Steward-ownership: For Entrepreneurs Who Want to Make a Positive Impact
Have you heard about steward-ownership? If not, you probably heard that Patagonia’s founder, Yvon Chouinard, is giving away his company to fight climate change. If you missed this, you must have been living under a rock!
When the Chouinard’s gave away all their shares, the news went viral with headlines like: “Patagonia founder donated Patagonia to charity”, “All of Patagonia’s profits will now be used for climate protection”, and “Patagonia: Earth is now our only shareholder”
But their decision went further than philanthropy.
Their corporate ownership structure was redesigned based on the principles of steward-ownership. Their new model serves two purposes:
- It safeguards the values and independence of Patagonia. (Nobody can ever buy the company. And it can decide its own direction.)
- It donates profits to fighting climate change. (Nobody can privatize company profits.)
Steward-ownership as a solution
Why is this so interesting? Few entrepreneurs begin with the goal of making profits at the expense of the earth and other people. But if voting rights (i.e. power) and economic rights (i.e. financial interests) are in the hands of the same people, the possibility exists that at some time profits become more important than purpose.
Why is that? Do we still hear the echo of Milton Friedman's 1962 statement. "There is one and only one social responsibility of business. And that is to use its resources to engage in activities designed to increase its profits."
But now we know better, don't we? If you agree, let's hack the system!
How can we do that? Steward-ownership may be our best solution. It’s a way to organize the ownership of a company. The premise is that a company is not owned by shareholders but belongs to itself, with stewards at the helm.
Principles of steward-ownership
The concept of steward-ownership is not new, but it’s not well-known. Many entrepreneurs don’t know they can organize ownership differently, while keeping company mission center stage.
The universal principles of steward-ownership:
- Self-governance: Control remains in the company with people directly connected to stewarding its operation and mission. Control can no longer be bought or sold.
- Profits serve purpose: The profits generated can’t be privatized. They must serve the company mission. Which means they are either reinvested in the company, or its stakeholders, or donated.
- Investors are rewarded: Investors and founders are fairly compensated via capped returns or dividends.
Patagonia has applied these principles by giving all shares with voting rights to a foundation-like entity that safeguards the values and independence of Patagonia. And all shares with economic rights are donated to a non-profit organization that uses all dividends to fight climate change.
More to come...
This article is the first in a series. In it we will share unique stories about steward-owned companies. We hope to inspire others to explore the new economy.
Here’s a quick preview of what you can expect in the steward-ownership series:
- Steward-ownership 101
- Models for steward-ownership
- The Earth as a shareholder?
- Self-organized companies & steward-ownership
- Investing in steward-owned companies
- Working for a steward-owned company
We can’t wait to share more inspiring stories about steward-owned companies that are changing the game.
Have we intrigued you?