Meet the Jewish billionaire who studies Torah every morning
Before he sold Timberland, the family company he headed until last year, Jeffrey Swartz made the firm a pioneer in 'social responsibility.' Now, $2 billion later, he studies Torah each morning and spends the rest of his time trying to make the world a better place.
Jeffrey Swartz's appearance is misleading. The former president and CEO of the footwear company Timberland is an affable Jew with a yarmulke, and as far as you can get from the rugged look of the shoes he sold until recently, a brand beloved by rappers and world travelers. Swartz dresses modestly and walks around without an entourage in tow - not what one may have expected from the CEO of a big company who made a $2 billion exit when he sold it less than a year ago.
Even when he ran a company with annual revenues of $1.6 billion, he didn't seem especially interested in talking profit margins, share yield and market value. Swartz, 51, began preaching corporate social responsibility back when it was considered a loony idea reserved for activists.
"It is not enough for Timberland to make the absolute best boots, or shoes, or clothing in the world. We recognize we must also serve. Everything we do, everything we sell has an impact on the communities in which we live and work," wrote Swartz in his first "corporate social responsibility report," in 2000. From then on he made a point of issuing such a report every three months, along with the requisite quarterly financial reports.
Swartz should ostensibly be satisfied today: Corporate responsibility has moved from the margins to the mainstream, and likewise the demand for ethical activity has moved from the wacky activist margins of society into the consumer and business mainstream.
But Swartz is not satisfied. In fact, he says in a recent interview in Tel Aviv, with a combination of sadness and dismay, "the data is all against me. Twenty-five years ago, when I started saying this, nobody believed business should do this. Now, business does it, and things are worse."
The reason, he says, is rage. That is what he sees as being wrong with Occupy Wall Street and the other protest movements: "It is just rage. It is not constructive. In fact, it is self-indulgent," he says. "When I see that Foxconn [the component factory serving Apple and other electronics firms] is raising wages by 25 percent, because they were abusing their workers, when I see that Apple finally does something - if you really want to raise your voice, don't 'occupy': Use the power of the consumer to make the marketplace be accountable.
"Do you think that Apple wanted to raise their wages? Absolutely not! Why did they do it? Because instead of raising their voice, [their critics] said: 'We won't do business with you. If you mess with us, we will not do business with you.'"
Swartz contends that the key to social change is civic engagement and dialogue with the centers of power, whether they are governments or businesspeople. "There is a rap song from a long time ago by Public Enemy, called 'Fight the Power.' No: Use the power. That is what is wrong with the rage movement. There is no agenda. There has to be an agenda. The agenda has to be the perfection of society, not its destruction or demonization.
"The government is not wrong. Business is not wrong. Wealth and equity did not happen. It is an accountability that we share. What are you going to do about it? You want to just Rage Against the Machine? That's a cool band," he says, but rage alone is not enough; the way to effect real change is to utilize the market to compel CEOs to take responsibility. "We are a generation that demands more," he adds.
The effective way to foment social change, asserts Swartz, is by way of "a targeted conversation aimed at the CEO that makes him or her a little uncomfortable, but that is done in a way that allows there to be some middle ground for a conversation, that says, we will negotiate solutions. [The problem solvers] will not be from the left or from the right. They will be in the middle. Politically, militarily, socially.
Torah each morning at 4
Swartz, an observant Jew who once said in an interview with the British newspaper The Guardian that he rises each morning at 4 to learn Torah, is a fast talker and passionate when talking about social change - and that seems like the only thing he talks about these days. He peppers his words with Hebrew expressions, in a heavy American accent.
Since leaving Timberland, Swartz says he has been dividing his time between Boston and Jerusalem, where he recently bought an apartment - though he has not yet had the time to furnish it. He was in Israel to give one of the keynote speeches at the annual convention of the investment house Landmark Ventures. In the meantime, he keeps abreast of what is happening in Israel, and says he takes a special interest in the consumer protest against the high cost of living and food. In fact, Swartz asks to convey a message to the protesters, the CEOs of the major companies, and the government.
"Who is the most powerful person at [food manufacturer] Strauss today? The guy that won't buy the candy bar. [Company chair] Ofra Strauss cannot make the stock go up. I am sure she is sitting with her lieutenants and is saying, 'What does this mean?' Now, there are two things she can do. One is [to say], 'Maybe they will forget about it. We can put our prices up.' But, I bet she is not stupid. I bet she is thinking, 'Uh oh, we have to rearrange our relationship.' I prefer to think she will choose the second option, because what else can she do? Netanyahu has the Trajtenberg Committee. She cannot appoint a committee. She actually has to be responsible. Otherwise, the consumers will desert her. If they desert her, the stock will continue to go down. There is method in the marketplace for holding a CEO accountable. I wish there was method like that for politicians. I wish you could say, 'Your stock is down, you're out.'
"Greenpeace came to Timberland 10 years ago. I got 80,000 e-mails in 24 hours saying: 'You are a corporate scumball and you should die.' I am a good guy. What was the issue? The issue was in the Amazon. The cattle ranchers were cutting down trees and letting the cattle grow. Now what does that have to do with me? Well, the cattle get sold to a beef company. The beef company kills the cattle and uses the meat and sells the leather to another company. And the leather company sells it to me.
"So why are you yelling at me? Why don't you yell at the cattle guy? They were smart. They realized, if you are rageful in the Amazon and you scream and yell at the cattle guy, you get no leverage. They came to me, at the very end of the chain, and they said, 'We will hold your brand accountable.' So, they were angry. Rage had its role, but it wasn't just rage."
Did it work for them?
"Yes, because I worked right back down the supply chain. I said, 'Guys you want to do business with me, you are going to have to fix this problem.' I stopped buying from them. And Nike did the same thing. We made a real change. No protests. Focused energy. Constructive engagement that says: 'I will not accept your behavior, but here's something that will be acceptable to me.'
"What was the phrase last summer in Tel Aviv? 'Ha'am doresh tzedek hevrati' - the nation demands social justice. What did you offer in return? What were they [the protesters] offering in return? 'The government owes me social justice.' No, the government does not owe you social justice. The government was elected on its platform. And it will execute its platform," so if you don't like it, Swartz says, go ahead and vote them out at election time.
"Rage? Good. You want to sit in a tent? Okay. But what do you want from me? What are you offering in return? 'Ha'am doresh.' What is the opposite of 'doresh?' 'I offer.' Wouldn't it be wonderful? The people offer - we will volunteer an hour a week, but in return we expect the land to be freed or we expect the tax rate to be adjusted. That is not rage. That is hard-nosed accountability. There have to be two people in a negotiation. When people say, 'We are pissed off,' I think, 'What do you want me to do about it?'
"What I say about rage is: I appreciate the emotion. I respect it. But if you want to hold a CEO accountable you have to create a proposition: 'If you mistreat your workers I will not buy your product.' A Talmudic guy would say the opposite of that comment is, 'if you treat your workers right, I will buy your products.'"
Jeffrey Swartz belongs to the third and last generation of the Swartz family to head the Timberland Company. His grandfather, Nathan Swartz, came to America from Russia early in the 20th century, and founded the company in 1952. His father and uncle, who inherited the helm, built up the brand as it is known today and focused on making hardy, rugged, waterproof boots, ideal for outdoor work. Accordingly, the company became synonymous in America with work clothes.
Even though Timberland went public in 1987, with a market value of around $1 billion, the family retained a tight hold on the reins and on the voting rights. Jeffrey Swartz was not supposed to enter the family business: He spent his summers working at the Timberland factory, but his grandfather did not want him to be a part of "the dirty and dangerous" industry, so he went to medical school instead. In the end, following his grandfather's death, he did join the company, in 1986. In 1998 he took over from his father, Sidney, as president and CEO of Timberland. In those years Timberland enjoyed unprecedented growth. The brand became the darling of hip-hop artists, who turned Timberland boots into a trendy fashion accessory. The company's sales increased 75 percent between 1998 and 2006, its profits tripled, and its stock price rose more than 300 percent. Between 1992 and 2005, the company's market value grew eightfold. Swartz took advantage of the company's economic success, which was accompanied by massive expansion into other types of clothes and more than 200 brand stores in the U.S. and Europe, to implement some of the farthest-reaching social initiatives ever enacted by an American corporation.
Along with an employment policy that firmly protects workers' rights, Swartz led programs to plant a million trees, funded dozens of charity events in scores of countries, jeopardized or completely nullified contracts with companies that refused to adopt standards of fair employment and environmental responsibility, and in 2004 even distributed $3,000 each to Timberland workers who purchased hybrid cars. Many outside observers, not to mention some of the company's shareholders, thought Swartz was nuts, but so long as the bottom line kept growing at an accelerated pace, they did not protest.
Swartz was the CEO that could do no wrong, and his influence extended well beyond the little kingdom of Timberland: He managed, though with great difficulty, to persuade several clothing manufacturers, primarily other makers of hiking boots, to incorporate ecological standards into their production process.
And then the hip-hop crowd tired of the brand and moved on to others, and Timberland's sales began dwindling. By 2009 sales were down 20 percent, shares plummeted 50 percent, and Timberland was forced to close 43 stores. "It was a failure of leadership," Swartz explained to The Guardian, in a frank interview. "I said yes to everything when I should have said no to some things. I set us up to reach for more than we could achieve and that's my failure." In 2010 the company gradually rebounded, its stock rose and so did its sales.
Despite the decline in sales, Swartz refused to stop initiating and promoting corporate responsibility programs. In 2005 he came to Haifa with friends, and helped to renovate a school. In 2008 he stopped working with one of Timberland's suppliers in China because it was violating workers' rights. Relocating production was a costly and controversial move: Production costs rose and the company was forced to raise prices. The timing was terrible, coming as it did in the midst of the global economic crisis. At the same time, Swartz tried to persuade other Timberland partners to switch to renewable energy, even at the risk of jeopardizing their relationships.
"So you risked your relationship and Timberland's relationship, and squandered time you might have spent negotiating nitty-gritty business details such as input costs, and got nothing?" an interviewer from the magazine Fast Company chided him in 2008. Nevertheless, Swartz preferred to define himself as a "change agent." In interviews he has said that social responsibility is part of Timberland's DNA.
In June 2011, however, he suddenly decided to sell Timberland to VF, the owners of such fashion brands as Wrangler and North Face, for $2 billion. At the time the company's profit margins had dropped to 9 percent, and profits for the first quarter of 2011 had fallen 30 percent because of a rise in production costs. The decision, which fully removed the Swartz family from any involvement in Timberland, was met widely with surprise.
According to Swartz, making a quick exit was not the intention behind the sale of the company: "I sold Timberland because our shareholders were offered a very fair price by a very reputable company. The second reason is: My dad was ready. He was the founder of the business . The personal reason that I sold Timberland, which is the last reason, is that I wanted to find out what would happen when I stepped out from behind the curtain. Do you remember the Wizard of Oz? I decided I wanted to go into the darkness on the edge of town and find out what I had, personally. I wanted to see who I was and not what I was. So, I decided to take their offer.
"I am 51 years old. I don't know how long I am going to be healthy. I don't know how long I will have my marbles, but I know for sure this: I don't think I was put on this world to be a boot salesman and I am not a boot salesman anymore. So I'd better figure out fast what I am expected to be."
Since he sold the company Swartz has devoted all of his time to social change, philanthropy, social entrepreneurship, and advocating corporate responsibility among companies and businesspeople. To this end he speaks at events, talks to entrepreneurs, and studies venture capital funds "like a scientist," as he puts it. "This is not the way I dress," he says pointing to the modest suit he has on. "This is like camouflage. I dressed like a CEO today because I wanted them to hear me."
His new job description is apparently too tentative for some people to grasp. "It has been incredibly frustrating, because people say, 'What do you do?' And I answer, 'work on making the universe a better place.' And they ask, 'Is that a new app?' I say, 'No, I work with organizations to put an end to problems. In the U.S. there is an organization that I have worked with for 20 years and they are going to end childhood hunger. Period. I spend a day a week there, using my CEO skills to help sharpen up their business. 'Yes, yes, but what do you really do?'
"I am a social investor. And so, all these venture capital guys - I've met them all. I know the best social entrepreneurs in America. I looked at their boards. I looked at their strategies and I make the decision where to invest. I dive into them. I tear the organizations apart and the organizations get put back together. I am not a board member, but I am an investor."
Swartz says he truly believes that the road to positive change runs through the junction of justice and business. "The unit of community is the engaged citizen, not the egocentric citizen. The central atom of the molecule of social justice is the engaged, not the enraged, citizen. I believe that.
"Why did Walmart start to use organic cotton? Because they like organic cotton? No! Because the consumer says, 'This is important.' 'It is important to you, I want to do business with you - so it is important to me.'
"I know what happens when I am mad at Apple. When I am disappointed with the way they treat their workers or the way they treat the environment, I will hold them accountable - with all the rage I feel - by not buying their goods or services, by informing my friends and creating as much conversation as I can about that."
The key to a more just society in the future, he says, resides in a three-way conversation between the public, CEOs and government. "I have met plenty of ideologues full of rage and they don't want to engage, they want to destroy. Those people frighten me," he says. "All of us - consumers, businesspeople and regulators - need to demand more of ourselves. "I believe there are three players in this. Consumers have a responsibility to draw their red lines, and to insist on them, to say, 'We won't do business with you anymore.' The CEO has a responsibility to appreciate the rage and not to sit and say, 'Unless the consumer complains, I don't do it.' I don't think that's good enough. That's not how I ran my company. Every 90 days you have to tell people about your numbers. Not just the profit data, but also the social data. That is what I did at Timberland.
"The government has to demand more of itself, and that means tightening regulation. For example, where is the Israeli governmental policy on environmental sustainability? In Germany there are laws about packaging. Apple complies with them, whether they like it or not. In Israel there are no laws. That is the trash on the side of the road."
The demonizing of those in the top one-hundredth percentile, the 1 percent as they were called during the protest wave in the U.S. - frightens him. "First of all, the rhetoric of 'the 1 percent' is as close to anti-Semitic as you would like to have," Swartz says, "These families, we demonized them. They provide the jobs, they provide the economic capital, they provide the infrastructure of the country, they are good people. Are they sensitive to the problems of environmental disparity? I cannot speak for them. It would appear from the outside, not as sensitive as they need to be. How do I know? Because somebody gets really pissed off at the price of the chocolate bar and stock prices go down.
"But, 99 percent of the people that are demonized love their children, love their god, love their country, did their time in the military, believe in Israel, want a democracy, want to earn a fair return on their capital, take enormous risks, work really hard, and care desperately about their fellow man and do not have a clue about how hard it is to be those people. That is an opportunity waiting to be crossed off - not enraged, engaged."
Is the joint enlistment he talks about of all parts of the population to bring about positive change even possible? Swartz concedes it is probably not. Life as an idealist, he says, can be frustrating. When he began talking about corporate social responsibility 25 years ago, he was laughed at. Now businesses are following his lead, yet the situation is worse: "There are more hungry children now than when we started."
To a certain extent, he admits sorrowfully, he is trying to hold back the tide with a spoon. In fact, "I feel like that is a good day," he says, "sometimes I feel like I am standing with no spoon. Here comes the tide. Now what do I do? Sometimes I am so grateful for a spoon."
There is an American story he likes about a little girl. "She was at the beach with her grandfather. The tide brought in a million starfish. They are all dying on the beach. The little girl bends down, picks one up and throws it back in. The grandfather says, 'There are a million starfish. You will never succeed in saving them all.' She bends down, picks up another one and throws it in. 'There,' she says, 'I saved that starfish.' I am a big believer in this notion from Sanhedrin in the Talmud Bavli that says: If you take accountability to save a life, it is as if you've saved a generation. I have to believe that. If I didn't believe that, I would jump off a cliff."
Nevertheless, his future role in trying to solve the world's problems is not entirely clear. "I have credibility, but not for much longer. You can be the former CEO for only so long before you become just some guy who retired. So in the end, I'll lose the audience I have here, and then what? Don't know. I only know that it is nobody else's job to fix but yours and mine. Am I an idealist? I am. I am an old dried-out son of a bitch, but I absolutely believe it's in our hands to fix."