Exploring the Dynamics of Steward Ownership

Exploring the Dynamics of Steward Ownership

Companies like Bosch, Rolex, and Patagonia, each in their way, adopted a steward ownership model. What is steward ownership, how is decision-making and governance organized, and who uses it?

What is steward ownership?

Steward ownership, also known as mission-driven or purpose-driven ownership, is an approach to corporate ownership and governance that prioritizes a company’s mission and long-term sustainability over short-term profits. It typically involves structures and practices that ensure the company’s purpose is preserved and advanced by aligning stakeholders’ interests, including employees, customers, and the broader community.

Companies like Bosch, Patagonia, and Rolex are often cited as examples of steward-owned businesses, although the specific mechanisms may vary. Here’s a brief overview of how steward ownership operates at these companies:

  • Bosch, a German multinational engineering and electronics company, has a unique ownership structure known as the Robert Bosch Stiftung. The foundation owns many of the company’s shares and aims to promote social and societal welfare. The foundation’s ownership helps ensure that Bosch prioritizes long-term stability and the well-being of its employees and communities over short-term profit maximization.
  • Patagonia, an outdoor clothing and gear company, is known for its environmental and social responsibility commitment. It is a certified B Corporation meeting high social and environmental performance standards. Founder Yvon Chouinard has often expressed his intention to build a company that prioritizes sustainability and serves a mission to “Save Our Home Planet.” Patagonia’s ownership structure and practices are designed to support this mission.
  • Rolex is a Swiss luxury watchmaker with a reputation for quality and longevity. It is often cited as an example of a company that maintains strict control over its products and distribution channels. While Rolex’s specific ownership structure may not be as transparent as some other companies, it is known for its focus on craftsmanship and longevity, aligning with steward ownership.

In all these cases, steward ownership is manifested through a commitment to the long-term well-being of the company, its stakeholders, and its mission. These companies prioritize environmental and social responsibility, quality, and sustainability, often at the expense of short-term financial gains. Steward-owned businesses typically use ownership structures, governance practices, and policies to maintain this focus on their core missions.

How is decision-making organized within a steward ownership company?

The decision-making process in steward ownership companies is typically organized to align with the company’s mission and long-term goals rather than solely focusing on short-term financial gains. Here are some common aspects of decision-making in such companies:

  1. Mission-Centric Focus: Steward-owned companies prioritize their core mission and values. The company’s purpose guides decision-making, whether environmental sustainability, social responsibility, quality, or another long-term goal.
  2. Inclusive Stakeholder Involvement: Steward ownership often involves engaging a wide range of stakeholders, including employees, customers, local communities, and the environment. These companies seek input from various groups to make informed decisions.
  3. Long-Term Orientation: Steward-owned companies emphasize long-term sustainability over short-term profits. This means decisions are made with an eye toward how they will impact the company and its stakeholders in the future rather than just the next quarter.
  4. Transparent Governance: Transparency in governance is crucial. Steward ownership companies may have clear structures and policies that ensure accountability and transparency in decision-making. This could include transparent reporting on environmental and social metrics.
  5. Ethical Leadership: Leadership in steward-owned companies is often driven by ethics and values, with leaders committed to the company’s mission. Ethical leadership helps guide decisions that align with the company’s purpose.
  6. Employee Involvement: Many steward-owned companies actively involve their employees in decision-making. This can range from having employee representatives on the board of directors to seeking input on essential matters.
  7. Balancing Profit and Purpose: While profit is essential, steward ownership companies strive to balance it with their broader mission and social or environmental goals. Decisions are made to ensure that financial success supports the company’s purpose.
  8. Risk Mitigation: Decision-making in steward-owned companies may involve carefully assessing risks and opportunities related to the company’s mission and long-term objectives. This includes considering the potential social, environmental, and reputational risks.
  9. Adaptive Strategies: Steward-owned companies are often adaptable in their strategies. They may change course if necessary to better align with their mission and adapt to evolving circumstances.
  10. Impact Measurement: These companies often have robust systems for measuring and reporting their impact on the environment, society, and other relevant factors. Decision-making is informed by the desire to improve these impact metrics.

In essence, steward ownership companies structure their decision-making processes to ensure their mission and values are at the forefront of strategic choices. They seek to balance profitability with a commitment to long-term sustainability, social responsibility, and environmental stewardship. This approach is fundamentally different from the profit-maximization focus of more traditional corporations.

How is governance organized within this type of organizations?

Governance in steward ownership organizations is typically structured to reflect their commitment to their mission, long-term sustainability, and stakeholder well-being. Here are some common elements of governance in such organizations:

  1. Mission-Driven Governance: Steward-owned companies prioritize their core mission and values in their governance structures. The company’s purpose, whether it’s environmental sustainability, social responsibility, quality, or another long-term goal, serves as the guiding principle for governance decisions.

  2. Board of Directors: Steward-owned companies often have boards of directors aligned with the organization’s mission and values. These boards may include diverse stakeholders, such as employees, customers, or representatives from the broader community, to ensure the company’s mission is upheld.

  3. Transparency and Accountability: Transparency is critical in governance. Steward-owned companies typically maintain clear, transparent governance processes and structures. This includes open reporting on financial and non-financial metrics, such as social and environmental impact.

  4. Ethical Leadership: Leadership within steward ownership companies is grounded in ethics and values that support the mission. Ethical leadership ensures that governance decisions align with the company’s broader purpose.

  5. Stakeholder Involvement: Governance structures may involve the active participation of various stakeholders, including employees, customers, local communities, and environmental organizations. Their input is considered in decision-making processes.

  6. Long-Term Focus: Governance in steward-owned companies is geared toward the long term. Decisions are made with a view to their impact on the company and its stakeholders over an extended period rather than just the next quarter or fiscal year.

  7. Risk Management: Governance often focuses on risk assessment and management, particularly concerning the company’s mission and long-term objectives. This entails considering potential social, environmental, and reputational risks.

  8. Adaptive Strategies: Steward-owned companies are often adaptable in their strategies and governance structures. They can change course if necessary to better align with their mission and adapt to evolving circumstances.

  9. Impact Measurement: Governance often encompasses systems for measuring and reporting the company’s impact on the environment, society, and other relevant factors. This data informs decision-making and helps improve the company’s performance in these areas.

  10. Balancing Profit and Purpose: Governance decisions aim to balance financial success and fulfill the company’s broader mission. Profitability is seen as supporting the organization’s purpose rather than the sole goal.

  11. Legal Structure: Some steward-owned companies use legal structures like Benefit Corporations (B Corps) or other hybrid forms that allow them to legally enshrine their commitment to a mission alongside traditional business goals.

In essence, governance in steward ownership organizations is structured to ensure that the company’s mission and values drive strategic choices. It emphasizes inclusivity, transparency, ethical leadership, and long-term thinking, focusing on positively impacting society, the environment, and other relevant stakeholders. This approach to governance contrasts with the often profit-centric governance found in more traditional corporations.

How does this model comply with the legal framework?

Steward ownership organizations face a unique challenge in complying with legal frameworks that traditionally favor and protect shareholder value. The legal framework in many countries is often structured to prioritize the interests of shareholders, particularly those seeking short-term financial gains. However, steward ownership companies are designed to prioritize long-term sustainability, social responsibility, and mission-driven objectives. Here’s how they navigate this challenge:

  1. Benefit Corporation (B Corp) or Alternative Legal Structures: Many steward-owned companies choose legal structures that explicitly allow them to balance profit with purpose. Benefit Corporations (B Corps) and similar legal forms are designed to enshrine a company’s commitment to a broader mission, even prioritizing social and environmental benefits over immediate shareholder value.

  2. Mission Statements and Charters: Steward-owned companies often include their mission statements and charters in their legal documents, clearly defining their purpose and commitment to long-term sustainability. This can provide legal protection against pressure to maximize shareholder value solely.

  3. Shareholder Agreements: Companies can create shareholder agreements that outline their mission-driven approach and expectations for shareholders. These agreements can reinforce the commitment to the company’s mission.

  4. Transparency and Reporting: To address legal requirements, steward-owned organizations often emphasize transparency in financial and non-financial reporting. They may report on their social and environmental impact, governance practices, and adherence to their mission.

  5. Stakeholder Engagement: Companies may actively engage with stakeholders to demonstrate how their decisions align with the broader social and environmental interests. This can help counterbalance any legal pressures to serve shareholder value solely.

  6. Advocacy and Legal Reform: Some steward-owned companies, as well as organizations like B Lab, which certifies B Corps, advocate for changes in legal frameworks to create a more favorable environment for mission-driven businesses. This includes efforts to reform corporate laws for greater consideration of stakeholders beyond just shareholders.

  7. Litigation Risk: While steward ownership companies strive to comply with legal requirements, they may face legal challenges from shareholders who prioritize immediate financial returns. The company’s commitment to its mission and legal structure may be tested in court in such cases.

It’s important to note that the legal landscape is evolving, and there is growing recognition of the need for businesses to balance profit with purpose. Some jurisdictions have introduced legal changes to accommodate mission-driven companies. However, steward-owned organizations often must be proactive in navigating the legal framework to ensure they can remain true to their mission and values. This may involve working closely with legal experts and advocates for responsible business practices to address these challenges.

Next to Bosch, Rolex, and Patagonia, who else uses this model?

Since my last knowledge update in January 2022, several other companies have transitioned or been structured as mission-driven or steward ownership organizations. Remember that such organizations’ landscape may have evolved since then. Here are a few notable examples:

  1. The Body Shop: The Body Shop, a cosmetics and skincare company, has pioneered corporate social responsibility and mission-driven business. It commits to environmental and social causes.

  2. Eileen Fisher: Eileen Fisher, a clothing brand, is known for its focus on sustainability, ethics, and empowering women in the workplace. The company has a solid mission-driven approach.

  3. King Arthur Baking Company: King Arthur, a Certified B Corporation, is a flour and baking ingredient producer. It emphasizes its commitment to quality, sustainability, and the well-being of employees and the local community.

  4. Danone: The multinational food-products corporation Danone has embraced a “One Planet. One Health” mission, aiming to balance the interests of shareholders with those of other stakeholders and the environment.

  5. New Belgium Brewing: This brewery, known for brands like Fat Tire, was a Certified B Corporation before being acquired by Lion Little World Beverages. It maintained a strong commitment to environmental sustainability and social responsibility.

  6. Ben & Jerry’s: The ice cream company Ben & Jerry’s, a subsidiary of Unilever, has a long history of supporting social and environmental causes and maintaining an independent board of directors to uphold its mission.

  7. Interface: Interface, a modular carpet manufacturer, aims to become a restorative enterprise focused on eliminating its environmental footprint and positively impacting society.

  8. REI: REI (Recreational Equipment, Inc.) is a retail cooperative focusing on outdoor gear and sporting goods. It emphasizes sustainability and encourages outdoor activities.

  9. Natura &Co: Natura &Co, a Brazilian cosmetics and personal care group, aims to use business as a force for good, with a solid commitment to environmental and social sustainability.

Please note that the specific approaches to steward ownership and mission-driven business practices can vary among these companies, and developments may have occurred since my last update. You can check the latest information on these companies’ websites or through trusted sources to see how their approaches to steward ownership have evolved.

What type of model is steward ownership?

Steward ownership is not a single, rigidly defined concept but a broad philosophy encompassing elements of leadership, organizational structure, and ownership models. It is primarily an organizational and ownership model with a strong leadership and governance component. Here’s how it can be characterized:

  1. Ownership Model: At its core, steward ownership is an alternative ownership model that prioritizes a company’s mission, long-term sustainability, and the well-being of multiple stakeholders over short-term financial gains for a narrow set of shareholders. It often involves unique legal structures or corporate forms, such as Benefit Corporations (B Corps), allowing companies to enshrine their commitment to a broader mission legally.

  2. Leadership Model: Steward ownership organizations emphasize ethical leadership and values-driven decision-making. Leaders in these organizations are often committed to the company’s mission and work to align the organization’s activities with its purpose.

  3. Organizational Model: It can also be considered an organizational model due to its impact on the structure and culture of a company. Steward ownership often leads to a flatter organizational structure with greater stakeholder engagement and a focus on collaboration, transparency, and inclusivity.

  4. Governance Model: Governance is a critical component of steward ownership, as it involves how decisions are made, how stakeholders are involved, and how the organization is held accountable. Governance structures and practices in steward-owned companies are designed to uphold the company’s mission.

In summary, steward ownership is a comprehensive approach encompassing ownership, leadership, organization, and governance. It represents a shift from traditional profit-maximization models towards a more purpose-driven, sustainable, and collaborative way of doing business. It is a response to the idea that companies should be responsible not only to their shareholders but to a broader set of stakeholders and the well-being of society and the environment.

How does this model deal with internal organizational barriers?

Steward ownership organizations can have a significant impact on horizontal collaboration and hierarchical inefficiencies, often in ways that promote more collaborative, agile, and mission-driven approaches. Here’s how they affect these aspects of organizational structure and culture:

  1. Promotion of Collaboration: Steward ownership organizations tend to foster a culture of collaboration and inclusivity. By involving a broad range of stakeholders, such as employees, customers, and local communities, in decision-making processes, they create opportunities for diverse perspectives and ideas to be heard.

  2. Reduced Hierarchy: Steward-owned companies often have flatter organizational structures that reduce traditional hierarchies. This can lead to quicker decision-making, as decision-makers are closer to the front lines and can adapt to changing circumstances more rapidly.

  3. Empowered Employees: Empowering employees to participate in decision-making can lead to more engaged and motivated teams. Steward-owned companies often trust their employees to make crucial decisions, reducing the need for a rigid hierarchical structure.

  4. Mission Alignment: The mission-driven focus of these organizations serves as a unifying force, helping employees and stakeholders align their efforts toward a common goal. This reduces hierarchical inefficiencies from conflicting priorities or a lack of shared purpose.

  5. Agility and Adaptability: Steward ownership organizations are often better equipped to adapt to changing market conditions or emerging challenges because they have a mission-driven and flexible approach. This contrasts with more hierarchical structures that can respond slowly to change.

  6. Decision-Making Efficiency: Decision-making in steward-owned companies can be more efficient because it is often guided by the organization’s mission and long-term goals. This results in a clearer sense of purpose and priorities, reducing the bureaucracy associated with hierarchical decision-making.

  7. Stakeholder Engagement: Collaboration with various stakeholders, such as customers and local communities, can lead to better-informed decisions and more efficient problem-solving. It ensures that the organization considers the perspectives of those directly affected by its actions.

  8. Risk Mitigation: By actively involving stakeholders in decision-making, steward-owned companies can identify and address potential risks more effectively. This proactive risk management minimizes inefficiencies caused by unexpected setbacks.

  9. Adaptive Strategies: Steward-owned companies are more likely to pivot and adapt their strategies when necessary, given their focus on the long-term mission. This adaptability reduces hierarchical inefficiencies that stem from rigid adherence to established practices.

While steward ownership organizations have the potential to address hierarchical inefficiencies and promote horizontal collaboration, it’s important to note that their effectiveness in doing so can vary depending on the specific company, its industry, and its commitment to mission-driven principles. Implementing these changes can be a complex and ongoing process, but it often leads to a more dynamic and mission-focused organizational culture.

How does this model compare to Consentricity?

Consentricity, as described within the RoundMap framework, and steward ownership share common principles, such as a focus on mission and values, inclusivity, and multi-directional engagement. However, there are also differences between the two concepts. Here’s a comparison:

Similarities:

  1. Mission-Driven: Both approaches prioritize the organization’s mission, values, and long-term sustainability over short-term financial gains. They aim to create businesses with a higher purpose.
  2. Inclusivity: Both approaches emphasize inclusivity and interdependence. They encourage active participation and collaboration among stakeholders, whether in concentric circles or through steward ownership practices.
  3. Multi-Directional Engagement: Both models promote multi-directional engagement. “Concentricity” encourages representatives from different circles to participate actively in adjacent circles, while steward ownership often involves a wide range of stakeholders in decision-making.
  4. Consent-Based Governance: Consentricity incorporates consent-based governance, which aligns with steward ownership, where decisions are made to ensure the well-being of various stakeholders and not just shareholders.

Differences:

  1. Ownership Structure: Steward ownership primarily focuses on the ownership structure of a company, emphasizing alternative legal forms like Benefit Corporations (B Corps) and ownership by foundations or mission-driven entities. Consentricity appears to focus more on the organizational and governance structure rather than ownership.
  2. Organizational Model: Consentricity is based on concentric circles around a Circle of Confluence or stakeholder board. Steward ownership is centered on how companies are owned and governed and its legal and ownership structure.
  3. Positive Inquiry: Consentricity mentions the use of Positive Inquiry principles to foster a positive culture. While steward ownership promotes ethical and mission-driven leadership, it doesn’t typically refer to positivity.
  4. Cultural Ethos: Consentricity is presented as a cultural ethos that permeates the organization. Steward ownership, on the other hand, is a model primarily associated with ownership and governance practices but may also influence organizational culture.
In summary, Consentricity and steward ownership aim to create more purpose-driven and inclusive organizational models. Consentricity is primarily described as an organizational and governance model within the RoundMap framework, while steward ownership focuses on the ownership and governance structure of a company. They can complement each other in creating organizations with solid missions, values, and collaborative cultures, but they may be applied in different areas of organizational design.

Author

  • Edwin Korver

    Edwin Korver is a polymath celebrated for his mastery of systems thinking and integral philosophy, particularly in intricate business transformations. His company, CROSS-SILO, embodies his unwavering belief in the interdependence of stakeholders and the pivotal role of value creation in fostering growth, complemented by the power of storytelling to convey that value. Edwin pioneered the RoundMap®, an all-encompassing business framework. He envisions a future where business harmonizes profit with compassion, common sense, and EQuitability, a vision he explores further in his forthcoming book, "Leading from the Whole."

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