Anti-corporate 2.021

Armin Steuernagel, founder of the Purpose Foundation, has discovered a solution, or part of a solution, to the dysfunctional behavior of corporations. The root of the problem is what he calls “absentee ownership”. Absentee ownership treats a company as a source of profits. Whereas founders usually see their companies as creating a useful product, and employees see their company as providing jobs. Local ownership of companies also usually have some kind of positive relationship with the local town, investing in local infrastructure and charities. The big problem is that when the founders (or inheritors) of private companies want to retire or move on to other projects, the only way to get their capital and compensation out of the company is to sell it, often to an absentee owner, who either liquidates it or reorganizes it to maximize profit. Steuernagel found an alternative, first developed by the German optics company Zeiss, and implemented by many other large and longstanding German, Swiss and other companies including Bosch, Ikea, Rolex, Vitorinox, Carlosburg, Ikea, and Firefox. His Purpose Foundation provides education and financial/legal instruments to enable other companies to do this. The solution is twofold:
  1. The company owns itself, so as to be permanently, legally protected from sale and liquidation.
  2. The company’s profits do not leave, but are either reinvested in operations or donated to charitable purposes.
Those who run the company are considered to be owner-stewards. They “own” the company in the sense of having responsibility for its purpose, but they do not own it financially or legally, in that they do not have the power to sell it. The Purpose corporation promotes several instruments for company self-ownership:
  • In a trust-foundation, two legal entities are created, one of which owns more than 90% of the economic shares but no voting shares, and the other which holds more than 90% of the voting shares but no economic shares. The shares cannot be sold. In this way the two interests are separated.  (The Bosch family receives the remaining small percentages of the company so they can continue to be supported by it and to have some voice in its direction.)
  • The “golden share” model gives a veto share to a non-profit foundation whose role is to block any sale of shares. Furthermore, no one who doesn’t work for the company may own voting shares. The golden share model is cheaper to set up, and one of the services the Purpose Foundation offers, is to hold these golden shares for various companies. (Economic shares with capped profit rights may be used to reimburse  initial investors or compensate founders.)
To date, the Purpose Foundation has supported 100 companies in establishing these legal/financial frameworks.  

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