Deutsch responded as best he could--by moving workers around, shortening the legs on the production tables, and proposing the use of more automated equipment. Deutsch says he felt constrained in dealing with the carpal tunnel syndrome because of Cohen's insistence that the candy be thin and have a homemade look. In a February 6, 1993, memo to Deutsch, Cohen wrote, "Re: Choc Covered RFC Samples...thickness is too thick--please make the pieces as thin as possible." In a memo nine days later Cohen wrote, "Can we get the toffee any thinner?...Toffee thickness was a lot thinner than [the previous sample]. This is proper thickness."
Deutsch confronted Cohen anyway. "I constantly told Ben about the carpal tunnel syndrome," but the response was noncommittal, he says. Cohen counters, "When I became aware of the carpal tunnel syndrome, I instructed Irv to find a way to make the candy without putting stress on the workers."
By mid-1992 carpal tunnel syndrome was affecting CPI's performance. In a September memo that year, general manager Broad noted, "Our production crew's efficiency has not been at its usual level due to carpal tunnel problems." In CPI's operating plan for 1993, Broad wrote of her hopes to lower costs "if improvement in labor problems caused by carpal tunnel problems can be resolved."
But operating problems seemed of lesser concern to Cohen than abstract issues such as the values, vision, and culture that he stressed in numerous memos to his managers. In one such message he wrote, "I want to be known as a company that uses business to meet human needs." In another, he saw CPI as part of a new world where what counted was "putting people ahead of profit and passing laws that end up getting more money into the hands of poorer people and less money into the hands of richer people."
And yet getting more money into the hands of its workers did not seem a high priority at CPI. In June 1992, CPI's board considered raising wages, according to meeting minutes. "Perhaps could increase wage scale by giving a little less to nonprofits," the minutes read. It was proposed that the starting wage be raised from $6 an hour to $7--nominal compared with the amounts CPI was giving away.
Linda Culpepper was a steady, uncomplaining worker. She ended up working at CPI for nearly eight years, mastering almost every job in the plant along the way. She never earned more than $10 an hour, and her profit-sharing payouts dwindled with CPI's fortunes. Culpepper received three profit-sharing checks for 1992, totaling about $1,200. She would particularly remember the disappointing size of the third and last installment: $162.53.
Deftness with Taxes
Martha Broad, hired by Ben Cohen as CPI's comanager in July 1989, had a different set of concerns. A graduate of the Yale School of Management and a former environmental lobbyist, Broad was an energetic believer in the ideal of socially responsible businesses. She had gotten Cohen's partner, Jerry Greenfield, to speak at Yale, and through that connection her résumé reached Ben & Jerry's. Her domain was CPI's front office, not its fevered production area. Still, her seat was plenty hot. Broad recalls the early days at CPI as chaotic: "We were so overloaded, but I didn't care."
Broad labored over spreadsheets and business plans just as doggedly as Deutsch patrolled the production floor. The two of them formed a counterweight to the brilliant yet mercurial Cohen. Although Cohen was nominally the president and chairman of CPI, he maintained his office at Ben & Jerry's and made increasingly infrequent visits to his fledgling company, according to several former CPI employees. By late 1991, Cohen was absent for long stretches; occasionally he'd swoop in with a host of ideas to be implemented.
The company's ability to generate cash helped ease the crunch. From 1990 to 1992, CPI reported $907,000 in taxable income--and gave away $531,000 of that to Cultural Survival and the two nonprofit organizations chosen by CPI's three board members. And yet those numbers reveal more than CPI's generosity. They show its deftness in dealing with tax law.
CPI said the money it gave away was "donations," as indicated by the message on its packaging and in numerous articles in the press. And yet CPI told the Internal Revenue Service a different story. On its tax returns for the years 1990 through 1992, those "donations" are labeled "marketing expenses paid to nonprofit entities." That is significant because although marketing expenses are fully deductible, the Internal Revenue Code limits charitable donations to 10% of taxable income--or a sum far lower than CPI was actually giving away.
Broad began prodding board members on the issue as soon as CPI became profitable. The board members, their nonprofits fueled by CPI's largesse, seemed less engaged by the matter. At a September 1990 CPI board meeting attended by Broad, Cohen, and Peter Barnes (standing in for Scher), "they were not sure that the IRS would allow CPI to take the expenses...unless they were more clearly tied to transactions that brought revenues into the company," according to minutes kept by Broad. The board then "brainstormed," wrote Broad, on making that link clearer. One proposal included having board members pay themselves directors' salaries and consulting fees, which could be expensed and then transferred as donations to the nonprofits.
Barnes then cautioned, Broad's notes continued, "that CPI could take an aggressive stand" on the issue "but better have a bunch of money in the bank to back us up with if the company is hit with interest and penalties later on."
By the spring of 1991 the board had not reached a resolution--even though Broad and Jeff Furman had begun seeking legal counsel on the matter six months earlier. Their tax lawyer had recommended that CPI draw up formal contracts with the nonprofits it was funding. In an agenda for an April board meeting, Broad wrote, "It is time for CPI to make a final decision about how to treat money that the company pays to our selected nonprofits....In this case CPI must write contracts outlining exactly how we can meet the IRS test that these services 'bear a direct relationship to the taxpayer's business." The board, according to the minutes of the meeting, responded by proposing that the contracts "outline the fact that we are paying a licensing fee for the use of their names, logos, etc."
