Design: Leon Postma and Harald Dunnink (Momkai)

The public service veto: How The Correspondent protects itself from profit maximization

Jay Rosen
The Correspondent
Published in
10 min readOct 18, 2018


In my recent post, What The Correspondent will add to the American press, I explained in detail why I decided to work with the Dutch founders of the site (who are half my age) on their expansion to English language publishing.

The simplest answer is: I like the way they do things.

For example: A design principle and aspiration of De Correspondent, their five-year-old Dutch site based in Amsterdam, is to optimize everything they do not for clicks, likes, ads, or journalism prizes, but for trust. I like this a lot. And I like the way it fits with their business model. De Correspondent is the world’s most successful ad-free, member-funded news site. Some 61,000 people who believe in its approach support it with their Euros, time, and expertise. But they won’t continue to do that if they don’t trust the company, as well as the journalism it produces.

As a condition of their trust and support, De Correspondent’s Dutch-speaking members expect transparency. “Readers pay us, and we invest that money into journalism,” writes CEO Ernst Pfauth. “That is our business model in a nutshell. And just like shareholders from a publicly traded company, our members want to know how we invest that money.” His post explains just that: how member fees are spent.

As Trust Advisor to The Correspondent — the English-language site that we hope will launch with its own editorial staff in the next eight months — I have been thinking a lot about the kind of transparency required of member-funded journalism before it even has members, or any journalism to show. First on the list are the principles that will guide The Correspondent’s editorial work, and what makes them different from journalism-as-usual. Founding editor Rob Wijnberg had been writing about that. (See this post and this one.) Second on the list is transparency around ownership, governance, and legal structure.

Rob Wijnberg (L) and Ernst Pfauth (R) speaking at a De Correspondent member event | Photo: Bas Losekoot

In my weekly meetings with the Dutch founders, I have been asking them the kinds of questions that I think will come up when we start inviting people here to become members of The Correspondent. The one question I have asked more than any other goes like this: “How would a member know for sure that what happened with the sale of the Huffington Post — for $315 million to AOL in 2011 — could never happen with The Correspondent?” This matters because unpaid contributions from readers were at the time a part of the Huffington Post’s business model. (They no longer are.) Members, I said, are not going to support a site which, if wildly successful, will exploit their contributions by selling it to a profit-maximizing property. They promised me there would be an answer to my question.

Now in my first official duty as the company’s Trust Advisor I am going to explain what that answer is. Ready?

The Correspondent, Inc. is a Delaware Corporation. CEO Ernst Pfauth told me, “We’ve chosen this corporate structure because it’s easy to set up. When our membership campaign is successful, we can research whether another structure would fit our mission better — such as a public benefit corporation or a B Corporation — but our current legal structure is already sufficient for protecting our mission.”

I will explain in a moment the basis for Pfauth’s statement, “sufficient for protecting our mission,” but first it is important to state this clearly:

  • The founders of De Correspondent are not “above” making a profit from their creation (that wouldn’t be very Dutch of them…)
  • But they understand well the damage done to journalism by profit maximization and the unrealistic expectations of investors.
  • They have therefore taken steps to make sure this doesn’t happen, but they have not incorporated as a non-profit, as other news sites with similar missions have done.
  • Still, one of The Correspondent’s ten founding principles says that it will “always put journalism before financial gain.”

One way this gets put into practice is with a self-imposed profit cap: five percent. The Correspondent’s principles state:

For over a century, the dominant business model in the news industry has been selling the attention of audiences to advertisers. The end goal is to maximize shareholder profit by attracting as much attention as possible. At The Correspondent, our goal is to serve our members, maximizing trust instead of financial gains. That’s why we do not maximize shareholder return, limiting dividends to 5 percent of revenue. We do not accept investment capital that does not adhere to this dividend cap.

One reason for the profit cap is to make The Correspondent uninteresting to a hedge fund or a profit maximizing media company like Disney or Gannett. Another is to say clearly to members, “We will never let the journalism suffer because of profit maximization.” Because the profit cap is self-imposed, a skeptic might ask: what’s to stop the company from simply changing its mind and eliminating the cap? Fair question! The answer to that involves the legal structure of the company, and the terms on which it has attracted investment.

The Correspondent Inc. is wholly owned by a Dutch company (The Correspondent, BV). That company is controlled by the four Dutch founders: Sebastian Kersten, Harald Dunnink, Rob Wijnberg and Ernst Pfauth. But it has investors too. The investors have provided the so-called “runway” funding needed to launch a membership campaign for English-language readers. The hope and plan is that The Correspondent’s journalism will be fully funded by reader revenue. (That means no ads, which makes it different from Buzzfeed, and no corporate sponsors, which makes it different from NPR.) But to become member-funded first you need members. It costs money to design and execute an effective membership campaign. This is what the investors have provided: runway so the project can take off.

One of them is Luminate (part of the Omidyar Group), which announced in May 2018 that it would give $950,000 in runway funding. (Read why here.) The other investor with a stake in The Correspondent is a Dutch foundation, Stichting Democratie & Media, or SDM, which put up 600,000 Euros in September 2017. (See the announcement and terms here.) SDM also backed De Correspondent, the Dutch site, when it got off the ground in 2013–14. Craig Newmark provided $100,000, as well, but he structured that as a grant from Craig Newmark Philanthropies.

For both of its investments, SDM claimed what is called a “priority share,” designed to safeguard the site’s fundamental principles. Essentially it’s a public service veto (that’s my language) over changes in The Correspondent that would alter its fundamental purpose or endanger its founding principles. This is why the company couldn’t just change its mind about the profit cap. SDM would veto that.

Nienke Venema of SDM | photo: Christel Groot

In my role as Trust Advisor to The Correspondent, I wanted to make sure I understood where SDM was coming from as “priority shareholder.” I thought it was important to be crystal clear with potential members about the use of the public service veto and SDM’s reasons for investing in The Correspondent, as well as its core beliefs. Here’s how Nienke Venema, executive director of SDM, answered my questions:

What was the original reasoning behind the Democracy and Media Foundation’s investment in The Correspondent? Why did you invest?

When SDM invested in the Dutch Correspondent back in 2014, it was kind of a big deal. At the time most foundations believed that journalism doesn’t need funding. Still today, only a tiny slice of philanthropic money goes to journalism annually, despite the fact none of the social causes that philanthropic institutions support would succeed without a free and independent press. Investing, through equity or loans, in a media company for idealistic reasons is even more rare.

SDM decided to invest in De Correspondent because it strongly supported the founding principles behind the platform, which started as an alternative to the “daily news grind.” The foundation’s board at the time was concerned about the fact that trust in news was decreasing and agreed that the way journalism is conducted by for-profit companies is in part responsible. They were interested in the premises that a journalism platform based on membership and free from any commercial interests could prove a serious antidote. It was a bit of a leap of faith, but at the least it would be an experiment worth trying. There was a lot of trust in the purpose driven, entrepreneurial team as well.

Four years later, we at SDM are happy and proud to have been able to contribute to the success of De Correspondent in The Netherlands. As strong supporters of their founding principles, we are eager to see them flourish in the English-speaking world from New York. And what better time or place to start, considering the times we live in. That, in short, is why we are co-funding The Correspondent.

The Correspondent’s ninth founding principle is, ‘We always put journalism before financial gain.’ How does the Foundation stand toward that principle?

This principle is very close to SDM’s history and core mission. The foundation was founded during World War II to be the not-for-profit owner of then-illegal resistance newspaper Het Parool. At the time, the founders of Het Parool (and of SDM) believed that commercial ownership of newspapers was in part to blame for the failure of journalism to address and resist fascism. They wanted to guarantee that financial gain would never get in the way of truth-finding at their own newspaper.

Resistance newspaper Het Parool | Source: Geheugen van Nederland

SDM is no longer the majority shareholder of Het Parool or any media company, but putting journalism before financial gain is still at the core of its mission. Which is not to say that media companies shouldn’t be run in an entrepreneurial or business savvy way. Financial sustainability is crucial for running a healthy journalism platform. But the core business of a media company should be independent quality journalism. Thankfully, these things don’t need to be mutually exclusive.

The Foundation asked for a priority share. What was the idea behind that? And what is a priority share?

We believe that having a mission-driven investor like SDM doesn’t just protect the public interest identity of The Correspondent, it also reinforces their reputation as providers of quality independent journalism. As a minority shareholder, SDM doesn’t make or interfere with day-to-day business decisions of media companies. To keep with the historic public interest mission of the foundation, we ask for a priority — or ‘golden’ — share that provides us with specific veto rights. At The Correspondent, these rights allow us to intervene where necessary to protect the platform’s editorially independent and ad-free status, as well as its dividend cap.

What priorities would come into play if there was a decision to be made as a priority shareholder? What questions would you ask?

Let’s say if The Correspondent becomes extremely successful and attracts venture capital investors, we would be able to veto the selling of the company — or part of it. And we would do that, if we believed that this could in any way jeopardize the platform’s core values. We would also be able to veto if the founders decided to change the nature of the company, for example by allowing advertisements, writing branded content for companies, or propaganda for politicians.

What can a member of The Correspondent expect from SDM in this key role you have as priority shareholder?

I expect and hope that they will never have to hear from us, as I don’t have any concerns about the current founders digressing from The Correspondents founding principles. But circumstances can change, as can people. With SDM as a mission-driven shareholder, members can trust that The Correspondent will always be an independent, ad-free platform which puts quality journalism before profit. We don’t have an exit strategy, we’re in it for the long run.

So there’s your answer to, “How would a member know for sure that what happened with the sale of the Huffington Post — for $315 million to AOL in 2011 — could never happen with The Correspondent?” (Or, for that matter, what happened with supporters who contributed early seed funding to Oculus Rift.) As investors, both Luminate and SDM accept the principle of the five percent cap. (In practice, the founders have not taken any profits out of the company, choosing instead to reinvest in the journalism.) Tossing the cap would almost certainly be vetoed by the priority shareholder. No retreat from the ad-free model will be permitted. Turning away from the founding principles is not a power the directors of the company have, which is the genius of the priority share design.

As I said, I like the way they do things. That’s why I am supporting them. This is probably a good time to mention that while I am an advisor to The Correspondent, I am not on the board, I do not have shares in the company, I am not an officer, and I am not being paid.

Now I know what some of you are thinking. If The Correspondent is so mission-driven and all about the journalism, why isn’t it a non-profit, like ProPublica, the Texas Tribune, or Voice of San Diego? I asked Ernst Pfauth that question.

“Because we don’t see journalism as just charity. We believe in the value of having to make a product that people want to pay for. And in the discipline that brings to an operation.”

Become a founding member at today.

Jay Rosen teaches journalism at New York University, where he has been on the faculty since 1986. He is the author of PressThink, a blog about journalism’s ordeals in the age of the Web, which he launched in 2003. He writes and speaks frequently about the predicament of the press in a time of rapid transformation.

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Jay Rosen
The Correspondent

I teach journalism at NYU, and direct the Membership Puzzle Project. Advisor to De Correspondent as they expand to English-language publishing.