An Alternative Paradigm of Business and Finance

More and more entrepreneurs, investors, customers and communities worldwide are longing for a different approach to business – a different way of thinking about enterprises and the structures and relationships we build in and around them. They are looking for structures that are coherent with their understanding of entrepreneurship, their vision of a healthy economy and healthy businesses creating good products, services and value for customers, employees, communities and the planet.

This search for new models is particularly visible in the investment world where the demand for alternative, less extractive, regenerative or innovative forms of financing are becoming prevalent. But when talking about new forms of investment, it is not just essential to talk about what we invest in, but in order to align structure with intention, we also need to look at the how of investments: the investment structures and structures of the companies that are invested in. 

This is exactly what steward-ownership is all about. Steward-ownership gives a different answer to how a company is structured on a deep design level. So to take everyone along on the ride, let’s first briefly align on the essence of steward-ownership.

 

Steward-Ownership

Steward-ownership is a corporate ownership structure for companies that ensures that the company remains self-determined and purpose-oriented in the long run. It presents an alternative to shareholder value primacy, actively asking 1) who should have power over a company and why? And 2) Who should benefit from value created in the company, to what extent and why? Steward-ownership enshrines two core principles in the DNA – the ownership level – of the company. 

These principles are (legally) enshrined in the company in the long run, over generations of stewards.

These principles fundamentally change the primary role of the company away from existing to create shareholder value to serving its purpose (whatever that may be). Nevertheless, steward-owned companies are also normal companies operating and competing on the markets. Companies that have to and are set up to make profits and become financially healthy businesses, so they even have the means of serving its purpose. Companies that can have their ups and downs – and that require entrepreneurs that not only have a vision, but also the abilities and means (and/or necessary support) to be able to build a financially healthy business.

Aligned Financing

So the elephant in the room – and the topic of this online journey – is how to finance these companies. You cannot rethink ownership without having to rethink financing. Talking about ownership means talking about money and power – and steward-ownership effectively rethinks the relationship between money and power. So what does this mean for investments into these companies or companies that potentially want to move towards steward-ownership in the future?

This reads like quite a definition, but simply put: decisions within the company rest with and are guided by what stewards deem best for its purpose and long-term success, while honouring the vital and enabling role of investors in a way that does not put financial gains above everything else in the incentive structure and turn the whole company into a speculative good. This turns investors into financing partners rather than co-owners. And while the definition may seem complex at first glance, its practical implementation does not have to be. As you’ll see throughout this guide, steward-ownership-aligned financing builds on existing solutions that have been around for quite some time. So don’t worry – you might be more familiar with the concept than you think.

You will also realize that the way steward-ownership-aligned financing can be structured shapes both financing processes and the available options. While some may view this as limiting, if steward-ownership aligns with your company’s vision and goals, the financing structures it excludes are likely not ones you would seek out in the first place. So, from this perspective, steward-ownership opens up conversations and creates opportunities to explore a whole realm of more aligned financing solutions, if this is what you are looking for. This applies to SMEs as well as startups, as well as large corporations.

At the same time, the principles of steward-ownership can also be incorporated into your financing structure, even if your business is not legally steward-owned, allowing you to align with its values without committing to full legal implementation just yet. 

In the following chapter, we will dive in and explore the basics of steward-ownership-aligned financing.  But before we'll dive briefly into the history of SOAF.