Working Assets Funding Service

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Working Assets Funding Service

101 Market Street, Suite 700
San Francisco, CA 94105
U.S.A.
Telephone: (415) 788-0777
Toll Free: (800) 788-8588
Fax: (415) 788-7572
Web site:http://www.workingassets.com; http://www.workingforchange.com

Private Company
Incorporated: 1985
Employees: 100
Sales: $140 million (2000 est.)
NAIC: 522210 Credit Card Issuing; 513322 Cellular and Other Wireless Communications; 514191 On-Line Information Services

Working Assets Funding Service is a long-distance, Internet, and credit card company that donates a portion of its revenues to politically active and philanthropic nonprofit groups. The company’s phone service donates one percent of customers’ phone charges to organizations such as Amnesty International, Oxfam America, and Planned Parenthood, and ten cents is donated every time a customer makes a transaction using the Working Assets credit card. In 2001, the company reported it had donated approximately $25 million dollars since its inception in 1985.

Working Assets provides customers with free phone calls and company-Generaled letters to Congress, the White House, and business leaders on matters of national debate. Says Laura Scher, the CEO of Working Assets, “We provide a way for people to become effective activists and philanthropists through their everyday activities, at little or no cost to them. ... We’re all about building a world that is just, humane, and environmentally sustainable.”

Although Working Assets measures its success in terms of dollars donated rather than money earned (Sher points to 2000 as the company’s most successful year because Working Assets donated $5 million and Generaled 900,000 letters and calls), the privately held company has succeeded according to more traditional business criteria, as well. Working Assets’ revenues for 2000 totaled $140 million, and the company has appeared five times on Inc magazine’s list of the 500 fastest-growing enterprises in the United States.

Beginning in Social Consciousness

Working Assets sprouted roots in 1983 as a socially conscious investment house. The firm, called the Working Assets Money Market Fund, was founded by a group of eight partners headed by environmental activist Peter Barnes. The fund targeted investors looking for a way to invest money in a way that was socially and environmentally responsible. As Barnes told The Progressive in 1983, “We’re offering a choice that hasn’t been there before. What’s important for an investor to understand is that other criteria can be applied to investment than maximizing the bottom line.”

The Working Assets fund avoided interest in companies that engaged in unfair labor practices, violated environmental standards, invested in nuclear power, or conducted business in South Africa, which at that time followed the government-sanctioned policies of racial segregation (apartheid was abolished in the early 1990s).

Instead, the fund focused on such investments as alternative energy sources, certificates of deposit in financial institutions that funded farmers, and government loan programs for students, small businesses, and housing development. Despite industry skepticism and the difficulties inherent in ensuring the integrity of all their investments (for example, avoiding South African interests was particularly difficult, as South African stocks made up more than half of the market capitalization of the S&P 500), the fund had attracted $63 million by 1985. That year, Barnes became interested in playing a more active role in the causes Working Assets believed in. Realizing that many similarly-minded people didn’t have $1,000 to open a money market account, he decided that offering services and products linked to charitable giving would be a more efficient and popular way to support these causes. The subsidiary Working Assets Funding Service was founded, and Barnes hired Laura Scher, who had just graduated from the Harvard Business School, to head the venture.

From Conscience to Contributions

“For three months, I was the only employee,” Scher said in 2000, remembering the early days of Working Assets Funding Service. “I had to do everything from customer service to marketing to bookkeeping.” Her primary responsibility was to develop the products that would carry out the new company’s goal of promoting social responsibility. The first product was the Working Assets Visa Card, loosely modeled on a summer-long project conducted by American Express to fund the renovation of the Statue of Liberty. Working Assets donated five cents for every transaction made using the Visa card (this would later be raised to ten cents)—without cost to the customer and while maintaining a relatively low interest rate. While such “affinity cards”—cards that offer perks such as frequent flier miles—later became widely popular, in 1985 they were virtually unheard of.

Finding a bank willing to support such a card—and keep annual rates lower than the 20 percent typically charged at that time—was a major challenge. A Massachusetts bank launched the card with a 17.5 percent interest rate. By the end of the first summer, Working Assets had 10,000 customers—the number the bank had projected would be signed up by the end of the third year. The bank told Working Assets to stop signing up customers, forcing the company to find other banks to issue the card. In its first year, Working Assets donated $32,000 in proceeds from the card to 16 charities.

During the early years, Working Assets established the policy that would distinguish its donations from other corporate gifts and that would remain in effect throughout the life of the company: The donations would be made from revenues, not the bottom line. In other words, the company would donate regardless of whether it earned a profit. “Making money is not the company’s goal,” said Scher in 1985.

Despite this unorthodox business plan, the company thrived. By 1987, revenues—and donations—had tripled. That year, 55,000 cardholders Generaled $109,000, which was distributed among 32 organizations, and a Working Assets MasterCard soon followed. In 1988, Working Assets began allowing its cardholders to cast ballots to determine the percentage of donations allocated to these organizations. Also in 1988, the company offered a Working Assets Women’s Card, which made donations only to organizations that helped women and children.

With Working Assets Funding Service growing rapidly, the money market fund, which by then had $100 million under management, was spun off into its own entity in 1988. It would later become Citizens Fund, one of the largest socially responsible funds, with $765 million in assets by 1999.

Dialing for Donations

Newly autonomous and inspired by the success of its credit cards, Working Assets set about in 1988 to develop its next socially responsible product—long-distance phone service. Working Assets began the venture as a sales-agent for U.S. Sprint, using the same donation model it had used for its credit cards. Working Assets marketed donation-linked service wherein one percent of customers’ phone bills was donated—without cost to the customer—and Sprint provided the phone service. In 1989, 32 groups benefited from revenues Generaled by the long-distance service, and by 1991, Working Assets had attracted more than 50,000 customers.

That year, the company changed its method of providing long-distance service. As a sales-agent, Working Assets received a small marketing fee, which was roughly equal to its one percent donation and not enough to keep the operation afloat. Further, working with such a large carrier didn’t allow Working Assets control over its billing or the ability to customize its service to fit the needs of its subscribers. Working Assets became a reseller, buying discounted long-distance time in bulk from the major long-distance carriers and selling it to its customers at a competitive price (Working Assets rates would consistently stay about a penny cheaper than larger carriers). Operating as a reseller proved enormously successful for Working Assets. Revenues jumped from $2 million to $15 million in 1992, $1 million of which was donated. In 1993, revenues rose to $35 million, long-distance subscriber rates climbed to 130,000, and, as of the third quarter of that year, the company turned a profit for the first time. Working Assets also added business long-distance service in 1993.

Freed from its ties to Sprint, Working Assets was able to control its billing, and in 1991 it introduced the phone bill that Laura Scher called the company’s greatest innovation. “No one else thinks of the bill as a product,” she told the New York Times in 1993, “This is the crux of our whole operation and this is where we have fun.” Each Working Assets bill was printed with soy-based ink on 100 percent post-consumer recycled paper. The company felt compelled to plant trees to replace those felled to make the paper originally, and between 1991 and 2000 donated $400,000 to tree-planting groups all over the world.

Company Perspectives:

Working Assets is a long distance, credit card, and online services company that was created to build a world that is more just, humane, and environmentally sustainable. The company was established in 1985 to help busy people make a difference in the world through progressive philanthropy and political activism.

Working Assets donates a portion of its revenue to non-profit groups working for peace, human rights, equality, education, and the environment. The company also serves as a strong political force, dedicated to giving its customers the opportunity to speak out on critical public issues.

Working Assets customers were given the option to “round up” their bills (for example, paying $37 on a $36.14 bill). The rounded-up funds, which averaged $50,000 a month in 1993, were added to the one percent of revenues set aside for charitable donations. At the end of the year, customers were issued a ballot and could vote on the organizations they wished to receive the money.

Working Assets wanted its bill to serve as a lobbying tool as well as a fund-raising tool, and with the creation of the Citizen Acton program, it provided customers with easy ways to speak out on issues important to the company. Each bill highlighted two current issues, listed contact information, and encouraged customers—through free and discounted calls, and later company-Generaled letters—to contact the people making decisions about those issues. Later, the bill evolved to include a “recommended reading” list of books in line with the company’s political philosophies. Customers could order the books directly on the bill at a ten percent discount, with one percent of the price going into the donations pool.

By 1997, Working Assets’ donations had grown to $2.5 million, and E magazine called the company the “granddaddy” of the burgeoning movement of socially and environmentally progressive long-distance companies. The bulk of the company’s revenues and donations came from the long-distance service, which had 250,000 subscribers. New subscribers were given a coupon for a free pint of Ben and Jerry’s ice cream each month for the first year of service.

Citizen Action Victories

Working Assets was generating between 30,000 and 50,000 calls and letters each month from the Citizen Action alerts included their bills, and the lobbying efforts were beginning to bear fruit. In a 1997 interview with the environmental organization SEE Green, Scher reported that Working Assets had asked subscribers to lobby Mercedes Benz to pay reparations to Holocaust survivors who had been slave laborers for the company during World War II. The campaign Generaled more than 30,000 letters and calls, and within months, Mercedes Benz had contributed to a $2 billion reparations fund, along with several other German companies.

Working Assets-Generaled letters and calls also accounted for about 44,000 of the 200,000 received by the USDA that led the agency to apply strict labeling standards for organic foods. The Capital Research Center, a group that studies nonprofit organizations, reported that 24 percent of the 26 Citizens Actions headed by Working Assets in 1999 resulted in success, including a campaign to back a bill to encourage wind energy production through a tax credit. In its press kit, Working Assets counts “renewing the Violence Against Women Act, protecting the Tongass Rainforest in Alaska, and convincing Congress to invest $12 billion in conservation initiatives” among its 2000 Citizens Action victories. “We don’t win all the time, but we win enough to make a significant impact,” Scher told SEE Green.

Working Assets in the Internet Age

Working Assets continued in its quest to add products and services, and in 1997, it introduced Internet access. The service was provided in partnership with the nationwide Internet service provider Earthlink Network, Inc. Earthlink provided the service and customers were billed via their Working Assets bill. Working Assets’ donation model was applied to the new venture: the company contributed one percent of the $19.95 monthly service fees to nonprofit groups selected by members.

In 1999, the company launched a trio of “e-philanthropy” Web sites that promoted the company’s commitment to social change. Giveforchange.com allowed visitors to make online donations directly, giving them access to hundreds of nonprofit groups in one location. Volunteerforchange.com helped individuals nationwide find volunteer opportunities at more than 20,000 nonprofits and public sector organizations. Shopforchange.com provided a portal to 60 popular online merchants such as Amazon.com, Land’s End, and the Sharper Image. A percentage of the price of every item purchased was donated to nonprofit organizations. The site also maintained lists of progressive merchants, tips on socially responsible shopping, and a Citizens Action program similar to the one connected with the Working Assets long distance service. In the first five months of its existence, shopforchange.com registered 100,000 customers.

Challenges Ahead

The turn of the century was challenging for Working Assets. An attempt to enter the local phone service market in 1999 failed after the company experienced difficulty working with Pacific Bell. Working Assets also attempted to enter the broadcasting arena by starting an AM radio station, KWAB 1490 in Boulder, Colorado, that broadcast simultaneously on the Internet. While the station won awards for its coverage, it was unsustainable as either a traditional broadcast business or as an Internet broadcaster. Working Assets sold the station to Colorado Public Radio in May of 2001.

Working Assets’ growth also slowed somewhat at the end of the decade. Revenues between 1998 and 1999 grew by $10 million, a small increase compared to the exponential leaps made in the early 1990s. In response, Working Assets looked for a way to expand its service line. “To continue growing at the pace that Working Assets is growing at, we need to offer new products,” Scher told the San Francisco Business Times in 2000.

Key Dates:

1983:: The Working Assets Money Market fund is established.
1985:: The Working Assets Funding Service is incorporated; Laura Scher becomes CEO; the company offers its first credit card.
1988:: The mutual fund business spins off; the company offers phone services.
1991:: Working Assets Long Distance is established.
1993:: The company becomes profitable for the first time.
1997:: The company offers Internet access services.
1999:: The company launches three “e-philanthropy” Web sites.
2000:: The company offers wireless services.

Working Assets became one of the first wireless resellers in the country when it began offering digital wireless phone service in 2000. Initially, the service was available only in Seattle and San Francisco, but it soon expanded into 20 major metropolitan areas. As with its other services, Working Assets donates one percent of its wireless revenues. Working Assets also began exploring the possibility of providing electricity to customers in parts of the country. However, in 2001, Working Assets’ primary future business goals underscored the emphasis it had always placed on philanthropy over profits: to donate $10 million dollars a year and to Generale two million political calls and letters a year. “We’re highly motivated to growing our business,” Scher told SEE Green, “We need to be bigger.”