Social Entrepreneur Michael Pirron Files Lawsuit
FOR IMMEDIATE RELEASE
A Trying Case for B Corps: Pirron v Impact Makers
Richmond, VA-based Social Entrepreneur Michael Pirron is suing Impact Makers, the organization he founded in 2006, saying he was improperly removed as Permanent Director of the Board through an illegitimate sale of the $18.6m firm — for only $1000 — which ultimately jeopardizes the company’s mission.
Richmond, VA, May 8, 2019 — Today, business leader Michael Pirron filed a lawsuit challenging the leaders who took over — and since sold the controlling voting rights — to the Richmond-VA based IT firm Impact Makers, Inc., a B Corp Pirron created in 2006 and helped turn into a $23 million organization. The outcome of the suit could challenge the future of the B Corp movement.
From the start, Pirron’s mission was to donate 100% of his firm’s lifetime value to charitable causes through partnerships and nonprofit organizations. After surpassing his “big hairy audacious goal” of contributing $1 million to charities, in 2015, Pirron raised the bar and donated the stock of the entire company to two public charities: The Community Foundation of Greater Richmond, and Virginia Community Capital. Impact Makers also continued to give donations to additional charitable organizations.
To protect Impact Makers’ gift, Pirron and the Board created a new corporate governance structure in which a new nonprofit called IM Holdings, Inc. owned all of the voting shares for Impact Makers’. In 2015, Pirron became the Permanent Director of IM Holdings and the Senior Director of Impact Makers. These positions gave him veto power of four key issues that could dilute Impact Makers’ gift: amending the articles or bylaws, paying dividends, issuing more stock, or awarding equity to executives.
By 2024, Pirron hoped to make a $100 million cumulative impact by gifting cash and pro bono work to organizations in Richmond.
But at the end of 2017 the Board of Directors decided it wanted to go in a difference direction, explains Pirron, who on January 4, 2018 was fired as CEO.
“I accepted the Board’s decision, but wanted to maintain my position on the Board to protect the model and mission of the company that I created,” says Pirron.
Then, on April 10, 2019, the Board received a mysterious one-page offer from a company called Benefit Holdings, Inc. Though it gave no reason why, Benefit Holdings wanted to buy all of IM Holdings’ shares in Impact Makers—a multi-million-dollar company—for $1000.
The offer contained no information about Benefit Holdings. A review of Virginia’s State Corporation Commission records shows that Benefit Holdings’ effective date of incorporation was April 11, 2019. Therefore, on the day it made the offer, Benefit Holdings did not yet legally exist.
Nevertheless, on April 11, and over Pirron’s objections, the Board voted to sell the IM Holdings’ voting shares to Benefit Holdings. As a result, IM Holdings no longer owns the shares essential to performing its sole purpose.
Within hours, the Board informed Pirron that Benefit Holdings had appointed someone else as Senior Director of IM, even though IM’s bylaws do not provide for Pirron’s replacement before his term ends in 2021.
“I decided to file a lawsuit because in this current business and political climate, it’s important to stand up against bullying business tactics and conventional business practices,” he shares. “I simply want to maintain the initial mission, values and models of the company that was built.”
The group that is now the Defendants in the case — current and past board officers including Karen Coleman, Teresa DiMarco, Scott Walker, W.Wilhelm Rabke, Rodney Willett, and Marianne Vermeer — are charged with empowering and enriching themselves by targeting and eliminating the authority of IM Holdings’ Permanent Director position and removing Pirron as Senior Director.
This, Pirron’s attorneys explain, is in violation of Virginia law and the corporate charters thus destroying IM Holding’s purpose and gutting Impact Makers’ public benefit mission.
“What does this mean for the future of the B Corp movement when an organization that is trying to make an impact on the community where it resides is trumped by the board of directors that I helped put into place to support that mission?” Pirron questions. “They may believe that what they’re doing is right for Impact Makers, but from my point of view that couldn’t be farther from the truth. My primary goal is reverse their decision.”
Following is a statement by Pirron explaining his position:
I, along with the support of a number of the shareholders, have brought a lawsuit against Impact Makers and many of the leaders currently running the company to save and protect the values, mission and the model created and designed to benefit the communities in which the company operates.
As the founder, I built the company as a public benefit vehicle that could both serve the interests of the communities in which it operates and the employees who work there — not the private interests of those that control and oversee its operations. This model of true public benefit company was my vision and dream along with those individuals and nonprofits that participated in helping to launch and sustain Impact Makers to grow it to a $23m company.
This original intention is now in serious jeopardy. This lawsuit is not to preserve my personal financial interests or those of the other impact investors who are supporting me in this suit. There is no financial gain to be achieved.
The structure of Impact Makers and the affiliated IM Holdings organization was constructed to ensure that there would always be a Permanent Director, a caretaker, who would have the ability to preserve the commitment of the company to its founding vision. The actions of the board and executive leadership are a blatant attempt to remove those safeguards.
The current Board has attempted in the recent past to transfer significant equity in the company to members of the Executive Team, and have tried to pay themselves as volunteer Board members. Just last month, they sold the full controlling voting shares of Impact Makers, a multi-million dollar company, for a mere $1k — that is held in trust by the holding company and that allows the Permanent Director to guard the mission against encroachment by private interests.
At great personal expense, I and others believe we have no choice but to take a stand to protect the integrity of this unique model of a community benefit corporation and the stakeholders for whom it was created to benefit.
Click here to view the lawsuit.
To set up an interview Michael Pirron, contact his PR director, Hope Katz Gibbs: 703-346-6975 / hope@hopegibbs.com. Learn more about the case at www.MichaelPirron.com.
In 2006, Michael Pirron founded Impact Makers — a revolutionary social enterprise model. An “all-profit-to-charity” IT consulting firm, it is governed by a volunteer Board to ensure its commitment to mission, and which was gifted to two public charities to create lasting community benefit.
With $50 and a laptop, and as CEO grew it to a staff of 140, until he left the company last year.
What inspired him to create the organization?
Michael spent the early years of his career as a Senior Consultant with Andersen Consulting (now Accenture). His tenure allowed him to consult, with increasingly complex engagements, throughout the EMEAI (Europe, Middle East, Africa, and India) region.
During this time, he lived or worked in seven countries and spent significant time in more than 25 nations becoming conversant in French along the way. When he moved on to be a Product Manager with ViryaNet Systems in Jerusalem, Israel, he added Hebrew to his language skills. Later, while an independent consultant, Michael completed an MBA from Kellogg School of Management at Northwestern University in Evanston, Illinois.
Upon returning to the US, Michael held positions including the Manager of Application Development at Health Management Corporation (HMC), a leading disease management company and subsidiary of WellPoint Blue Cross / Blue Shield (one of the nation’s largest providers of health insurance) and the Director of Product Development at First Health Services Corporation.
In May 2019, he filed a lawsuit suing Impact Makers for negating the intent of of what he calls his “big hairy audacious goal (BHAG).” Keep in touch as the case evolves.
Michael Pirron, Impact Makers from Tony Loyd on Vimeo.
Follow Michael at www.MichaelPirron.com
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Richmond Times-Dispatch, May 2019 — A Richmond-based company known for its innovative business model that includes donating all of its profits to charity is now facing a legal challenge
from its own founder.
The founder and former chief executive officer of Impact Makers filed a lawsuit last week claiming that he was wrongfully pushed out of his leadership role with the technology and management consulting business.
Michael Pirron, who started Impact Makers in 2006 and led the business until he stepped down as CEO in January 2018, contends in the lawsuit that the company’s charitable mission could be jeopardized because its board of directors voted in April to change its corporate governance structure.
Pirron’s lawsuit, filed May 8 in Richmond Circuit Court, also claims that some of the company’s
executives and board members “vindictively and maliciously conspired” to remove him from
leadership.
The lawsuit seeks to reverse a vote by the company’s board in April that rendered toothless a “permanent director” role that Pirron had retained even after his departure as CEO. The role gave Pirron veto authority over certain matters affecting the company’s public benefit mission. Pirron had used that power to squelch proposals such as changing the company’s bylaws to allow for compensation of its volunteer board, changing a bonus plan for executives, and a proposal to sell the company to insiders.
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Michael Pirron filed suit against the IT firm he founded in 2006 last week after claiming other executives forced him out of the business.
May 16, 2019, Richmond BizSense — The original CEO of a well-known local IT firm is suing the company he founded, claiming he was pushed out by “ambush” to clear a path for an allegedly illegitimate sale.
Michael Pirron last week filed suit against Impact Makers, which he launched in Richmond in 2006 and helped grow to upwards of $20 million in revenue annually.
The company gained notice for routinely landing on lists of Richmond’s fastest-growing companies and for gifting its equity shares and the proceeds of its eventual sale to two local charities.
Also named as defendants in the suit are company executives and directors Karen Coleman, Teresa DiMarco, Scott Walker, W. Wilhelm Rabke, Andrew Wolff, Rodney Willett and Marianne Vermeer.
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This field-based case was prepared by Elena Loutskina, Associate Professor of Business Administration; Gerry Yemen, Senior Researcher; and Jenny Mead, Senior Researcher, Olsen Center for Applied Ethics. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation.
I’m a fiscal conservative, and I don’t believe in unbridled capitalism. Impact Makers is how I could best use my skills, experience, and training to go to work every day and make an impact in the world and change the world. That’s not why everyone is here, but that’s why I’m here. — Michael Pirron
Michael Pirron was looking in a mirror thinking about the difficult task he had at hand. Nine years earlier, in 2006, he founded a new type of company, Impact Makers, with the help of $50, a single client, and a laptop. On the surface, the company was no different than any other IT consulting company: it attracted top-quality employees, paid them competitive salaries, and provided superior service to its clients.
What was different was that the company was committed to donating 100% of its lifetime value to charitable causes, largely through partnerships with various nonprofit organizations. In 2015, Impact Makers reached annual revenue of $17.8 million and had cumulatively contributed more than $1 million to local charities since 2006. By any standards, Pirron’s built-from-scratch model had made a significant impact on the local community. But was it enough?
Establishing Impact Makers was a point of pride and achievement for Pirron. His company’s commitment to community added a spring to his step on the way to the office. It made him feel happy and complete in his job and gave him a sense of purpose. He knew that he was not alone in feeling this way. He was surrounded by a team of like-minded individuals and friends. “We are a group of middle-class professionals doing the same work we have always done in the consulting industry and receive market wages,” Pirron said. “But we are now making the same impact in the community as most foundations!”
In 2006, Pirron and his team started with a “big hairy audacious goal” (BHAG) of making a sustainable $1 million cumulative community impact using cash and pro bono work. As the company grew and surpassed this goal, it decided to revise the BHAG to state that by 2024, Impact Makers would make at least a $100 million cumulative impact in the communities in which it did business.
To do that, Impact Makers had to further grow its consulting business both through expanding a menu of services and through conquering new geographical markets. To do either, or both, the company needed a cash infusion. Internal cash was limited, as up to 40% of it flowed to charitable partners, demonstrating Impact Makers’ commitment to its mission. Raising debt for a company without fixed assets was challenging and time consuming.
Complicating it all was that being structured as a nonstock corporation rendered equity raising difficult. Could Impact Makers raise money to grow and stay true to community values at the same time?
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