On Christmas, we take a moment to discuss corporate philosophy.  Most studying and surveying the behavior of public companies agree that management should, as its core purpose, seek to maximize values for shareholders.  Assuming this as a given, does it mean that companies should be parsimonious with wages, indifferent on the environment (unless the law requires otherwise) or unaware of the social consequences of their behavior?   It would take a Scrooge to answer in the affirmative. 

From time to time, we will give examples of companies that somehow manage to be out front on these issues, but at the same time providing shareholders with a healthy return.  We mention first Chipotle, a burrito chain started right here in Denver, currently with 670 locations (compared with 32,000 for McDonalds).  Chipotle does not advertise on television; it does not franchise.  Yet theWSJ described the company as arguably "the country's most successful fast-food chain in recent years."  The benefits?  Shares have doubled over the past year, with same store sales growing at double digits.   

At the same time, Chipotle struggles to provide socially aware ingredients.  As the article notes:

• A quarter of the beans Chipotle serves are organic. It has started buying some locally grown peppers, onions and cilantro and serving dairy products from "pasture-raised cows," which it says have spent less time in confinement than cows on most large dairy farms.

See also Chipotle Form 10-K for 2006 ("We also are pursuing our vision of “Food With Integrity”—which to us means finding the best raw ingredients from the best sources, including naturally raised meats, where the animals are fed a vegetarian diet and not given antibiotics or hormones.").  Is this entirely a result of the clientele?  Apparently not.  The CEO reports that it is the company that cares more about where the ingredients come from than most of its customers do.  Perhaps.  But step inside a Chipotle and note the austere decor and the many references to the naturally produced meat or the organic food.  It is very much part of the dining experience. 

Chipotle, therefore, combines social activism with high profitability.  They can be done.  Moreover, there is every reason to expect that consumers will increasingly become interested in the source of the labor used to produce the goods, the greenhouse gas effect of the production process, and the availability of health care to employees.  Providing these things can be very good for business.

What does this have to do with corporate governance?  The company has a small board, seven people.  From the proxy statement, it appears that a majority have industry experience and are modestly paid.  The chairman and CEO are both young, in their early 40s.  We don't know what role the board played in the corporate strategy, but it must be a supportive one.  We do know that as the social conscious of consumers grows, boards with a progressive view point will help their companies become early adopters, benefiting disproportionately. Mirror image boards that meet seldom and rubber stamp existing wisdom are not likely to be the ones that accomplish this task.