Conscious Capitalism: Giving All Stakeholders a Seat at the Table

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Wharton’s Katherine Klein talks to Vital Farms investor Karl Khoury and CEO Russell Diez-Canseco about how stakeholders benefit from the ethical pursuit of profit.

Karl Khoury and Russell Diez-Canseco were on separate journeys to bring more meaning to their personal and professional lives when their paths crossed in 2014. Now, the two businessmen are linked by the common goal of conscious capitalism.

Khoury is co-founder and partner at Arborview Capital, a Maryland-based environmental impact investment firm, and Diez-Canseco is president and CEO at Vital Farms, an ethical food company producing egg and butter products from a network of more than 200 family farms. Arborview Capital is an investor in Vital Farms, and Khoury sits on the board of directors.

“This isn’t about eggs and butter. This is about an operating system and an ethos,” Diez-Canseco said about Vital Farms. “We are wired to operate differently. We have different outcomes for all stakeholders than other companies that produce the commodities that we happen to produce.”

Khoury and Diez-Canseco spoke with Katherine Klein, vice dean for the Wharton Social Impact Initiative, during a recent episode of the Dollars and Change podcast. (Listen to the podcast at the top of this page; find more episodes here.)

Both had considerable success in following traditional paths after business school and were far down the career road when they decided something was missing. In 2008, Khoury partnered with Wharton alum Joe Lipscomb to create Arborview and invest exclusively in companies that are helping to build a more sustainable economy.

“I saw this as an opportunity to democratize better food in this country, and I was really inspired to be a part of that.” –Russell Diez-Canseco

“We believe that fundamentally there is a theme, a macro theme, towards consumers, businesses, governments, and institutions spending their dollars differently in a way that is promoting resource efficiency and sustainability,” Khoury said.

In 2013, Diez-Canseco wanted to make a career choice that would help him become a better father and role model to his young son. While living in Austin, Texas, he learned about Vital Farms’ founder Matt O’Hayer, who was gaining visibility for disrupting the factor-farm industry to bring sustainable food to the marketplace. Diez-Canseco was immediately attracted to the idea of providing high-quality, ethically-produced food at scale. He reached out to Matt and joined the team.

“I saw this as an opportunity to democratize better food in this country, and I was really inspired to be a part of that,” he said.

Vital Farms is a Certified B Corporation and Public Benefit Corporation. It raised $200 million in capital during its IPO earlier this year.

“Without question, Vital is probably one of the most genuine and authentic stories when it comes to conscious capitalism,” Khoury said. “It permeates through the entire organization top to bottom.”

Seeing Demand

Khoury believes good governance is the same for conventional businesses as it is for those following a stakeholder model, and there are plenty of the same challenges. But there is an important difference for businesses that keep an eye on the long-term prize of public benefit.

“When you look out for all of your stakeholders, you are reducing risks in the supply chain and the employee base in ways that make the company more resilient and ultimately more profitable and stronger in the long run,” he said.

That was the message Vital Farms took on the road for its IPO, and the investors responded favorably, according to Diez-Canseco.

Prior to Vital Farms’ IPO, Beyond Meat, a maker of popular plant-based meat substitutes, went public in 2019, demonstrating that capital opportunities for companies in the sustainable food space are on the rise. “I think what Russell and the management team at Vital Farms saw was that there is demand in the marketplace right now, and there just aren’t enough companies that are public benefit corporations that actually can become a pipeline for these investors,” Khoury said.

“The lessons that I have learned from this company … make me a better board member, a better father and a better person.” –Karl Khoury

In addition to being committed to changing the future of food production, Vital Farms also holds a deep commitment to its employees, who are referred to as “crew members.” The company encourages all crew members to examine its Profit and Loss statements and other financial information. It also pays a minimum wage that is at least 25% above the standard living wage in Springfield, Missouri, where Vital Farms’ egg washing and packing facility is located, Diez-Canseco said.

“We will have hired you for some specific attributes that we believe lend themselves to operating with stakeholders in mind, including being humble, having an ownership mindset, having a growth mindset and having very strong empathy,” he said. “[Those are] four critical elements of being able to work in service of others as opposed to in service of yourself.”

He spoke fondly of one employee who was able to rise from egg packer to a leadership position in shipping and receiving. The employee recently purchased his first home with the help of a $5,000 gift that O’Hayer gave every team member during the IPO as a token of appreciation.

“These are personal stories that really get me out of bed in the morning,” Diez-Canseco said.

Khoury’s inspiration comes from his three daughters, who love to cook with Vital Farms products. He said he’s proud that the message of sustainability, ethics and fairness are “embedded” in his family.

“Unlike any other business that I’ve invested in over my 25-year career, the lessons that I have learned from this company, and the decisions that I’ve made with their help and as a member of this board, make me a better board member, a better father and a better person,” he said.

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