Basics of Steward-Ownership

Summary

Steward-ownership makes it possible to anchor the independence and value orientation of a company in its DNA. The voting rights are held by active entrepreneurs and people who are inwardly connected to the values of the company. The company's assets can only be privatised to a limited extent and remain tied to the company. Steward-owned companies have a long-term orientation and can focus on the long-term well-being of the company, its employees, customers, investors and other stakeholders.

What is Steward-Ownership?

Steward-ownership is an alternative to conventional ownership structures. It enables the independence and value orientation of a company to be anchored in its DNA –its ownership.

For many generations, entrepreneurs around the world have found a wide variety of legal solutions to implement steward-ownership and legally anchor two principles within the company:

1. Self-governance

The voting rights, or "steering wheel," of the company remains inside the company with the people directly connected to stewarding its operation and mission. They assume the entrepreneurial responsibility for the actions, values, and legacy of the company as stewards for the company and for future generations of stakeholders.

2. Purpose-orientation:

The company's assets cannot be privatized by shareholders but remain tied to the company. The company's profits and assets are thus a means of working towards the company's purpose and not purely an end in themselves. Profits are reinvested, used to cover capital costs or donated.

While the purpose of the enterprise is traditionally seen as maximizing profits and increasing its value according to economic theory, steward-owned enterprises want to serve a specific purpose and view profits as a means to that end. In this regard, steward-owned companies believe that profits are not purely an end in themselves, but seeds for the future, a means by which the very purpose of the enterprise is advanced.

In order to remain true to the values of the company, the "steering wheel" – control over management and strategic decisions – remains in the hands of people who work in or are closely associated with the company. Thus, steward-ownership can bear resemblance to the structures of family businesses: the company is not kept in the "bloodline" but is kept in "skill and value relationships." In this way, decisions are always made by people who understand the company's purpose, know the corporate culture and values, and understand the consequences of their decisions – and not by "absentee owners," who have no real connection to the company and make decisions primarily based on numbers.

Ownership therefore means the responsibility to be able to freely decide what is best in the long term in order to realize the company's purpose. The steering wheel of these "self-owned companies," i.e. the majority of voting rights, can therefore not be sold, but is held by stewards for a certain period of time and passed on to capable, value-related successors. Since control over the company can neither be purchased nor inherited, steward-ownership can be understood as an alternative means of transferring power in the company. In addition to the principle of "blood" (inheritance) or the principle of "money" (sale), it counts who is able, value-aligned and closely connected to the company.

Old and new

Steward-ownership is simultaneously both a new and an old idea. New because it is still rarely used today. Old because pioneers like the Zeiss Company or Bosch implemented it a long time ago, and there are many other successful examples. Over the years, hundreds of steward-owned companies have emerged that anchor the two principles in the ownership structure in a legally binding way and use various legal structures to do so. In addition to Bosch and Zeiss, the best-known of these companies include the Danish pharmaceutical company Novo Nordisk, the British department store chain John Lewis, the U.S. Internet pioneer Mozilla, and Ecosia, the search engine that plants trees.

The Benefits of Steward-Ownership

Steward-ownership anchors the sense of purpose deep within the structures of the company. It enables generations of stewards to realize the company’s purpose while remaining true to the company's values and developing them further. This understanding of ownership aligns the interests of all stakeholders, including employees, customers and society.

Focus on purpose and values

Steward-ownership enables companies to operate with a long-term sense of meaning and purpose while at the same time keeping them alive and growing. The old economic engine – profit maximization – is replaced in these companies by another engine: purpose and values. People who seek maximum monetary profit tend to not be interested in becoming stewards because this office is not endowed with profit rights. Stewards receive a salary and are intrinsically motivated. Even if a company in steward-ownership no longer sees any other option and is about to be sold, the sales proceeds remain tied to the ownership structure and thus continue to serve the purpose of the company or flow to charitable causes. In this way, the focus is always on the company and its purpose, as well as the stakeholders.

Long-term orientation

Since the majority of voting rights in steward-owned companies are not for sale, they are not subject to short-term pressure from financial markets and investors but can instead focus on the long-term well-being of the company, its employees, customers, investors and other stakeholders. Since a large part of the revenues can be invested in research and development, the innovative strength of these companies increases. This in turn increases the lifespan and ensures a higher probability of survival in economically difficult times.

Stakeholder commitment and trust

Steward-ownership binds employees, customers, and business partners to the promise that cooperation serves the company's purpose rather than the owners' financial benefit. This enables a completely different motivation and identification; it strengthens intrinsic incentives. Who likes to work for owners they don't know and who are only interested in increasing their assets? In steward-owned companies, employees work for the purpose of the company. It is also becoming increasingly important for customers to know "who" owns a company and how and for what purpose the value created is used. Steward-ownership also sends a clear and credible legal signal that the company is designed for the long term.

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