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Stephen Badger: Balancing profit with creating value for society

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Via Financial Times

It was the early 1990s when Stephen Badger first folded his arms and tipped backwards, hoping that another member of the billionaire Mars family would catch him as he fell.

Some relatives were less sure about the trust-building exercise but he credits the now-regular gatherings with tightening the bonds between members of America’s third richest clan, strengthening their determination to keep their $35bn-a-year empire private for another century or more.

Privacy (the word he prefers to secrecy) was a hallmark of Mars since its foundation in 1911, playing into a Willy Wonka-like reputation for guarding the formulas of its confections. But “G4”, the fourth generation Mr Badger belongs to, has changed that, just as it has reshaped a 115,000-person company which now employs 40,000 veterinarians alongside the employees making M&M’s, Wrigley’s gum and Whiskas cat food.

Their reason for doing so points to the challenge Mr Badger has taken on: how to keep a family company private while having a louder voice on the public issues on which its long-term success depends.

The Mars chairmanship rotates around the branches of the family tree, and Mr Badger (son of Jackie, grandson of Forrest Sr, great-grandson of founder Frank) is near the end of his second three-year tour.

There is no Willy Wonka magic in Mars’ studiously anonymous headquarters building in Virginia, where its egalitarian ethos means that the chairman’s desk is no bigger than anybody else’s. (“Consumers shouldn’t have to pay for us to sit at a nice desk,” he explains.)

On the walls are reminders of the five guiding principles that his uncles, John and Forrest Jr, codified. “We need freedom to shape our future; we need profit to remain free,” the last of them reads, and by “free” Mars means avoiding all risk of needing outside shareholders.

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“It was not an easy discussion” for Mr Badger’s relatives to consider sacrificing their low profile, he says, but they faced two challenges.

The first was the need to attract talent. “People want to know who they’re coming to work for . . . What do they stand for?” he observes.

The second was that as Mars stepped up its efforts to make its business more sustainable, it realised that it could not tackle issues as big as climate change alone. It needed partners from business, government and academia “to move the world”.

Mr Badger came late to Mars. He had grown up enjoying his privileged access to the almond M&M’s in his grandfather’s crystal decanter and worked summer shifts in an M&M’s factory, but felt little pressure to join the family company.

Instead, he pursued organic farming and became president of an heirloom seeds company which eventually faced a need for capital.

Selling Seeds of Change to Mars was the logical choice, and converted him to the idea that it was through business that he could have a positive impact on the world. In his time at Mars he has overseen its response to the obesity crisis, ending its marketing to children under 12, and championed a $1bn pledge to slash Mars’ carbon footprint by 60 per cent in a generation.

But with many of these issues, “there’s no way that we can move the needle ourselves”, so Mars must persuade suppliers, competitors and governments that systemic change is needed.

Its tool for doing so is a theory of business that Mr Badger traces to a letter Forrest Sr wrote in 1947, which argued that the company’s sole purpose was to generate “a mutuality of benefits” for the consumers, staff, suppliers, distributors and communities on which it depends.

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“We believe we will only achieve the best results if we are unselfish in these relationships and give a fair return,” the company mantra now reads. Even at a moment when investors talk about putting social purpose before profits, it is an unusual corporate creed.

Mr Badger wants to make it more common, by turning the “economics of mutuality” model into nothing less than a new school of thought. Since 2007, its in-house think-tank has been looking at how to balance profit with creating value for society. Five years ago Mars enlisted Oxford university’s Saïd Business School to find a quantitative definition of mutuality.

Now, its chairman is looking to establish a management model for others to follow, by extracting the think-tank from Mars, putting it into a foundation in Switzerland, and inviting input from other business schools and companies.

“What we’re trying to do is to not make this the Mars version of capitalism 2.0 but to really unlock the secret sauce to this issue such that we can spread it throughout businesses around the world,” he says.

Why would someone whose forebears guarded their secrets so closely now give them away? “If all boats rise with the tide . . . our business is going to be better-off,” he replies.

Mr Badger’s generation has codified a purpose statement for Mars, which states: “The world we want tomorrow starts with the business we build today.” But talk of tomorrow invites questions about what Mars will look like when G5 and G6 are in charge. Mr Badger is already acutely aware of the difference between his generation and the one it succeeded.

“There’s a different dynamic in a cousin consortium than there is between three siblings,” he notes, and he knows there is no guarantee that his children’s children will be as committed to Mars. “There will always, in future generations, be someone who says, ‘I’d rather spend my money on this’.”

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But he sees his role as one of stewardship and says he has been “putting in place the guardrails for the sanctity of the business”. Those include simple steps like ensuring that spouses feel involved in Mars and more formal policies to ensure family members working for the company add value.

Can he share more details? “No, I’d hesitate to,” he responds: “I think it’s a private family matter.”

Three questions for Stephen Badger

What was your first leadership lesson?

I wasn’t ready to be the president of [Seeds of Change]. What I learnt very quickly was that while I might be president in title it didn’t mean I knew everything by any stretch of the imagination . . . and that being president was a title which really empowered me to make sure . . . that I was having the right conversations to gain the wisdom of the team in order to make the best decision.

Who is your leadership hero?

My grandfather. I would say so because of his values . . . Many of the products that we still sell today he invented, which is extraordinary, and he had vision; he really had a vision to build a business that would have a positive impact on the world.

If you weren’t doing this, what would you be doing?

I’ve been an organic farmer; I’ve briefly thought about being a musician [but] very quickly hung that up . . . I’ve made a film which premiered at Sundance [Muscle Shoals] . . . I’ve been fortunate to be able to pursue those things, really fortunate. I think where it’s left me is that if I weren’t sitting in the chairmanship role I would still want to be involved with Mars, even only as a family member, because I really have a deep belief that business has to be part of the solution to the world’s problems.

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