Rethinking Ownership in the 21st Century
Steward-ownership represents a viable alternative to shareholder-primacy ownership. In addressing fundamental structural deficiencies of our system, it retools the goals and incentives the guide decision making in companies in the corporate DNA. By doing so it has the power to transform the economy.
The concept of “steward-ownership” harnesses the power of entrepreneurial for-profit enterprise, while preserving a company’s essential purpose to create products and services that deliver societal value and protecting it from extractive capital.
These structures replace shareholders and financially incentivized managers at the helm of businesses with people who are connected and committed to a company’s purpose, employees, and broader stakeholder community. Businesses following this approach are not simply distant investment vehicles focused on short-term shareholder profit-maximization, but connected living-enterprises oriented to delivering the long-term success of the business’ underlying purposes and value-maximization for all stakeholders.
These models have been tested for over a century, often structured as trusts, foundations, or employee-owned companies, all of these companies have fundamentally redefined ownership by committing to two principles:
(1) Self-governance — Control remains inside the company with the people directly connected to stewarding its operation and mission. With the control of the company held in a trust, it can no longer be bought or sold.
(2) Profits serve purpose — Wealth generated by these businesses cannot be privatized. Instead, profits serve the mission of the company, and are either reinvested in the company, stakeholders, or donated. Investors and founders are fairly compensated with capped returns/ dividends.
Industrial giants such as Novo Nordisk, BOSCH, and Zeiss, as well as Mozilla, OpenAI, Newman’s Own, and dozens of startups and mid-sized businesses (and thousands of business in Denmark) are proving steward-ownership a viable, successful third way of ownership. These businesses not only outperform traditional for-profit companies in profit margins, they are more likely to emerge from financial crises intact, and offer significantly less volatile returns. Compared to conventionally owned companies, steward-owned companies also pay employees higher wages with better benefits, have lower employee attrition rates, and are less likely to reduce staff during financial downturns.
Steward-ownership not only enables companies to better internalize externalities, acting more responsibly towards people and the planet, it also helps combat the growing wealth gap caused by the accumulation of inherited wealth. Because steward-owned companies cannot be inherited, they help prevent dynastic wealth accumulation. What’s more, they prevent owners from extracting excessive profits from businesses. Instead, steward-owned companies are “self-owned.” These businesses belong to the commons, serving their purposes and the interests of all the stakeholders who contribute to their successes, and helping to build a more equitable, regenerative economy. In this sense, they democratize capital.