In It For The Long-Haul: ShoreBank Pacific CEO David Williams

by

ShoreBank Pacific CEO David Williams is a speaker at the 2010 Revisioning Value Conference (ReVV 2010) hosted by Springboard Innovation. Join us in Portland, Oregon on April 26th to hear from David and a host of other world-renowned social entrepreneurs on social enterprise and impact investing.

David Williams goes into things for the long haul. He isn’t looking to make a quick profit. Instead, he believes that long-term sustainability is the real measure of success for investments. David sat down with us to talk business—100 years and beyond business—and why rethinking our quarter-to-quarter mindset on financial returns could yield untold benefits for the future.

SE: How are the programs and lending practices at ShoreBank Pacific different than your average financial institution?
DW:
I wouldn’t necessarily say our programs are different, but our overall focus, unlike most banks, is on building sustainable communities. We focus on two questions: Why is the community here? And, what are the industrial sectors that caused that community to be created? Then we look at the businesses that exist and try to determine whether there is a way for those businesses to evolve so that they’ll be around in the next 100 years. If there is, we work with them to adopt the strategies that will accomplish this.

Those strategies are things like how they make their product, their impact on the environment, how they treat their employees, how they generate wealth within their communities, how they work with local businesses, and then how they work the local community itself in order to be sustainable over a long period of time.

It’s that kind of thinking, that we bring to the table when discussing lending behavior, that distinguishes us from other banks. We report this kind of activity to our depositors and those are the folks that want to support it. So the lending isn’t any different and the deposit structure isn’t any different, but the outcomes are different.

SE: Is this just about sustainability in terms of the environment or does it have an impact on the security and well being of Americans on a broader scale?
DW:
It’s much broader than the environment. We sat down and asked three questions: What does sustainability mean? What elements need to be present in order to have a sustainable community? And what does it take to be a sustainable business within this community?

That evaluation system that we run all of our borrowers through, not only addresses environmental issues, but also employee issues, education, health care and so on. Defining wealth as wealth generation within a community deals with how local businesses interact with each other, support each other and bring each other along.

SE: What do you see as the role of the banking industry in changing how we think about, generate and use wealth in order to become a more sustainable society?
DW:
There are a number of ways to look at that. We run our bank to be around for the long haul—100+ years. To achieve that, we don’t make or change our decisions on a quarterly basis the way many of the publicly traded banks do. And yet, we yield the same kind of returns that our peer banks do, which is a key element to how we run the bank and our success. Because if we can do things our way and still generate a comparable return, others might look at our model and see some sense in it.

Having said that, the kinds of activities that we do and communicate to our depositors, appeal to a depositor who is looking for more than just a return on his or her money. Many of our depositors are also looking for a social return on their investment in the form of a change in the community that they support.
It’s our opinion that if you follow that strategy, you will find a number of investors who are looking to achieve something more than just a straight return.

SE: Why does ShoreBank Pacific focus on small and mid-sized companies for lending business?
DW:
For starters, we’re of a size that we can really work best for small and mid-sized companies. The second reason is that 94 percent of employees in the United States works for a company with less than 24 employees. So if you want to change the economy, that’s where it’s going to happen. You don’t change it with the big guys, you change it for the little guys.

Third, these smaller companies are quicker to make changes, because it often just takes the owner changing his or her mind. Therefore, you can push adoption of sustainable activities much more quickly than if you’re dealing with a large company.

The fourth piece is that, if you look at the state of Oregon (more than Washington), it’s primarily a small business state. It’s much more responsive to these activities than if you’re an area with a lot of large businesses.

SE: How do you rise above green washing by your competition?
DW:
There are some banks that have purported to do green things and for that we congratulate them. But we have to point out that there are a lot of other things to be concerned about in addition to the environment and hope that they come along.

Over the years there have been some challenges—people have represented themselves as “the first green bank” or the “first sustainable bank.” Our choice has been to keep on doing what we do rather than challenge them directly. At this point there are enough banks that recognize we’re pretty far along in defining and dealing with these issues. They’re not claiming to compete with us, they’re just selling their product. We always hope that any banks that make those claims are really doing something with strength behind it rather than just supporting a marketing ploy.

SE: What is the importance behind working with rural companies and communities?
DW:
There are a couple of reasons why we do it. First of all, most banks don’t focus on rural communities. They focus on the cities because there are usually more opportunities in urban areas and more support for business than in rural communities. We see that as an opportunity for us to help an under-served market in rural Oregon and Washington.

Secondly, we know that the banks that are in rural communities tend to be focused on the retail activities of the community. They don’t have the depth of lending experience to do some of the more sophisticated lending that help the businesses that we focus on thrive. So, we come in with a pool of skills that doesn’t necessarily compete with the local bank. We end up supporting the local bank by offering these additional services.

SE: What do we need to do more of to help American businesses be around for 100 years? What do we need less of?
DW:
I go back into the history of the corporation and the reason for corporations. They were created to help build villages back in the days of the guild. A corporation can create more outcomes than just generating financial returns for investors. One of the changes that needs to take place is for the investors to realize that we can get a greater benefit than just a return on our dollar if we invest in businesses that perform community-responsible activities. So our first task is to get people to realize that when they have excess money they want to invest, opportunities with returns that go beyond monetary wealth are available to them.

The second thing is to convince people of the benefits of long-term investing. People need to draw out their investments over time. The worst case of shorting investments are the day traders, who invest in the morning and take their money out at night, and most investment bankers are in and out of securities all the time. I’m of the mindset that you can’t do that. You make an investment with the intent of staying with it for a long time and you expect to get a better return on it over that amount of time. There are folks who do that and do quite well. The obvious example being Warren Buffett. He invests over a long period of time and gets the greatest return out of his businesses.

Those are the two things we need to do. What we need to be concerned about is business schools promoting investing based on quarter-by-quarter returns. I believe that’s a bad behavior and poor educating on the part of the business schools. What they’re teaching is a destructive activity rather than a constructive activity. Rather than engage in a finite cycle of business that leaves investors happy, but communities devastated, we need to encourage infinite, sustainable cycles that support both communities and investors for the long-term.

SE: When did you come to the realization that this was the track that you wanted to spend your life’s work pursuing?
DW:
I think it’s been in my blood always. I started growing up in a rural community in Oregon and then ended up in the city. So I’ve seen both sides and I’ve seen the demise of rural communities and asked myself why the mills got closed and why the town is decimated. Why are the fish gone and the fishing communities ruined? I just kept asking “why?”

I spent a fair amount of time thinking about that and talking to folks in business schools about it. Then I started thinking about what it really takes to be sustainable and why it’s a long-term project. And that caused me to start considering how you best create sustainable businesses and communities.

The reason that I’m doing it at a bank is because I’m at a bank. I would have done the same thing if I had been at a steel company. But all that would have affected would have been the little town that we were in as opposed to having a broader impact on society. A bank is a vehicle to do this on a wider basis than just one place.

SE: Is being able to affect a broad base of communities what motivated you to move into the banking industry from your former career ventures?
DW:
When I was teaching I was out to change the world. When you get out of college, you always ask, “OK, what am I going to do with the rest of my life?” I thought while I was teaching that if I changed all the kids I taught I could change the world. After 14 years of doing that I realized that you still hit a pretty small group.

Then I got into the business side of things and I found it very enjoyable. But I got into banking after I ran my last business, because I had worked with ShoreBank Pacific and they were looking for someone to take over the bank. It never occurred to me that I’d ever be a banker—and there are some in the banking world that think I ought not be a banker now—but doing this is a way to use my background to help out communities. The opportunity to run this company is an opportunity to change my thinking and solve all these problems that I said I would solve when I was a kid. I can attack those issues by working for a bank.

A bank is a good vehicle to help in those ways, because everybody needs a bank. There’s a place for us in all of these communities. That’s how I got here and why it’s worked out as a platform.

David Williams is CEO of ShoreBank Pacific. He’s also a speaker at the ReVV 2010 Conference in Portland, Oregon. You can learn more about David and his work with ShoreBank Pacific at : http://www.shorebankpacific.com

The ReVV 2010 Conference takes place on April 26-27, 2010 in Portland, Oregon at The Gerding Theater at The Armory. ReVV 2010 is a two-day conference geared towards educating citizens on social change and investment, and also including the community in finding solutions. The April 26th (Monday) agenda is a full-day schedule of educational sessions with leading social investment experts. Tuesday focuses on putting that knowledge into action through workshops, and discussing and brainstorming solutions for local, national and international issues. Tickets can be purchased for both days (best deal) for $349.00. Conference Only (April 26th | The Gerding Theater) is $239. Click here to register now and to view additional registration options.

Advertisements

Tags: , , , ,

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: