Steward-ownership refers to a set of legal structures that instill two core principles into the legal DNA of a business: self-governance and profits serve purpose. These structures ensure that control (voting rights) over the business is held by people inside the organization or very closely connected to its mission. Voting control in steward-ownership forms is not a saleable commodity. Profits in steward-ownership are understood as a tool for pursuing the company’s purpose. After paying back capital providers and sharing economic upside with stakeholders, the majority of profits are reinvested in the business. Steward-ownership forms include an asset-lock, which prevents the proceeds from a sale from being privatized. This structure aligns decision making power with active stakeholders close to the business, instead of remote investors or shareholders.
Principles of Steward Ownership
Purpose, an organization dedicated to promoting and supporting steward ownership, outlines two critical attributes of steward ownership:
- Governance is executed by stakeholders directly involved in running the company or directly connected to it, rather than by investors or outside influences.
- Profits are primarily reinvested or donated towards advancing the company‘s purpose.
Benefits of Steward Ownership
The principles of steward ownership dictate that the “steward-owners” be those who have the best interests of the company at heart. Since these steward-owners prioritize purpose over financial performance, 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 companies with ownership structures like this are trusted more by their customers, offer their employees better pay, and have better employee retention.
Currently, there is no one-size-fits-all legal entity for companies pursuing steward ownership; structures vary among legal jurisdictions and companies. Despite legal differences, uniting threads between them are that stewards must pass voting rights onto successors upon leaving their role and must be committed to protecting the company’s purpose and mission over time.
Jurisdictions: Germany, Netherlands, Finland, USA
Divides voting and economic rights between classes of stakeholders, with 1% of voting rights classified as the “Golden Share”, which also has the right to veto an attempted sale of the company or changes to structure
Examples: Sharetribe (FIN), Zielwear (USA), Ecosia (GER)
Jurisdictions: EU, USA, Central and South America
Business is majority owned by a self-governing non-profit institution, often with two boards: Corporate and Charitable
Examples: Hempel Foundation (DEN), Zeiss (GER)
Jurisdictions: Germany, Netherlands
Separates voting rights and dividend rights by placing them into separate legal entities: a charitable foundation and a foundation managed by stewards (decouples profits from charitable contributions)
Examples: Robert Bosch (GER), Elobau (GER), Mahle (GER)
Jurisdictions: United Kingdom
Company is owned by a trust on behalf of a group of partners, most commonly the company’s employees
Examples: John Lewis Partnership (UK)
Perpetual Purpose Trust
Jurisdictions: USA (DE, NH, WY, ME)
Non-charitable trust established for the benefit of a purpose rather than a person, may operate indefinitely
Examples: Organically Grown Company (USA), Metis Construction (USA)
Legal structure examples summarized from content in this booklet from Purpose
Sample Term 1 – Steward Ownership
Download a sample summary and term sheet that represents an overview of a private offering to purchase Series A non-voting preferred stock in a company.
Background and Case Studies
There is a strong history of steward-ownership in Denmark, the Netherlands, and Germany. Zeiss, the German optics manufacturing company, is one of the first examples of a modern steward-owned company, which has been in operation for over 100 years. Zeiss, transitioned to steward ownership after the passing of its founder, Carl Zeiss. The Carl Zeiss Foundation is the sole owner of Zeiss, and its corporate constitution ensures that the company cannot be sold and profits are either reinvested or donated for the common good.
Over the years, hundreds of steward-owned companies of various sizes and structures have been incorporated. Well-known examples include Bosch, Novo Nordisk, John Lewis department stores, and Mozilla.
Organically Grown Company, a leader in sustainable and organic agriculture in the United States for over 40 years, transitioned to an alternative ownership structure in the form a Perpetual Purpose Trust in 2018. Download the full case study: