Stimulating Market Forces: Getting Incentives to Work for You

Abstract

Every year, I invite a local businessman/entrepreneur to speak to my class in Corporate Social Impact Management. His name is Kevin Trapani, and he is the chief executive officer of The Redwoods Group, a company that has been extremely innovative in generating a strong positive social impact for its clients and their communities. Much of this positive impact can be attributed to Trapani’s astute way of aligning several incentives to work for the public good. The Redwoods Group sells liability insurance to YMCAs, Jewish Community Centers, and summer camps. Redwoods makes more money, and their clients are more satisfied, if no one sues or seeks liability compensation from these organizations, eating into Redwoods’ reserves. And if no one sues or seeks compensation, then Redwoods can afford to lower their rates and still make good money for their shareholders, pleasing their clients even more and leading them to recommend Redwoods to others. What stimulates all these financial incentives to work are training programs that Redwoods has developed that show their clients how to virtually eliminate drownings and child sexual abuse—the two biggest causes of liability actions against YMCAs, Jewish Community Centers, and camps.