The future belongs to steward ownership

There’s a bus company that drives from one of the big cities to my parent’s town, one of these private minibus companies started by pops and moms, call it the Family Express.

Because a business exists for more than a decade with non-stop transit services during the holidays and on -30 degrees Celsius winter days, drivers of the Family Express do know most of the passengers in a face and almost by name. You could drive all the way in your car, or you could choose a government transportation service, but what you couldn’t find somewhere else is extreme steward ownership shown by the Family Express employee and founders.

They know their customers, they live with their customers, and they do everything to help and provide a huge value within their business. And we need more of it.

Let me explain why.

When I talk about the need for more founder-managed companies and the deficit of owners, I mean the gap between responsibility and accountability taken by the founders and investors.

Our laws today define ownership not as a responsibility, but as an investment and a tool for generating personal wealth. I’m not fighting the idea of being rich, just today’s meaning of being an owner needs to be upgraded with more value.

There is the starting point when the founder decides not to make a successful company, not care about the employee, not benefit their community, but to go straight to the Shark Tank Boiler and get a VC on board. They haven’t yet recognized the idea of dependence from their quarterly reports to investors and high-pressure profiteering notions out there.

To the majority of the tech community, this is a no-brainer: simply raise venture capital! VC is known for loving bold, humanitarian visions, and a startup with the mission to reinvent transportation or books should be a great fit, right? Why not just raise a couple of million dollars to boldly build the greatest badass experience out there?

The thing that worries most is that previously owner-managed and family businesses are being stripped of their owners – and their stewardship. Owners that are controlled by the profit rat race rarely understand how profit return requirements impact consumers or employees. 

For example, while owner-managed companies often retain employees during economic crises, investor-driven companies and managers of publicly traded companies, who are responsible for producing quarterly reports, often let employees go to improve their short-term bottom-lines. The consequences felt by the companies themselves are only one side of the problem.

Economically, the disappearance of real, independent ownership is a dangerous phenomenon: More and more companies are being bought by large corporations, which has led to an unprecedented trend towards market centralization. The United States alone has lost half of its companies in the last 20 years according to a study by Cornell University. On average, companies today are three times as large as they were in 1970. Market centralization at this scale undermines our economic system, which is meant to be based on diversity, competition, and a decentralized market.

Steward-ownership is more than a fancy name for being extremely responsible for something, it’s an alternative to conventional ownership that permanently secures a company mission and independence in its legal DNA.

Solutions for steward ownership have been found by generations of entrepreneurs all over the world. These pioneers have found innovative ways of committing their businesses to two key principles: profits serve purpose and self-governance.

These principles enable companies to remain independent, purpose-driven, and values-led over the long term. Often structured as foundations or trust-owned companies, steward-owned companies historically have been broadly successful.

Some are old companies, like Zeiss, whose foundation ownership has preserved its independence for more than 120 years. Some are new companies, like Sharetribe. Others are large, like Bosch, while some are small, like Ecosia. What they all have in common is a radically different approach to corporate ownership.

Not only do they outperform traditional for-profit companies in long-term profit margins, but they are also more resilient to financial and political crises, and offer significantly less volatile returns. Compared to conventionally owned companies, steward-owned companies also pay employees higher wages with better benefits, attract and retain talent more effectively, and are less likely to reduce staff during financial downturns.

Steward-ownership structurally retools who holds control in companies and what motivates decisions. By disrupting the relationship between power/money and the purpose of business, steward-ownership is a powerful agent for economic change and a future decentralized economy where we have more independent producers than passive consumers.

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