What if there was a new model of company ownership that could enable founders to maintain control of their businesses while also attracting outside investment? Steward-ownership is a novel approach that may just offer the best of both worlds. Read on to learn more about this innovative concept.
What is steward ownership?
Steward ownership is an alternative to conventional ownership that permanently secures a company’s mission and independence in its legal documents. Solutions for steward-owned companies have been found by generations of entrepreneurs all over the world. These pioneers have found innovative ways of committing their businesses to something beyond maximizing shareholder value.
The main idea is that profits serve the company's purpose. The company still makes profits, but instead of going to remote capital providers, they are either re-invested in the company or donated to charities working towards the same purposes.
This type of ownership ensures that the company will always remain true to its mission, even as it grows and changes over time. As more and more business leaders realize the importance of stewardship pivoting their focus from short-term earnings to long-term impact, it is a model that is being adopted by an increasing number of companies that are rethinking ownership.
What is a steward in a company?
A steward in a steward-owned company is an individual who has the economic rights and responsibility to care for the property of the company for future generations. The steward-owner relationship is one in which the steward has a duty to protect and preserve the company's assets, while also ensuring that the company remains true to its mission.
What are the benefits of a steward-owned company?
The principles of steward ownership dictate that the “steward-owners” by those who are actively engaged with the company at heart and embody the company's purpose. Steward-ownership forms contain a so-called asset lock, which ensures that proceeds are not privatized in the event of a sale. In this way, the active stakeholders retain their voting rights instead of remote shareholders or other investors.
Since these steward-owners prioritize purpose over profit maximization, these companies are more long-term oriented and studies show that their survival probability is 6X higher after 40 years. Research by Professor Steen Thomsen, chairman of the Center for Corporate Governance at Copenhagen Business School, shows that mission-driven companies with ownership structures like this are trusted more by their customers, offer their employees better pay, and have better employee retention.
Steward ownership models
There are many different types of steward ownership models, but they all have one thing in common: they seek to create a more just and equitable society, rethinking ownership as it is. These models range from shared ownership structures that give workers a stake in the company, to intergenerational financing mechanisms that ensure assets can't be sold off in the future. One example is the Employee Ownership Trust.
Steward ownership models are still relatively new, but they offer a promising way to create more democratic and sustainable businesses. As we confront the many challenges of the 21st century, it's important that we experiment with new models of ownership that can help us build a better world.
What are the key principles of steward ownership?
Companies that use steward-ownership structures are committed to two principles:
Profits serve purpose
For steward-owned companies, profits are a means to an end, not an end in and of themselves. When the company is generating profits, all funds are either reinvested in the business, used to repay investors, shared with stakeholders, or donated to charity.
Regular companies are beholden to the interests of investors who are not involved in the day-to-day business of the company. Steward ownership structures are controlled by people who are active in and connected to the business.
Who is using steward ownership?
Steward ownership models are used by a variety of people/entities, below we gathered some examples:
- Communities - Focussing on maintaining value in communities and preventing displacement giving key contributors as much control as possible
- Non-profit leaders - Seeking alternatives to conventional charitable vehicles such as foundation ownership
- Retiring founders - Wanting to protect corporate independence and mission to set up the intergenerational succession. Looking for a solution that includes employees on the upside. This is usually done by setting up separate legal entities to design a wealth-building engine
- Startup founders - Wanting to raise aligned growth capital and build sustainable, long-term-oriented organizations. Seeking to build sustainable organizations with a long-term vision, accompanied by capital that aligns with their mission
- Municipalities - Looking for new ways in which economic value can be retained in communities
- Investors and fund managers - To contribute to intergenerational impact and systems change with their funds
Steward ownership models are the future for companies looking to create a more democratic and sustainable future. By implementing a steward ownership model, your company can ensure that everyone has a voice and a stake in the success of the organization.
If you're interested in learning more about how steward ownership can help your company create a brighter future, contact the WE.VESTR team for a demo. We'd be happy to show you how this innovative model can benefit your organization.