Blue Ridge Paper Products in western North Carolina is one result: a major US producer of milk and juice cartons and paper cups, with more than 2,000 employees at six processing plants and the main pulp mill in Canton, North Carolina. KPS created this company out of capital assets that Champion Paper was abandoning after a Wall Street auction to sell them failed to find any buyers. KPS bought them for $200 million, alerted by an urgent plea from Bob Smith, a vice president of PACE, the Papermakers, Atomic, and Chemical Employees union.

The KPS fund, with GE Capital as co-investor, put up $35 million in equity capital and borrowed $200 million to acquire 55 percent control--while the employees, union and nonunion, own the other 45 percent through an employee-ownership trust. To finance their stake, the employees agreed to take a painful 15 percent reduction in overall compensation. Workers have four elected directors sitting on the eleven-member board. They are embarked on the promising but very difficult process of changing industrial culture. "It's going to take a lot of time," Psaros says, "but we are transforming what I would call a Stalinist, reactionary, stifling, autocratic, oppressive culture that has existed in those plants for more than seventy years. We are creating a participative, communicative, twenty-first-century culture where the company relies on people's brains more than it does on their backs."

Bob Smith, the union vice president, spoke in the same terms. "For many, many years, American management of labor has been totally authoritarian," Smith says. "You come in and go to work and you check your brain at the door and just do what you're told. Instead, he says, "the culture needs to be, Hey, I'm part owner, I've got part of the responsibility for making this operation survive. The quality of the product is no longer the company as such. The company is now partly me."

Blue Ridge Paper became a more effective and profitable company rather quickly. During its first two and a half years, more than $100 million of expanded cash flow was reinvested back into modernizing the company, buying new machinery and acquiring another packaging company, which expands Blue Ridge's market share. It now makes every Minute Maid carton and has picked up the Florida Natural account. If things go well, KPS might be expected to "exit" its ownership in four or five years and sell its 55 percent stake to the stock market or other investors, including the employees. Blue Ridge's 2,000-plus worker-owners could decide to cash in too, collecting an equivalent reward of around $100 million. Or the employees might exercise the covenant that gives them first option to buy out KPS's stake, and they would own 100 percent of the company--which is what Smith is hoping for.

The essential meaning of Blue Ridge, however, is not about how to save a paper mill or how one can get wealthier by taking risks. The larger meaning is about finance capital's power to advance society's values. Blue Ridge Paper Products is a relatively simple example in which targeted investing has been employed to support "a different view of life," as Mike Psaros put it. In this regard, the techniques of direct-equity investing represent largely unexplored territory, since, outside labor's ranks, very few social reformers have tried to use capital in a tightly directed manner to gain social leverage within capitalism. The techniques are neutral in themselves. Their purposes depend upon who takes charge, on what they expect in the way of returns--financial and nonfinancial--and what they demand as covenants.

One can imagine many variations on the social theme, as people and groups learn how to mobilize and focus their capital for unconventional objectives. Rescuing industrial assets and manufacturing jobs, important as it is, represents only a small corner of investment activity, and the task of reaching into successful corporations with social covenants demanded by the investors is obviously far more difficult. So is the challenge of financing innovative startup firms that are willing to accept more ambitious social commitments in exchange for patient capital. Given the extraordinary variety of hybridized financial instruments that Wall Street devises, the potential for elaborating specialized interventions is vast but largely unknown. Conceivably, for instance, environmentalists could organize targeted capital investments in major corporations to provide financing for the technological changes in production systems needed to protect nature--the ecological reforms business and finance have been reluctant to make. The returns on targeted eco-capital would be based upon the improved efficiencies these technologies bring to the company. Society's return would be a less destructive industrial system.

So long as the risks are pursued with tough-minded self-discipline, there is nothing in the operating rules of capitalism to prevent any of these departures from the status quo, whether they involve community-loyal investment funds or the pressuring of pension-fund trustees to alter their investment priorities, or punishing the disloyal Wall Street firms or taking control of corporations by making direct-equity investments. Indeed, these are routine practices within the system, employed every day on behalf of narrower objectives and self-interested values. The financial power of society awaits the rise of tough-minded social inventors, investing risk-takers with the courage to take control of their own money.

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