Draft:Steward-ownership

The term steward-ownership refers to a distinctive corporate ownership paradigm.. This model disentangles a company's ownership rights effecting a separation between economic rights and voting rights, thus leading to a decoupling of money and power. In steward-owned companies, economic rights (pertaining to monetary aspects) and voting rights (pertaining to authoritative power) are structured in a way to ensure that decisions are made by people connected to the company (in line with the principle of self-determination) and driven by the company’s purpose (in accordance with the principle of purpose-orientation), rather than being predominantly influenced by shareholder value. Consequently, profit in this framework is construed as a means to an end and not an end in itself.

The implementation of steward-ownership has been witnessed in a range of companies globally, for numerous decades simultaneously serving as an alternative to shareholder primacy models. Companies implementing steward-ownership make a binding commitment to the principles of self-determination and purpose-orientation, thereby legally safeguarding their independence and purpose-orientation in the long run.

The steward-ownership model can be implemented using different legal forms depending on the type of company and jurisdiction. Often it is realized through a combination and/or modification of different legal forms, tailored to achieve the desired outcome. Steward-ownership may also be combined with employee or community ownership.

Steward-owned companies are also referred to as ‘self-owned’ or 'foundation-owned'. Although this ownership model has been in longstanding tradition in Northern Europe for centuries, it has only received increased attention from entrepreneurs and media since 2018. Noteworthy examples of steward-owned businesses include Signal (USA), Mozilla (USA), Lundbeck (Denmark), Carlsberg (Denmark) , Novo Nordisk (Denmark) , Bosch (Germany) , Zeiss (Germany) , Ecosia (Germany) or Patagonia (US).

Origin of steward-ownership
The corporate ownership model known as steward-ownership dates back to the 19th century, with steward-owned businesses being established across the world.

Notable early examples of steward-owned companies include Carlsberg, a Danish brewery, founded in 1847, which was transitioned to steward-ownership in 1888, and Zeiss, a German optics manufacturer where co-founder Ernst Abbe instituted a steward-ownership structure with the Carl Zeiss Foundation in 1889. Other pioneering companies of steward-ownership include Bosch in Germany and the John Lewis Partnership in the UK.

Steward-ownership gained prominence, particularly in Denmark, during the 20th century, becoming a preferred model for several large companies, notably in the pharmaceutical and shipping sector. The concept also resonated with some companies in the “German Mittelstand”, influenced by examples like Zeiss and Bosch. While steward-owned companies emerged in other countries like the US and the Netherlands during this period, the ownership model was not widely recognized, lacking a formal name and clear definition.

In 2017, the term steward-ownership as such was coined by the German Purpose Foundation following a study of steward-ownership pioneers. This initiative included outlining the common principles shared by these companies, thus providing the widely accepted definition of steward-ownership. The term itself refers to the application of the concept of stewardship to organizational ownership. The adoption of the steward-ownership model increased among companies starting from the late 2010s on.

Principles of steward-ownership
The legal implementation of steward-ownership exhibits variations, but all models adhere to two enduring principles :

(1) Self-governance — Steward-ownership structures are designed to maintain control (denoted as the majority of voting rights) in the hands of individuals (stewards) who carry the entrepreneurial responsibility and maintain operative involvement in the business. The transfer of voting shares is restricted from speculative sales or automatic inheritance; instead, they are passed on to suitable and values-aligned stewards. This model stands in contrast to absentee ownership.

(2) Purpose-orientation — The implementation of a capital lock ensures that the organization's value and profits of the organization serve the purpose of the company. Shareholders do not obtain unlimited access to the company's value. Profits are regarded as a means to an end and not an end in themselves. Their utilization includes reinvestment, covering capital costs, compensating founders, sharing with stakeholders, or donating to charities. The capital lock prohibits any individual owners, employees, or external stakeholders from claiming full entitlement to the business's value or profits. Consequently, no party is personally incentivized to maximize profits or shareholder value at the expense of the company's purpose. The principle of purpose-orientation presents a viable alternative to shareholder primacy models.

In steward-owned companies, these principles are committed to in the long run and intergenerationally, for example through the display of legal commitments. The specific integration of these principles into a company's ownership structure varies among organizations, but universally, all steward-ownership models ensure that both value and control remain within the company in the long term.

Legal implementation of steward-ownership
To implement steward-ownership, the legal and ownership structure of the company is structured to incorporate the principles of steward-ownership in a legally binding way. This commonly includes a separation of the voting rights and the economic rights of the company: The property rights of the company are no longer treated as a unified bundle of rights, but are distributed separately to uphold the principles of self-determination and purpose-orientation. Steward-owned companies institutionalize these two principles by using various forms of legal safeguards to ensure their longevity.

Divers models exist for the legal implementation of steward-ownership, with variations contingent on the jurisdiction and the type of company. The majority of companies implementing steward-ownership utilize a legally functioning entity that is owned in a specific form by a foundation or trust. The legal structure of the operating entity (the company) in steward-ownership displays diversity, with examples including limited liability companies or corporations as well as cooperatives.

Various global implementations of steward-ownership exist, generally classified into five fundamental models:

Single Foundation

In the Single Foundation model, the voting rights and dividend rights of a company are under the ownership of a self-governing non-profit foundation that functions as both shareholder and guardian of the steward-ownership structure and principles. The primary purpose of the foundation is to own the company shares and further the purpose and development of the company. The foundation may further pursue additional non-profit purposes

Examples of companies that have adopted the Single Foundation model include Zeiss (Germany), Novo Nordisk (Denmark) and Carlsberg (Denmark).

Double Foundation

The Double Foundation model entails the involvement of three legal entities: the operational entity (the company) and two foundations or other legal holding entities. In this arrangement, the voting rights (but no dividend rights) of the company are held by a stewarding organization managed by stewards of the company, while a charitable entity retains the dividend rights and the majority of capital shares of the company, but not voting rights. This structure embodies the separation of power and money is reflected on the legal level.

Examples of companies employing the Double Foundation model include Bosch (Germany), Mahle (Germany), Globus (Germany), Patagonia (US).

Golden Share/ Veto Share

In the ‘Golden Share Model’,  the principles of steward-ownership are explicitly articulated within the articles of association of the company. Stewards of the company hold 99% of the voting rights, but no dividend rights. The remaining 1% of the voting rights, designated as a ‘veto-share’ or ‘golden-share’, is held by an independent overseeing entity safeguarding the principles of steward-ownership. This entity is empowered with the right and responsibility to veto any changes or actions concerning the principles of steward-ownership. No one in- or outside the company has a right to its economic value. Dividend rights either remain in the company or are allocated to investors and/ or founders for example. Importantly, these rights do not grant unlimited access to dividends but must invariably be accompanied by a mechanism constraining the right to receive profits.

Notable examples of companies adopting the Golden Share model include Ecosia (Germany), Waschbär (Germany) , Sharetribe (Finland)

Perpetual Purpose Trust

The concept of the Perpetual Purpose Trust (PPT) represents a departure from conventional trust structures, as its establishment is centered around serving a specific purpose rather than catering to individual beneficiaries. Unlike most trusts with predetermined lifespans, a PPT is designed to operate indefinitely. Operational guidelines for PPTs are delineated in a Trust Agreement, which redefines the legal responsibilities of its trustees, also referred to as the trust stewardship committee. Within the context of steward-ownership, the PPT assumes ownership of the shares in the operating entity or company. While the trustees exert control over the PPT, they are not grated entitlement to access the company's value or profits. Examples of this trust model can be observed in organizations like the Organically Grown Company and the Breaking Ground Perpetual Purpose Trust, both illustrating the application of PPT principles within the United States.

Employee Ownership Trust

A specific configuration of employee ownership trust models can be employed to implement steward-ownership. In this arrangement, the shares of the operating entity are held by an employee ownership trust, which is indirectly overseen and controlled by the employees of the company. Notably, in employee ownership trusts aligned with steward-ownership, the participation of employees in the success of the company is restricted, adhering to the principle of purpose-orientation.

A recognized example of this model is evident in the John Lewis Partnership (UK) structure.

In certain companies or in some jurisdictions, the most suitable legal implementation may involve a combination of the different legal models. The Patagonia model, for instance, combines the Perpetual Purpose Trust model with the Double Foundation model.

Steward-owned companies
Steward-ownership represents a way of running a business that is applicable to businesses of varying sizes and across diverse sectors. Steward-owned businesses are present globally, spanning from regions such as Europe, North and South America.

The steward-ownership structure enjoys notable popularity in Denmark, where a substantial proportion of companies are predominantly owned by entities known as ‘industrial foundations’. Denmark accommodates approximately 1,000 companies operating under the steward-ownership model, and these entities contribute to approximately 60% of the total value of the Danish stock market index. Prominent examples include Carlsberg, Novo Nordisk , Lundbeck and AP Moller Maersk.

Germany, hosts a significant number of well-established steward-owned companies, with notable examples including Bosch and ZEISS. Additionally, there are over 200 other examples of steward-owned companies, encompassing a diverse range of entities such as Ecosia, a Berlin-based search engine that plants trees that transitioned to steward-ownership in 2018, WALA, several startups including Wildplastic , Neue Narrative , einhorn products , Goldeimer and soulbottles. Companies in the process of transitioning to steward-ownership include Ableton. Small to medium-sized enterprises (SMEs) like the family-owned business Sorpetaler Fensterbau, elobau , the home-improvement chain GLOBUS, and the organic food store chain Alnatura, further contribute to the steward-ownership landscape in Germany.

Steward-owned companies in the United States encompass various entities, such as the web browser provider Mozilla, Organically Grown Company, Wikipedia and the messenger app Signal. Notably, in September 2022, the outdoor apparel manufacturer Patagonia, along its founder Yvon Chouinard declared the transition of the founder’s ownership shares to the Patagonia Purpose Trust and the non-profit entity, the Holdfast Collective.

Additional, international examples of steward-ownership include the British department store John Lewis, the Dutch ethical bank Triodos (owned by the Stichting Administratiekantoor Aandelen Triodos Bank (SAAT)), BuurtzorgT, a self-organized mental-healthcare provider based in the Netherlands, Locales Connectados or Banca Ética Latinoamericana in Chile, Sharetribe in Finland, Victorinox in Switzerland and Ikea (Sweden, Netherlands and Luxembourg) , among others.

Further examples
 * Steward-owned companies in the Netherlands (in Dutch) by We Are Stewards


 * Steward-owned companies worldwide by the Purpose Foundation