10 years on: why I’m grateful for the financial crisis

Written by James Perry, on behalf of B Lab UK

Call me foolish, but I feel grateful for the financial crisis of 2008. COOK was 8 years old, at a vulnerable growth stage as the crisis broke. Looking back, the business we built — as well as the systemic economic problems we have identified — would not have happened without the crisis.

When the financial tables were flipped a decade ago, we started to think about what had led the world to this place. And the answer, pretty obviously, was that the overarching system was — and, honestly, still is — incorrectly designed. There is a fundamental misalignment between the interests of capital and the interests of society.

The policy response has been to use regulation to control the misalignments. Policymakers treat the misalignments as inevitable.

But they don’t have to be.

How We Got Here

Let me explain with a brief trip back to 2007–2008, when COOK’s financial journey began. When we were young entrepreneurs, we felt indestructible. We thought that our concept — to make healthy, delicious meals and deliver them as frozen meals to customers — made us geniuses. We were frustrated that the venture capitalists couldn’t see that (!), so we happily accepted the ease of borrowing money and getting credit at the time. We could get debt, taken out from the U.K. banking and insurance giant HBOS, to take the risk without selling any shares. What could possibly go wrong?

It didn’t take long to get an idea of all the potential things that could indeed go wrong. In December 2007, we nervously attended a meeting at HBOS (Halifax Bank of Scotland), just prior to signing our loan agreement, to confess that we were starting to miss our projections. The bankers had nothing to say and signed the documents. So we drew the cash, and within six months had breached our covenants.

In September 2008, when the financial crisis fully erupted, our sales went down 15 percent overnight and we were, for all intents and purposes, bust. We didn’t even bother calling the bankers, and within a month, they themselves were bust.

We threw everything we could overboard, got to know our balance sheet and all our creditors, begged shareholders for assets to use as security for subordinated debt (after using up all our own) and so on. We were in the trenches every day, doing just enough to stay alive until tomorrow. It forced us to grow up and get to know every line item on our balance sheet.

A year later, as we were getting back on our feet, HBOS woke up from its own crisis and came for us. After one unsuccessful meeting, we escaped what felt like two years of living in frantic town by refinancing our debt with a civilised, thoughtful and experienced high-net-worth individual who has provided all of our debt ever since — and who has been a joy to work with. We kept our heads down and focused on getting the business fundamentals right. And we reflected on our experiences.

What We’ve Learned

Now, 10 years on, people are questioning the misalignment between shareholders and society — or the stakeholders. The consequences of maximising the interests of shareholders (profit) at the cost of the stakeholders (namely, land and labour) are ever more visible. This misalignment sets business at odds with society, making it rational for business to exploit our environment, our communities and their own workers in order to maximise their profits. Dumping externalities on society is rational behaviour — even (some believe) a fiduciary responsibility.

The negative effects of this have become ever more evident with climate change, deteriorating ocean health, mass migration, political upheaval caused by widening wealth gaps, the hollowing of poor communities and so on.

We are convinced that COOK can create value for shareholders whilst also seeking to maximise the interests of all stakeholders. It is this conviction that in 2013 caused us to join the global and burgeoning Certified B Corporation movement, which now has nearly 3,000 other businesses that share this conviction. This is a movement that reboots business to operate for people and planet, as well as profit. And the movement was founded, by chance, in 2007.

So, to the financial crisis of 10 years ago, I say, “Thank you.” Without it, we probably would not have had the experience to succeed commercially. More importantly, it caused us to seek out and find a better operating system for business — and the $60 trillion of capital that it puts to work to shape our world and design our future.

It is incumbent on all business leaders, financiers and policymakers to learn this lesson and address this systemic flaw, as increasing numbers now are, so that we might avoid further crises (and associated human misery) and liberate business to fulfil its potential to build a shared and durable prosperity for all.

James Perry is co-founder and co-chairman of COOK, a Certified B Corporation, and a founding partner of Snowball LLP, a multi-asset impact investment manager. He is co-founder of B Lab UK and a member of B Lab’s Global Governance Council.

A first step for businesses interested in measuring their social and environmental impact is by using the free B Impact Assessment tool. Any company wishing to certify as a B Corp has its performance assessed by B Lab across all dimensions of its business. These companies are on a journey of continuous improvement to ensure business leverages its power to be a positive force in the world