experience.
- [42:11]
B
Yeah.
- [42:11]
A
So, yeah. Changes the DNA of the company materially. And the other thing I like about it is because it's about the shareholding, you know, the, the fact that 18 of the shares are in the Reed foundation, you know, if I cease being the chief executive and some other person comes in and has different priorities, they can't change that.
- [42:33]
B
Yeah. It's in perpetuities.
- [42:35]
A
Whereas if, if someone came in and they didn't like my sort of environmental preferences or whatever.
- [42:39]
B
Right.
- [42:40]
A
With esg they could. So it's sort of someone has to buy you out basically if you're gonna, if you're gonna change it. And so that makes it much more robust.
- [42:51]
B
And you, I mean you've been in the re business now over 30 years, is that right?
- [42:55]
A
Yeah, it's all my life. I've been in the reef business one way or another. As a kid I used to go with my dad to the office. So. Yeah. And you? I'm married to the. I'm a lifer, Alex.
- [43:04]
B
I won't tell. You almost said you're married to the business. I won't tell Nicola.
- [43:08]
A
I'm sort of married to it in a way, but I'm also married to Nicholas. Thank you.
- [43:13]
B
I guess you've obviously seen some highs and lows, I can imagine in, in that time, in your 30 years of working at Reid. I mean, could you point to sort of Philco making a. Being a Philco making a sort of tangible difference during that, that time was.
- [43:29]
A
Yeah, more than 30 years. I, I've been the CEO for nearly 30 years and in the book, the about the author section kindly describes me as battle hardened Alex. So, yeah, so I've been around. Yeah, I've seen some battles and I suppose thinking back, you know, I was thinking about this, you know, the, the pandemic was obviously one, the financial crisis was another, the dot com crash was another, 911 was another, the early 90s was another. And so we have these knocks periodically. Even now it's what I call a jobs drought. It's quite a tough environment. So we have these knocks and you have good years and you have bad years. The Filco status or the fact that we are a Filco, I think steals us for this and it makes certainly me acutely aware that, you know, we're going to be around in the future. It's, you know, we want to be relevant, we want to be engaged in our market, we want to be a leader in the market in the the future. So it does a couple of things. It makes us continue to invest in research, development, innovation, it makes us very focused on that. But it also makes us very determined to continue to get through it, to sort of not give up. And I think that really helps us because, you know, it is tough in business. You know, it's not easy and lots of days are pretty challenging. So to have that in mind, to know that in the end the work that we do is for the good, is really helpful. Just to have it in the back of one's mind. I feel I don't have any issues with commitment. You know, I'm fully, fully committed because I know that the work we do as a business and as a Phil Co is really positive. You know, our purpose at Reed is improving lives through work. Just four simple words. And every day, every one of us can do something at work to improve someone's life in some small way. Even if it's just make them laugh or make them a cup of tea. But it might be much bigger than that. Helping someone transition in their career or learn a new skill or move on in life in an important way. And this is all tied up in, in what we do. So I host at Christmas time lunches for people who've been with the company 10, 20, you know, 30 years long service lunches. And I always ask them, you know, why have you hung around so long? We go around the table and so many people say because of the work we do, the difference we make and the fact that we're a Filco. And so I think it's ultimately about motivation and engagement and it's so really, really important and helpful and it makes a big difference. So I contrast that with a private equity situation and I can trust in the book, you know, if, if I was a private equity company and I bought Reed, I would behave differently. You know, I would strip out the cash probably, you know, where we've got freeholds, I'd probably sell them and lease back, take a lot of money out, put debt in and it'd be a really different business which would feel very different to people working in it. And that is the difference between being a Filco and being a company that's going to be flipped every five years, I think. Yeah, and some private equity companies do a good job and improve the businesses but they're much more likely to go bust if it's a private equity run business than if it's a Filco.
- [46:52]
B
And I mean Reid is a sort of family run business and many field codes, there's a sort of, I would say a correlation between family owned companies and, and Philcos in that it sort of tends to I suppose be drawn out by entrepreneurs, business owners who are thinking about the sort of next generation and what that looks like. I guess what you have described is kind of sustaining that sort of the values that you have as a family, as you say, by changing the DNA of the, the business.
- [47:20]
A
Well, I think it does appear that the, the sort of profile of a lot of Filcos is founder led or founding family because they have to they have to make the commitment of passing the shares into the foundation. So, you know, it has to. Whoever controls the shares determines whether it's going to be a philanthropy company or not. And I suppose families have more leeway than a large disparate group of shareholders because the ownership's more concentrated, typically, so they can make these sort of decisions. It's interesting to me, you know, here in the uk, family businesses are quite challenged by the change that was announced in the last budget to business Property relief, where, you know, now they're going to have to pay 20% inheritance tax when shares are transferred from one generation to the next. And for a lot of families, that's really challenging because they might not have the liquidity to do that. How are you going to do that now? Are you going to invest and grow your business with that sort of burden on. On it? And this is a new and very significant change. But one route, one silver lining here for those sort of families in that situation is they could give those shares to a charity and become a Phil Co and maintain family control because they might be thinking, oh, we'd have to sell our, our business to, to pay the tax, but if they gave the shares, they wouldn't have to pay the tax and they could become a Philco, which would be good for their family business in the long run for all the reasons I've been talking about. So there is a silver lining here. So I'm hoping that this tax change, which, as you can imagine, I didn't particularly welcome, I'm hoping that it might lead to a lot more businesses considering becoming field codes and a lot more families seeing benefit in that. Right. So, you know, it's interesting how some things have unintended consequences that could be a really good consequence of that change.
- [49:19]
B
Never waste a good crisis, right?
- [49:20]
A
Indeed.
- [49:22]
B
So, James, for those businesses, for those business leaders, for those business owners that want to make this change, that want to become a Philco, where can they go for help?
- [49:31]
A
Well, we're trying to create a community of companies that are Filcos and we're trying to create a community that encourages others to join it. So, I mean, we've already created online destination. A website is called philcode.org uk so go and have a look there. There's a lot of advice and signposts there for how to. How to progress things. We've worked with a law firm called Bates Wells, have been incredibly supportive and helpful to this agenda and they have done some initial work on how to help companies transition to become Phil Cos they can give helpful advice, they know what they're talking about because they've been studying and, and developing these ideas for some time. And the book contains quite a lot more information and a list of other organizations that can be helpful, useful to people who are thinking of starting on this journey. I mean it does take a little bit of time, it does take care and consideration but it's really, really worthwhile and I think hopefully wouldn't take you more than a year or so to become a Phil Co if that's what you determine you really want to do.
- [50:46]
B
So we're coming into land now. Jameson's probably final question from me is, you know this is obviously amazing, a book that you've put a lot of time, energy, effort into, into writing. What's your sort of one message that you want people to, to take away from this book?
- [51:01]
A
Well, the karma capitalism works that being a Phil Co is a, is a good thing. Now not everyone has a business so a lot of, but a lot of us work in businesses. So trying to sort of take that message out to our organizations and trying to make more people consider whether this is the route they want to go strategically in business is what I'm hoping to achieve and I'd like to see a lot more companies become philos. I don't expect that to happen overnight. I mean this is going to happen over a period of time but the arguments are there, the stars are aligned. I think it will happen. Yeah because it works great.
- [51:45]
B
Well we're looking forward to seeing lots more karma capitalism karma capitalists pop up across the country and Europe.
- [51:52]
A
Yeah, I don't know how you spot them Alex, but probably wearing a bright.
- [51:55]
B
Orange T shirt or something.
- [51:56]
A
Yeah, I've got an orange jacket.
- [51:58]
B
So James, you ask all of your guests two questions at the end of each interviews and I'm afraid you don't get away scot free. We're going to ask you those two questions and these are all sort of from your, your book, why you. So James, what, what gets you up on a, on a Monday morning?
- [52:14]
A
That's a really good question Alex. I wish I thought of that. That's a really good question. Good karma gets me up on Monday morning and no, I love my job. I really enjoy the people I work with. I really look forward to getting on with my day and I don't hang around. I mean I want to get up and get going and right now I want to spread the word on karma capitalism and Phil Co. So this is my sort of mission to get the message out and that's what's getting me up. And I hope to have lots of opportunities to do that and to spread the word and encourage others to become Philcos.
- [52:52]
B
Right, and final question, where do you see yourself in five years time?
- [52:57]
A
Well, following the theme, I'm hoping to achieve nirvana, Alex. So what does that look like in Phil code terms? Yeah, well, I don't know what a filco. What the collective noun for Phil codes should be. I think you joke Phil Kai or something like that. But I hope there'll be a flotilla at least of Phil co's heading forward and I really want to be a part of it.
- [53:21]
B
Great. Well, thanks for being interviewed. Thanks for allowing me to interview you, James, and I wish you good karma.
- [53:27]
A
Thank you, Alex, and you too. All the very best. I've enjoyed the conversation. I'm looking forward to getting back into that soon.
- [53:37]
B
Thanks so much, James, for letting me interview you and for everything you do to make our philanthropic work possible. If you don't like to learn more about karma, capitalism, Reid or the big give, you'll find all the links in the show notes. I'm not James Reid and this has been all about business. Thanks for listening and he looks forward to seeing you next time.