Skip to navigationSkip to content

The New Purpose of Companies

There’s a world beyond shareholder returns, and forward-thinking business leaders are figuring out how to navigate it.

Henri Campeã for Quartz
WIDE AWAKE

The origins of La Colombe CEO Todd Carmichael’s social consciousness

By Sarah Todd

Todd Carmichael wanted to give some of his money away. The problem was that the people in charge weren’t letting him.

This summer, the 56-year-old millionaire, who serves as co-founder and CEO of the Philadelphia-based coffee roaster and retailer La Colombe, heard that a school district in northeastern Pennsylvania was telling parents that their kids could be put in foster care if they failed to pay off their children’s school lunch bill. So Carmichael offered to wipe out the debt by paying more than $22,000 to the district himself.

Much to his surprise, the president of the school board, Joseph Mazur, said no. It was the families’ responsibility to pay, after all, and Mazur said he thought most of them could afford it. It was the principle of the thing.

That kind of logic was familiar to Carmichael, who’d grown up poor, raised by a single mother along with his three sisters in eastern Washington state. His mother worked as a cocktail waitress and trucking dispatcher; he received free school lunches as a kid himself. He knew how quick some people can be to moralize financial struggles; that the cruel flip side to America’s rags-to-riches mythology is that it urges us to judge anyone who’s suffering, under the logic that people who fall behind on mortgages and car payments and school lunch bills are simply too lazy or too stupid and irresponsible to improve their lots.

“The concept is, if you’re wealthy, God smiles on you, and if you fail that, then you are something that is lower than someone else,” says Carmichael. It’s a convenient way to think, provided you’re doing well. And it’s always made Carmichael angry.

So he wrote an op-ed in the Wilkes-Barre, Pennsylvania, daily newspaper, condemning Mazur for trying to shame families over their debt. He went on the radio, telling NPR’s Morning Edition: “This really isn’t about the money. I think it’s about teaching people who are struggling some sort of moral lesson that they need to learn, no matter what the consequences are.” As the story gained national attention, resulting in plenty of public backlash, the school board reversed its decision: Fine, they would take his money, thanks.

Carmichael’s fight over school lunches has a lot in common with the plot of one of his favorite books when he was a teenager, God Bless You, Mr. Rosewater. Kurt Vonnegut’s 1965 novel is about a millionaire named Eliot Rosewater who decides he wants to help people and moves to a small town in Indiana. There, he becomes a volunteer firefighter, opens up a crisis hotline, temporarily gets sent to a mental institution, and ultimately gives away all his wealth.

Rosewater is trying to be a good person, but his social conscience is puzzling to a lot of the other characters in the book, who don’t expect millionaires to care about other people. It was puzzling to Carmichael when he was in high school, too.

“That really impacted me because I was poor kid when reading it,” he recalls. “I couldn’t understand why a rich guy would behave that way.”  

What does make a millionaire behave like Rosewater—or like Carmichael, for that matter? In the past few years, the La Colombe chief has emerged among a new class of activist CEOs—outspoken types like Salesforce chairman and co-CEO Marc Benioff or Patagonia president and CEO Rose Marcario, who are speaking up about inequality in America and broadcasting their progressive stances on a variety of economic, environmental, and social issues.

Beyond the lunch episode, Carmichael has made headlines as one of a handful of CEOs to criticize the 2017 corporate tax cuts championed by US president Donald Trump, characterizing the new tax rates on MSNBC as a “stimulation package that will be stimulating the stimulated,” with the benefits unlikely to trickle down to other Americans. He penned an op-ed in the Philadelphia Inquirer in favor of a $15 minimum wage, and urged people to boycott Facebook and Twitter in order to persuade the social-media behemoths to improve their privacy policies and vulnerability to trolls and misinformation campaigns.

Carmichael is getting so political, in fact, that some have wondered if he’s gearing up to run for office himself. He says he’s got no interest. He’s even written an op-ed arguing that CEOs simply don’t make good politicians. (“CEOs are neo-kings of sorts, hardly democratic leaders at all, and certainly not in a ‘practice job’ for leadership within a large, balanced democracy,” he wrote.) Instead, Carmichael is carving out a path as a CEO who’s representative of a dawning era of corporate enlightenment—in which business leaders are suddenly, surprisingly ready to acknowledge the pitfalls of capitalism.

The rise of the activist CEO

In August, for example, the Business Roundtable, a CEO lobbying group representing the heads of big US companies including Apple, Pepsi, JPMorgan Chase, and Walmart, formally acknowledged that corporations have a responsibility to look out for the interests of multiple stakeholders, including their investors but also employees, customers, suppliers, and communities—thereby abandoning its long-held maxim that a company’s sole purpose was to serve its shareholders.

What’s behind this change in tune? Several factors are likely. First is the growing pressure on CEOs from employees, customers, and even a handful of big investors to think beyond the goal of increasing shareholder value. As Larry Fink, founder of the investment giant BlackRock, explained in a letter to business leaders last year, “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

The polarization of politics in the US is pushing CEOs to take a stand, too, according to Aaron Chatterji, an associate professor of business and public policy at Duke University. He argued in a 2018 New York Times op-ed  that as Americans’ political affiliations become increasingly central to their sense of identity, there’s a business case for CEOs to speak out on the issues that matter to their customers.

The Financial Times, meanwhile, has suggested that CEOs’ newfound readiness to criticize capitalism may be motivated in part by plain old fear of the masses. The spread of global populism means that CEOs worry that glossing over the problems of the 99% now could mean facing an even bigger political backlash (perhaps even the dreaded s-word—socialism) down the line.

But while there may be PR benefits to positioning oneself as a socially conscious CEO, there are risks involved, too. A 2018 survey (pdf) of 1,000 Americans by the public-relations firm Weber Shandwick found the public is evenly divided over whether CEOs ought to speak up on social issues. The survey also found people are far more in favor of CEOs speaking out on subjects related to the workplace (like equal pay, sexual harassment, and jobs and skills training) than they are keen on business leaders sharing their thoughts on issues like climate change, nationalism, abortion, or gun control.

For his part, Carmichael isn’t worried about alienating potential customers when he insults Donald Trump, or taking a financial hit because he comes out in favor of gun control. He’s spent his life embracing risks of all kinds.

Carmichael holds the world record for the fastest unsupported trek across Antarctica to the South Pole—a 39-day, 700-mile journey, during which he lost 40 lbs while coping with frozen lung tissue. He spent five years post-college abroad while learning the European art of coffee roasting, spending part of that time on living in an antique sailboat he’d restored himself. He took a sabbatical from his business in 2000 to live for 10 weeks on a tiny island in the South Pacific with just 150 villagers. “I like to put myself in those situations where I am absolutely uncomfortable,” he says. Now he wants to use his platform to encourage other business leaders to take political risks, too.

“If I can accomplish one thing, that is to be an example to other CEOs that you can step outside your office and you can float truth and your company won’t tank,” he says. “It’ll probably be neutral. Some people will hate it. Some people will be attracted to it … But you will have created an environment that is better for your country.”

There’s reason to be skeptical anytime a member of the 1% starts positioning themselves as a champion of the people. But Carmichael’s steadily climbing public profile is also an indicator of the ways that the role of the CEO is changing in the 21st-century economy. In a culture where work is the new religion, leaders who want to stay successful are increasingly turning their gaze beyond stock valuations and earnings reports, and seeking to run their businesses in a way that provides themselves, their customers, and their employees with a deeper sense of meaning.

Catching the buzz

AP Photo/Matt Rourke
Todd Carmichael

On a hot August morning, Carmichael is sitting with 10 or so members of his staff in a back room at La Colombe’s flagship coffee shop, located in the Philadelphia neighborhood of Fishtown—a rapidly gentrifying area named by Forbes in 2018 as one of America’s hottest neighborhoods. The shop’s neighbors include a skincare parlor and an atelier stocked with clothing by local designers.

Inside, the decor is post-industrial chic, with exposed wood beams, washed brick, and vases stuffed with tall purple alliums. Country music plays over the loudspeakers; customers drift in at a steady pace, placing orders for lattes, cast-iron cake, and spicy soppressata pizza.

Carmichael, a tall, lean man with a lightly grizzled stubble, exudes a cheerful nervous energy; he tends to bounce a foot or drum on the tabletop with his fingers when he talks. He’s wearing a denim La Colombe baseball cap, a blue button-down shirt, and jeans. Around his wrist are a few bracelets—beads, a loop of red string. The overall effect was a little bit business, a little bit boho.

He’s there to lead the group through one of the company’s regular tasting sessions, trying out new potential products from the R&D team. That day, the testers are tasting iced teas. The company tries to move fast when it lands on a drink everyone loves; its cold brew shandy lemonade, Carmichael says, took just four weeks to get from the initial idea to market. A more typical pace for La Colombe can be as little as four to five months. “It’s lightning fast,” Carmichael says proudly.

Carmichael was in an upbeat, apparently well-caffeinated mood, joking with one staffer about her fuzzy sweater and singing to himself occasionally under his breath. While everyone shared their opinions on beverages throughout the meeting, he was clearly at the center of the tasting session, piecing out praise and rendering final verdicts. Carmichael prides himself on the knowledge he’s built up over the years about coffee and tea, working his way from a barista at Starbucks in the early 1980s to traveling the world to educate himself on the best beans and farming practices. His recent business adventures—sourcing coffee in countries like India, Thailand, and Guatemala and exploring global coffee cultures—were chronicled on the Travel Channel series Dangerous Grounds and Uncommon Grounds.

“Just like Gates knew how to code, the people at the top know how to make coffee and tea,” Carmichael says, referring to himself and his cofounder, JP Iberti, the resident artist to Carmichael’s businessperson in their partnership. One foundational element of La Colombe’s mythology is the story of how, after the pair started the business back in 1994, Carmichael quite literally snuck into the fine-dining world through the back door, wandering uninvited into the kitchen of famed Philadelphia restaurant Le Bec-Fin and preparing a cup of coffee for the chef. “He drank it, he loved it, and we were serving coffee in the restaurant that day,” Carmichael recounts.

The back-door maneuver became La Colombe’s strategy; soon their coffee had won over premier restaurateurs like Danny Meyer and Jean-Georges Vongerichten, too. “I can’t remember if we thought that was a trick,” Carmichael says. “It’s the innocence of the startup—if you really know everything about your industry before you start up, you won’t do it.”

Today, Carmichael is concentrating on appraising the teas on offer, offering careful feedback to his team. The astringency in one tea is too extreme. The caramel flavor in another is too close to butterscotch, when it should be tilting more toward butter. One variation on rose-colored hibiscus tea is a general crowd pleaser. “You can taste what’s good for you,” he says with a nod.

La Colombe is always experimenting with new products and flavors, but tries to distinguish between fads (bad) and trends (good). “That’s why we avoided turmeric coffee drinks,” Carmichael notes. Conversely, he’s proud that La Colombe was ahead of the curve on oat milk, which he first tasted while traveling in Iceland; the company began using Oatly in its cafes in 2017, and now peddles the dairy alternative in the form of the company’s oatmilk draft latte. More recently, the company got in on the White Claw-fueled wave of excitement around booze with lower alcohol content, working with MillerCoors on two varieties of hard-brew coffee.

The most important trend for La Colombe, however, may be the steadily growing popularity of cold brew and other chilled coffee beverages, as consumers move away from sugary sodas and into the realm of seltzers and beyond. As Nielsen reported this autumn, sales of chilled coffee in bottles or cans brought in $3 billion during the 12 months ended in July, up 16% from the same period a year earlier.

The trend has supported the growth of La Colombe, which has placed draft lattes and cans of other ready-to-drink beverages in major US supermarkets, including Walmart, Target, Wegman’s, Costco, and Whole Foods. At its 34 cafes across six US metropolitan areas, a majority of customers order something cold. “People drink hot coffee in the morning, and cold coffee in the afternoon,” Carmichael told Forbes last year. About half of the company’s sales across the US come from cold drinks, and the number is trending upward each year.

The business of doing good

The company’s success has put Carmichael in a position of influence. La Colombe has more than 700 employees and brought in $94.9 million in revenue last year, according to Inc magazine’s 2019 guide to the 5,000 fastest-growing private companies, up 178% over the past three years.

Hamdi Ulukaya, the founder of Chobani yogurt, took a majority stake in La Colombe back in 2015. “I’m not aiming for Starbucks,” Ulukaya told the New York Times in 2015. “What I think we can do is appeal to a large number of people like me who think they don’t like coffee—until they taste this one.” The company says its current valuation is $1 billion.

AP Photo/Matt Rourke
Freshly roasted.

Through his work in the coffee industry, Carmichael has seen up close many of the problems faced by developing nations, and has emerged from his travels attuned to the role that business can play in perpetuating—or alleviating—global poverty.

“Coffee brought me to two-thirds of the world’s countries,” he says. “I got informed about what the human condition is, and the nature of privilege and what it means.” He also saw the effects of poverty in his four kids, each of whom he and his wife, the singer-songwriter Lauren Hart, adopted from Ethiopia. When each child first came home, he says, “everyone’s disappointed them, they’ve been abused in ways you can’t imagine. But once they stabilize and are provided security, nutrition, love, and education, my four kids—people stop me everywhere. They’re better than I am.”

Seeing the rapid change in his children, once they had access to the simple resources that all kids need, drove home a simple truth that informs Carmichael’s approach to politics and corporate policy: It’s only when people’s basic needs are covered that they’re empowered to transform their lives.

“Some people think that they’re dragging the poor along, and [poor people] want to suck us dry,” Carmichael says. That’s the philosophy that makes some Americans bristle at the idea of Medicare for all, or cheer on cuts to food stamps. In contrast, he says, “I see every person in the country as a potential asset.” A person who’s struggling, in his mind, “just needs a little bit of room to grow”—including the financial security that will enable them to flourish.

This attitude informs La Colombe’s policies and social efforts. “I don’t believe in preying on other people,” he says. “So I don’t pay predatory wages. We don’t pay predatory prices for coffee.”

La Colombe touts its policy of direct trade—that is, working directly with coffee farmers as a way of ensuring both the quality of the coffee beans and that the farmers themselves receive fair prices, beyond what they’d receive under fair trade after the cuts that go to the mills, export agents, and other middlemen. The company also has multiple philanthropic endeavors aimed at benefiting the countries and people with which its business intersects. That includes the Haiti Coffee Academy, co-founded in 2013 with the Clinton Foundation, which offers training programs and resources to help local coffee farmers develop their agricultural businesses; helping to rebuild a school that benefits orphaned children in Uganda; and partnering with Leonardo diCaprio on the coffee blend Lyon, 100% of the proceeds from which go to the actor’s charitable foundation for environmentally sustainable causes.

Stateside, La Colombe has sought to demonstrate a commitment to the environment, pledging to donate at least $100,000 to support America’s national parks in 2018. Carmichael also frequently speaks out about the importance of paying people a living wage. In 2017, he published an op-ed championing a proposal to raise the federal minimum wage to $15 per hour, writing, “I am living, breathing, profitable proof that raising the minimum wage is good for businesses and workers.”

But he’s also faced accusations of hypocrisy: The starting wage for La Colombe baristas is $9 per hour. An organizer with the service-workers union Unite Here told the Philadelphia Inquirer, “It’s galling that he gets all these plaudits and praise for being a progressive leader on the basis of his claims to be paying a fair wage, and ultimately, it seems to be nothing more than another branding strategy from a giant corporation.”

Carmichael says that La Colombe tracks tips to ensure that workers at its coffee shops are making at least $15 per hour in take-home pay. It also offers health insurance, 17 days’ paid time off, and paid maternity and paternity leave.

Carmichael acknowledged in a statement to the Inquirer that the “tip/base system in America can be acutely frustrating for all involved.” But for now, it seems, the company is sticking with that system—which raises the question of whether Carmichael can fairly take credit for the full amount that baristas take home. One former barista told the Inquirer, “It wasn’t La Colombe, the company, that was paying me $15 an hour, it was customers being generous.”

Started from the bottom

Carmichael’s story can fall pretty neatly into Horatio Alger territory: Growing up poor in Spokane, going to the University of Washington on a long-distance running scholarship, working odd jobs to save up $100,000 in order to start the business that would become a third-wave coffee empire.

At times, his self-narrative does hew to that pattern. He recalls that he was driven to start earning money at a young age; he first started working when he was 12, rebuilding small motors for lawnmowers. He worked on farms during the summers.I picked every conceivable type of fruit and vegetable in that part of the world,” he says. His first formal job was at a gas station in high school. There, he started a side hustle, repurposing tires as inner tubes. “I would buy the old ones for a dollar a piece, patch and fix them, and sell them along the river,” he recalls.

But Carmichael doesn’t buy into bootstrapping wholesale. He doesn’t expect every poor person to be able to do what he did. He says he worked hard to get where he is today, but luck and opportunity factored in, too. “Bad things happen to good people, and bad things happen to good ideas,” he notes. No matter how good La Colombe’s coffee was, there was always the possibility that it could have gone bust.

He compares his idea of how success happens—to him, or to anyone—to running through a shooting gallery, or climbing a mountain and avoiding an avalanche. “That’s the smartest success story, right?” he says. “I didn’t get killed.”

This kind of thinking makes Carmichael fairly unique among his cohort. The Pew Research Center has found that a majority of wealthy people say the rich are more hardworking than the average American, while one 2019 study (pdf), published in the Journal of Personality and Social Psychology, found that people who belong to the upper class tend to be more overconfident about their abilities compared to their lower-class counterparts.

People want to believe that they deserve their success. It’s an understandable impulse. But as Robert Frank, a professor of economics at Cornell University, observes, there are major social and political consequences to deemphasizing the roles of luck, privilege, circumstance. “Seeing ourselves as self-made—rather than as talented, hardworking, and lucky—leads us to be less generous and public-spirited,” he wrote in an article for The Atlantic adapted from his book, Success and Luck: Good Fortune and the Myth of Meritocracy. “It may even make the lucky less likely to support the conditions (such as high-quality public infrastructure and education) that made their own success possible.”

That’s definitely not the case with Carmichael. “The problem in America right now is wealthy people,” he says. Carmichael welcomes the wealth tax proposed by Democratic presidential candidate Elizabeth Warren, a view that sets him apart from business leaders including JPMorgan Chase CEO Jamie Dimon, Microsoft co-founder Bill Gates, and billionaire entrepreneur and Warren Democratic rival Michael Bloomberg, all of whom have expressed concerns over poverty and inequality but find Warren’s plan extreme. “Elizabeth Warren says she wants [to tax]two cents on every dollar over $50 million,” Carmichael says. “Okay, I’m in. Where do I write the check?”

The hardships that Carmichael grew up with have no doubt provided him with insight into the disadvantages and obstacles that work to perpetuate poverty and inequality. But ultimately, the best explanation for his public activism and community-mindedness may be the fact that, even as he’s joined the ranks of the elite, he hasn’t forgotten that the world doesn’t treat everyone fairly. As Frank explains, the more aware we are of how random circumstances have worked to our advantage in life, the more likely we are to want to help those who could use a lucky break of their own.

Back when Carmichael was reading Vonnegut’s God Bless You, Mr. Rosewater in high school, trying to understand the mindset of a loopy, big-hearted millionaire, he didn’t feel he had a lot in common with the protagonist. But he did understand how a person might take stock of his life and think, There has to be more than this. He was already thinking that way as a teenager, pushing up against the limitations of his life in Spokane, sneaking away on a Greyhound bus at age 15 on a covert mission to climb Mount Rainier. He’s still thinking that way now, dreaming up new projects and tests of endurance.

“There’s always this hope,” he says, “that your life will be meaningful in a way where you can do something that’s bigger than you, right?”

He acknowledges the point that wealthy businesspeople aren’t necessarily the ones who are best equipped to solve the world’s problems. But he has a platform now, and a loud voice. He intends to listen to people and use it. “I’ve seen other people waste their lives just to amass wealth,” he says. And what would be the point of a life like that?