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By John Reid Blackwell
Richmond Times-Dispatch, May 15, 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.
Pirron said in an interview that he still believes in the company’s mission and its staff, which he called “top notch.” He said he filed the lawsuit not for personal financial gain but to protect the company’s purpose and undo the governance change, which he said amounts to a sale of the business for only $1,000.
“I started Impact Makers to create a new, conscious capitalism model that would be a form of social
activism through business,” Pirron said. “In the times we are currently living in, I canʼt stand back and let bullying business tactics and conventional, traditional business practices win the day on whatʼs right. I need to stand up for the principals on which I founded this organization and the model I created to achieve those ends.”
Impact Makers CEO Andy Wolff said the lawsuit is baseless and the company will defend itself
vigorously.
“We definitely believe we have done nothing wrong, and we have acted in the interest of both the
company and the community on all fronts,” said Wolff, who was hired in October 2018, about nine
months after the board voted to remove Pirron as CEO.
*Impact Makers, which has its headquarters in Scott’s Addition, was the first company in Virginia to
become a certified B Corp., a model in which a business officially adopts social good or charitable
giving as part of its mission in addition to making a profit.*
From its founding in 2006, Impact Makers grew to have about $20 million in revenue in 2018, though the lawsuit says the company lost money in 2017 and 2018.
The company said in April that is has donated more than $3 million to philanthropy to date. Its most significant potential charitable gift came in 2015, when Impact Makers restructured as a benefit corporation and announced it had gifted equity ownership to two organizations that support philanthropy and community development: Virginia Community Capital and The Community Foundation for a Greater Richmond.
The gift was structured so those two organizations would receive financial proceeds from an eventual sale of the company. When the gift was announced, Impact Makers was independently valued at $13.4 million, the lawsuit says.
Sherrie Armstrong, the Community Foundation’s president and CEO who recently joined the Impact
Makers board, declined through a foundation spokeswoman to comment on the lawsuit. A spokesman for Virginia Community Capital also declined to comment.
At the time of the gift, Impact Makers’ governance was changed to create a holding company, Impact Makers Holdings, as the sole shareholder of all of Impact Makersʼ Class A voting shares, and Pirron was named permanent director. Those governance arrangements were specifically designed to ensure that the pledged gift of the business to the Community Foundation and Virginia Community Capital ultimately would be carried out, the lawsuit says.
In addition to blocking proposals on board pay and executive bonuses, Pirron also voted against an offer in August 2018 to sell Impact Makers to four company insiders for $13.4 million, which was $4.7 million less than the $18.1 million the company had been independently valued at eight months earlier, according to the lawsuit.
The named defendants include Wolff and the companyʼs board chairman Karen Coleman, the
president and founder of consulting firm Mount Royal Associates who is a former executive director
of the VCU School of Business Foundation and former VCU professor.
Others name are current board members Teresa DiMarco with DiMarco & Associates LLC; and Scott Walker with Consult360 LLC; former board member Marianne Vermeer with Vermeer Consulting Group; and the company’s vice president Rodney Willett, the Democratic nominee for the Virginia House of Delegates for District 73, which includes part of Henrico County.
Also named as a defendant is lawyer W. Wilhelm Rabke, with the Graybill, Lansche & Vinzani LLC firm, who according to the lawsuit first advised Pirron on how to set up the governance structure that made him a permanent director, then later advised the board on how to undo that same structure.
The lawsuit claims that Pirron was increasingly marginalized in board discussions and decisions. In late 2018, Pirron sought a waiver for the noncompete clause in his CEO separation agreement so
that he could seek other employment, but he was told the board would not grant him a waiver unless he resigned as permanent director. Pirron offered to nominate entrepreneur Jerry Gorde to succeed him as permanent director, but the board rejected that, the lawsuit says.
Then, in what the lawsuit describes as an “ambush,” the Impact Makers board in April voted to approve a sale for $1,000 of its non-economic Series A voting shares to an entity called Benefit Holdings Inc., created by former Impact Makers directors. The change in governance rendered the permanent director role powerless.
The lawsuit says the board was notified of the offer to sell the shares on April 10, but that was one day before Benefit Holdings’ effective date of incorporation in Virginia.
The company characterized the change as a transfer of shares, but Pirron contends it was in reality a sale that changed control of the company.
The lawsuit seeks to reverse that action or award Impact Makers Holdings $15 million in damages to “empower Impact Makers Holdings to fulfill its chartered purpose by giving the damage award to
public charities.”
Pirron is being represented by Thomas M. Wolf of the law firm LeClairRyan in Richmond, and Tricia
Dunlap of Dunlap Law in Henrico. Dunlap Law is a certified B Corp. and provides legal advice to those types of businesses.