TWST: When you look at corporations today, what role should they play in being socially responsible?
Mr. Glassman: The question pertains to the role social responsibility should play in American corporations. In many ways that role is driven by a corporation's view. If it is a one-dimensional shareholder view, and everything is seen through that lens, then it is a very limited view in the context of general society. Indeed, our mission statement defines a broader concept, a stakeholder concept in which our shareholders, while a vital constituency, are considered alongside our customers, our employees, and the larger community. So if you create a stakeholder concept and you look at your responsibilities and opportunities through that lens, it is a much more compelling role for a corporation to play in general society.
TWST: Is it the corporation's place to assume that role?
Mr. Glassman: I think in the end people and corporations have some similarities: they normally do what is in their self interest. But they often have different definitions of what is in their self interest.
For instance, a healthy environment is something most people would agree is in their long-term self interest. Yet most corporations believe if there are no dollars to the bottom line within a year or two by having environmental considerations, it's not worth it. Sure, there are ways in which some companies, like Wainwright Bank, would depart from that. I believe that corporations should have a wider view of what their responsibilities are in this area. However, you would not be doing this article and these interviews if the corporate interest in social responsibility were still a minor subset of the American business community as opposed to becoming a more significant constituency.
TWST: What is the company's mission statement?
Mr. Glassman: Allow me to read from our annual report. "With a sense of inclusion and diversity that extends from the board room to the mailroom, Wainwright Bank & Trust Company resolves to be a leading socially responsible bank. The bank is equally committed to all its stakeholders -- employees, customers, communities and shareholders."
TWST: How do you put that into action? What is the direction that you're taking in being socially responsible?
Mr. Young: I usually like to break our response to that question into internal and external practices. This is where social rubber hits the road, so to speak. Internally that means that we have very progressive management practices, and the key to that is embracing diversity. We have a wide range of people from different ethnic and economic backgrounds, and we have openly gay and lesbian officers and directors. To attract and retain the best employees we provide things that other banks don't normally, like domestic partner benefits for same-sex and opposite-sex couples. We offer flex-time for elder care and childcare. We provide a public transportation subsidy.
In this country the average starting teller gets one week's vacation. We feel that's not in the best interest of the employee and thus isn't in the best interest of the bank, so we provide three weeks to a starting teller. That gives you an idea of how we value our employees and why we have such a low turnover; they like working here. That's socially responsibility in action.
The external practices are basically how we put our capital, our deposits to work. We've committed a large portion of our commercial loan portfolio, currently about 40%, to socially responsible community development projects such as food banks, homeless shelters and special needs housing. There are a lot of benefits from this in that we're obviously strengthening the fabric of the communities in which we live, where the well being of the lowest common dominator in our society affects the well being of us all. And it's good business for the bank; a win-win proposition.
It also provides depositors with the knowledge their money is being invested in a socially responsible way, a way many wish to see it be used. I think the average consumer often doesn't think about how a bank uses their money, and what we've been doing here at Wainwright is educating them as to how capital can be used to provide a good return to the shareholders and provide value to the community as well.
Mr. Glassman: Let me add a couple of points to that. Our relationship to the nonprofit community in the Boston area is probably something that in many ways symbolizes our social agenda. This is a relationship that allows us to share a lot of different platforms with that constituency, whether it's a piece in our annual report or our newsletter or our annual meeting or our Website. In fact, we've created a unique vehicle on the Internet: it's called Communityroom.net. Nonprofit customers of the bank receive a free-hosted Website in which they can talk about their programs and services, display a calendar of events, and accept online donations. Visitors with a MasterCard, VISA or American Express can make a contribution from anywhere in the world. With just basic knowledge of e-mail and MS Word, nonprofits create and update their own site; daily if they wish to. We call that content management. This is a platform in which I envision hundreds of nonprofits in our community eventually participating. And I could well see this expanding to other cities. In our case, it's a publicly traded bank that is anchoring this relationship. It could well be a community foundation in another city or The United Way. But I think the partnering with a nonprofit community is a tangible component of what our social agenda does.
A few years ago somebody did an analysis and suggested that Wainwright represents probably a quarter of 1% of the commercial deposits in the Boston area, and at various times has done as much as 60% of the financing of housing for people living with AIDS in the Boston area. So there is where the social agenda really develops traction, as Steve was saying.
On internal policies, going back to a point Steve made, what could be more in a corporation's own interest than allowing every single employee to bring all of themselves to work, to have that employee feel the freedom, whatever their individual identity is, to be comfortable at work in that respect? This provides for much greater productivity, a much healthier culture, and does give us a number of other benefits as well.
TWST: You mentioned earlier that 40% of your current commercial loan portfolio goes for socially responsible community development lending. How does that compare with most banks of your size and position?
Mr. Glassman: It's hard to think of a comparison. Most banks that would have name recognition would have less than 1% of its lending portfolio involved in this area. There are probably a dozen or so select banks around the country that are about our size or smaller that are involved in this kind of activity, but it's just not a focus for other institutions, and for us it's worked out well. These loans are an excellent segment of our lending portfolio. And the relationships that come with them have been very significant core relationships for the bank.
TWST: Looking at it just from a business point of view, are the losses on those loans any different than your regular losses?
Mr. Young: Actually they have been less than 1% over the last 10 years, so it is the best performing segment of our loan portfolio; that could be compared favorably against any other part of the bank's portfolio. These loans are market priced; they're not discounted. But they're highly structured and that's where most banks lose interest.
TWST: Is it your reputation in this area? Is that the reason that people will come to you for this type of loan, rather than going to one of the bigger banks?
Mr. Glassman: Today we are about $450 million in assets, so we're still a relatively small player. However, we're a very large player in area of community development financing in that we are probably offered the opportunity to participate in most every project of some significance in the Boston area. Some of this lending requires, from a bank point of view, a relatively complex cultural fluency in terms understanding the many different layers of financing that are available through the state and federal governments. So it takes a degree of expertise to put together these projects. I guess like any company, you'd like to be a significant enough player so that you would get a chance to see all the business in your specialty.
TWST: As we look out over the next year or two, what are your plans in this area? Are you going to do more or are you going to do different things?
Mr. Glassman: I think that we're going to continue doing exactly what we've been doing. The bank was started in 1987, and probably from 1991 on has been focused on the plan we just discussed. I think our increasing visibility in the nonprofit community gives us the opportunity to see a lot of different business, and we get to see it both on the institutional front and the personal side; each of the nonprofits have significant numbers of directors who like to do business with us once they know about our commitment to social justice issues.
TWST: Is there any thought of expanding the geography into new markets?
Mr. Glassman: Within our retail branch network -- we're now in Boston, Cambridge and Watertown -- there are more local communities we can expand into. But if your question is, are we thinking of expanding out of the state, the answer is no.
TWST: Does the bank get credit from its shareholders for what it's doing?
Mr. Glassman: I think there is an awfully large segment of the shareholder constituency that is really proud to be associated with what the bank does. They may not be activists in their own right, and they may be rather passively interested in some of the things that we do, but I think they feel good about what our activities are. This is not something that I can definitively answer, since I don't have quantitative data. But the antidotal data by way of the correspondence that we get from shareholders from time to time is quite supportive.
TWST: How does the return that you generate for your shareholders stack up with your competition?
Mr. Glassman: In our business, getting 1% on assets is usually considered a benchmark; we've been doing that. I think our returns are competitive within our industry.
TWST: Are you paying a penalty for your social activism?
Mr. Glassman: No, absolutely not. The perception that one might pay a penalty is probably what keeps a lot of players out of this area, but it is a flawed perception.
TWST: Given that you do at least as well as the standard banks, is that likely to bring more people into what you're doing?
Mr. Glassman: For a decade now we have been anticipating that that would be the case, but it doesn't appear to be happening. You can't just show up on day one and declare yourself socially responsible. The barrier to entry is not one of capital or infrastructure; the barrier to entry is to have been committed over a period of time and to have earned the trust of these many constituencies.
I think banks suffer from the large turnover that takes place in our industry. Banks are coming and going in the marketplace; staffs turn over. Without the steady dedication of committed employees, it's difficult for a bank to ultimately gain a foothold with community organizations.
TWST: Is that another competitive advantage that you have?
Mr. Glassman: Yes, being consistent. I think we know exactly who we are in the marketplace. We stay true to that focus; we're not trying to be all things to all people.
TWST: What is the down side? What is the negative in taking the position that you have?
Mr. Glassman: I don't know. I'm not sure there is one. As we expand the bank, we will look at certain marketplaces or certain communities where there is a greater awareness of our kind of activities. Not every set of demographics is open and supportive of the things we stand for. So if we had a national agenda, there would be certain markets in other states that would not be as receptive to what we do as Boston and Cambridge have been.
TWST: Do you have a little bit of geography working for you?
Mr. Glassman: I think there is a cultural geography, if I might call it that.
TWST: Is there anything else that you would like to add?
Mr. Glassman: I think a lot of the flavor of who we are comes through our Website. For instance, you'll see some of the many local and national awards we've won. For an organization that does not have any PR firm working for it, we have gotten some wide recognition and an awful lot of visibility from these activities. Actually I just received a letter today from a local nonprofit, Victory Programs.
Mr. Young: Victory Programs has existed in the Boston area for 25 years. They have 16 facilities and they do drug rehabilitation and treatment, predominantly for those who have fallen through the cracks of other programs. So this is the last hope for this particular segment of society. The executive director, Jonathan Scott, is the person who has written this letter.
"Dear Bob, I was so impressed with your presentation at Wainwright's annual meeting. You have created an institution with a heart and a soul. There are so many communities that Wainwright has deeply touched, and I know that it is because of your leadership and vision. Wainwright deserves every award and every acknowledgement for going above and beyond. You've made it such an exciting and vital and vibrant work place, and the loyalty from your colleagues and staff is so apparent. Thanks so much for including Victory Programs in your wonderful presentation. It was moving, and everyone at Victory Programs is deeply, deeply touched. My thanks and gratitude and appreciation always." That's an example of what I call a passionate relationship between a customer and their bank.
TWST: Thank you.
Each Executive who is the featured subject of a TWST Interview is offered the opportunity to include an Investor's Brief or other highlight material to be provided and sponsored by and for the company.
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