Michael Sauvante

 

 

Michael Sauvante and the Commonwealth Group

Michael Sauvante is executive director and principal program creator of the Commonwealth Group (CG).* He has more than 30 years experience in new venture creation, and has long been a progressive thinker in the field of sustainability, corporate social and environmental behavior, and corporate responsibility.

Along the way, he developed a comprehensive understanding of the process of creating and growing new businesses and all aspects of new venture creation and corporate finance. He has a deep and wide understanding of general corporate law, corporate securities law, banking and tax law and more.

More recently he has pursued social entrepreneurial efforts, principally through Commonwealth Group. Over the past five years, he has applied his experience by advancing concepts directed at programs with a public benefit, primarily community economic development. Commonwealth Group has effectively operated as a small private think tank, advancing ideas on a number of dimensions.

The First Step

Sauvante’s first effort in this space was an academic paper entitled "Rewiring Corporate DNA" that was published by the Center for Business as an Agent of World Benefit at Case Western Reserve University's Weatherhead School of Management.

That paper identifies the critical role that corporate statutes play in driving corporate behavior and makes the case that if society wants to permanently modify the behavior of corporations - to make them more socially, environmentally and economically responsible - then we must change those statutes to drive the behavior we would like to see.

He followed that with the first project that served as the foundation for the Commonwealth Group – the Community Energy and Economic Development (CEED) Program.

The CEED Program

Sauvante developed the CEED Program in collaboration with Vari MacNeil and Patricia Carlson.  MacNeil now leads creative strategy and communications for Commonwealth Group and Carlson heads the organization’s operations.

The program called for using green energy as the basis for stimulating local economic development. It envisioned deploying a community based comprehensive plan for energy generation, conservation and efficiency as the drivers for creating dozens of new local companies, each needing to hire 5-20 employees. These new businesses would provide new goods and services not present in the local economy and therefore would not compete with existing businesses.

When it became clear that the local food movement also represented a "greening" opportunity for creating dozens of additional new, non-competing local businesses beyond those in the energy space, the acronym evolved to represent a more expansive concept --  Community Enabled Economic Development, with the obvious double and even triple entendre of the CEED acroynm. The core of the program revolves around the three key ingredients needed to successfully deploy any kind of local economic development program -- know-how, capital and credit.

The development of the know-how component evolved into a unique combination of ideas taken from franchising, business incubation and stand-alone start-ups. The program integrated those best practices into a template for how communities could choose from a menu of proven, energy-related business concepts in existence elsewhere in the country, and deploy them in a coordinated fashion. That template can be further expanded to include local food related businesses as well.

Capital AND Credit

The program hit a snag when CG attempted to address the money issues necessary to facilitate the creation and building of those local companies. Two systemic conditions negatively affect small business capital formation and credit: the country’s antiquated securities laws and the current financial crisis. Since 2008, the availability of credit has plummeted for small businesses. Community banks in particular have been devastated by the housing crisis and neither they, nor the big banks, have been doing much lending at the local community level. Local economies stagnated and in many cases collapsed as a consequence.

That led CG to turn its attention to these problem areas, recognizing that ways had to be found around the current barriers preventing the flow of funds to small businesses. Sauvante pursued two parallel paths, one focused on securities laws and what might be done to make them more supportive of small and medium-sized businesses, while the other explored the banking space and what might be done to break the logjam there.

Securities Laws

Sauvante began by assembling a comprehensive sampling of white papers, law journal articles, studies and other publications dealing with the barriers to capital formation for small businesses represented by securities laws. That  compilation represents one of the most complete sources of such information in the country.

Sauvante then developed two new concepts – the first concerned how to work with existing laws to overcome some of the most common barriers and the second explored ways to change the existing laws.

His efforts to find solutions within existing law led him to write a primer outlining currently available but little-known pathways to obtaining funding from the public. Titled "Going Public: How Companies Too Small for the National Stock Exchanges can Access Public Capital," the primer can be found in the Raising Capital section of the CG website.

Sauvante’s work on the larger problem of modifying securities laws at the national level started with the fact that the organizations overseeing the securities space have little expertise with small business. The SEC (Securities and Exchange Commission), tasked with rules generation and oversight of the nation’s securities laws and systems, and its proxy, a self regulatory organization (SRO) called FINRA (Financial Industry Regulatory Authority) that oversees stock brokers and stock exchanges, both understand Wall Street and its environment very well. Whether they effectively manage it is another issue, but they at least understand it.

The world of Main Street and small businesses, however, is quite foreign to them and they do a poor job of overseeing and managing it, as evidenced by the plethora of ineffective and counterproductive securities regulations highlighted on the above mentioned Securities Regulation page.

His work on those concepts led to an invitation from the White House and the Small Business Administration to attend one of eight roundtable meetings held around the country where entrepreneurs and others concerned with small business formation were asked to provide input on ways that the government stands in the way of small businesses and to recommend solutions. It was there that he conceived of the need for a new SRO.

His concept called for creation of a completely new SRO (parallel to FINRA) tasked with oversight of small business capital markets, leaving FINRA to oversee Wall Street. Ideally it would be set up and run by experts from the small business community, including entrepreneurs, small business owners, attorneys, accountants, angel and venture capital groups, community economic development specialists and others who know and understand that community well.  (See the first section on the Securities Regulation page for more information on this concept.)

Encouraged by the White House representative at the roundtable to purse his idea, Sauvante teamed with Lee Petillon, one of the nation’s leading small business capital formation legal experts. Together they crafted a draft Congressional bill that they presented to a former SEC commissioner who agreed to champion it before Congress.

Timing dictated that the draft bill be held back until a tangentially related effort had worked its way through Congress. A bill to legalize crowd funding was gaining Congressional support and a parallel effort was thought to be confusing and potentially hurtful to both. Crowd funding is a key piece of CG’s SRO concept and Sauvante was an early supporter of the legislation, writing to the SEC in support of the bill and participating with the lead group driving the effort in Congress.

Crowd funding and a number of other revisions to securities laws formed the basis of new legislation known as the Jumpstart Our Business Startups Act or JOBS Act. With the 2012 election looming and issues pertaining to the JOBS Act still to be worked out with the SEC, Sauvante put the SRO project on hold until those issues are resolved. But he believed that progress could still be made in the meantime, and turned his attention to banking, credit and the companion topic of foreclosures.

Banking AND Credit

While researching the securities space, Sauvante came to realize that banking in the U.S. can be divided into two worlds: that of community banks and that of Wall Street banks.

Community banks throughout the country (except in North Dakota, as detailed below) are in deep trouble, primarily because of the housing crisis compounded by the ripple effects on the rest of the economy. In contrast, the banks on Wall Street appear to be immune to the economic crisis and have been reporting record profits. To make matters worse, the origins of the housing crisis can largely be traced back to those Wall Street banks.

Sauvante learned of a third category of banks (here and elsewhere around the world) that is very healthy and contributes in a positive way to local communities. Known as “public” banks, these are owned by and for the benefit of the public rather than private shareholders. See this section on National Commonwealth Group’s Main Street Matters site, intended to explain and promote public banking and other sustainable financial models.

He began to consider publicly owned banks as an alternative source of credit for small business after reading about the Bank of North Dakota (BND), the only government owned bank in the United States. BND was started over 90 years ago and it appears to be the central factor in North Dakota ranking as the most robust state economy in the country with the lowest unemployment rate and the healthiest group of community banks.

He also learned that Germany makes extensive use of public banking, and the majority of German community banks (called Sparkassen banks, i.e., “savings” banks) are owned by local community non-profit organizations. See the above referenced section on Main Street Matters for articles and background on BND and the Sparkassen banks.

BND remained obscure until attorney and writer Ellen Brown wrote a book entitled “Web of Debt” in which she dissects the history and current makeup of the nation’s money and banking system, including the role of the Federal Reserve, and in the process, strips away many of the commonly held beliefs and myths about banking and money. She spells out how the private banking community has been granted the right to create money (through the loan process) and that the industry is largely self serving and counterproductive to the rest of society, something that the now almost-daily revelations of corruption and fraud on Wall Street make clear.

Brown’s continuing research led her to BND and other public banks around the world, information which she added to later editions of her book. She learned that public banks operate on a completely different set of standards that very much support the needs of society rather than private shareholders. Wherever one finds public banks today, one generally finds the healthiest economies. Brown has since published numerous articles on public banking, as can be seen here.

Her book, articles and public speaking on the subject of our current money system and the alternative represented by public banking triggered a nationwide public banking movement (at least 18 states have introduced some form of public banking bills) and Sauvante has become a leading proponent. The movement resulted in creation of the Public Banking Institute (PBI), with Brown as President and the Chairman of the Board. For a period of time, Sauvante served on the Advisory Committee to PBI. PBI held the nation’s first conference on public banking in April 2012 in Philadelphia.

The Housing Crisis AND a Plan to Stop Foreclosures

Sauvante was a speaker at the conference, introducing the notion that one cannot address the banking crisis without simultaneously addressing the housing crisis. In his presentation titled "Foreclosures, Eminent Domain and Public Banking," he explained how eminent domain could be used to block foreclosures and keep homeowners in their homes. He then presented a hybrid public banking model bringing together non-profit and government organizations to create a new form of public bank.

The premise is that government-owned and non-profit-owned banks (both forms of public banks) have individual strengths and weaknesses. However, because those strengths and weaknesses are nearly perfect mirror images, the right combination of the two will offset the weaknesses.

Sauvante suggested that although a foreclosure prevention program and a public banking program can each stand on their own, they would be more beneficial in concert. You can view his presentation and learn more here.

After an analysis of implementation strategies, it was determined that halting foreclosures would do more to get the economy back on its feet that almost any other single action. Serendipitously, the public banking effort then becomes easier to launch as a support mechanism.

Sauvante's 2012 book "Eminent Domain - How to use eminent domain to stop foreclosures, rescue homeowners and save communities” provides readers with the tools needed to implement the eminent domain strategy on a local level. It calls for a team effort among local governments, local non-profit organizations and local attorneys.

Before Commonwealth Group

Sauvante spent the bulk of his entrepreneurial career founding and running more than a half dozen companies in the San Francisco Bay Area, including more than 8 years in Silicon Valley.

In 1998, he founded Rolltronics Corp., VoltaFlex Corp. and InnoSigns to leverage new “roll-to-roll” manufacturing methodology. He later co-founded Seertech Corp. to consolidate these companies and provide a platform for growing new ventures.

Those projects evolved from his pioneering work at HP Labs, where he initiated a new business development project intended to provide a more conducive lab-to-market environment for technologies that were not finding commercial outlets within the company. Sauvante solicited and received help for the project from Harvard Professor Clayton Christensen, author of “The Innovator’s Dilemma” and “The Innovator’s Solution,” and from Dr. Mark Rice, co-author of “Radical Innovation: How Mature Companies Can Outsmart Upstarts” and later dean at Babson. His efforts to develop pathways for new product commercialization within a company as large as HP were viewed as so game-changing that he was invited to use his project as the foundation for a custom Ph.D. designed to capture his ideas concerning new venture creation in mature companies. He reluctantly shelved those plans when he elected to leave HP to start Rolltronics.

Before joining HP, Sauvante founded NovaQuest, an IT consulting company; NovaQuest/proQuaestus a software company that developed an international trade database related to commodity classification and customs duty rates; Interconnect Options, which specialized in telecommunications systems; Warm Springs Development Associates, a real estate development company that led the initial development phase of a 700-acre high tech industrial park in Fremont, Calif.; and I.E.S. Construction Services, which served the heavy equipment segment of the construction industry.

Sauvante’s philosophy for building sustainable businesses is outlined in “The Triple Bottom Line: A Boardroom Guide,” published in the “Director’s Monthly” of the National Association of Corporate Directors (NACD). His efforts to change California's laws to make corporations more socially and environmentally responsible is highlighted in the book, "Megatrends 2010: The Rise of Conscious Capitalism," by Patricia Aburdeen. He expanded on that topic in the aforementioned article "Rewiring Corporate DNA," published by the Center for Business as an Agent of World Benefit at Case Western Reserve University's Weatherhead School of Management. He is also principal author of the eBook, “So, You Want To Be An Entrepreneur?”

Along with corporate responsibility, Sauvante is a strong advocate of transparency. This became even more important following an unsuccessful takeover attempt of first VoltaFlex Corp. and then Rolltronics Corp. by a small group of investors who then embarked on a campaign of disinformation against the founders. Unfortunately their efforts also resulted in the demise of those companies, in spite of management's best efforts to salvage them.  Nonetheless, that experience served to further motivate Sauvante to help bring about constructive change in the world of business. Thus the creation of the Commonwealth Group and its emphasis on programs dedicated to public benefit.

In 2002, Sauvante was recognized by the World Economic Forum in Davos, Switzerland, as one of 35 “Technology Pioneers” worldwide. He holds a dual Bachelor's degree in Business Administration and Technologies Studies.

His other writings include:

"A New Stock Exchange Where People and the Planet Matter" What if there were a stock exchange where society and the environment were the top priority and profit a means to maintain continuity and not an end in itself? What if the corporations listed on such an exchange were valued based on how well they served society instead of solely by short-term profit? Such an exchange is possible. Read this article for the basics and then go to this link for updates.

"A Primer on Going Public in the U.S." This article teaches the basics of what it takes for a company to go public in the U.S. with a particular emphasis on how small companies can go public and take advantage of public capital.

"The Wealth of the Commons and Public Benefit Financial Institutions" takes a look at how individuals can change the current wealth dynamic that has existed for decades.

"Corporate Cooperatives - What Are They?" The label "Corporate Cooperative" is used to describe a specific kind of business structure whose purpose is to aggregate a number of small and medium sized private businesses into one collective public entity (a corporation), in order to provide the individual businesses with the increased health, viability and liquidity that a larger, public organization can achieve.