Steward-Ownership – What Exactly Is It Again?

by the Purpose Foundation

Ten years ago, we founded the Purpose Foundation and began our work around the idea of steward-ownership. At that time, whilst this form of corporate ownership had already been implemented and well-tried by some pioneering companies around the world, the concept was not yet well defined, and had no identifiable name. Coining the term “steward-ownership” and communicating the principles behind it was the starting point of our journey with the Purpose Foundation. 

One decade later, a lot has changed. The term steward-ownership is now widely used in many parts of the world and translated into other languages, for example, the Spanish Propiedad Responsable. More and more companies are taking inspiration from the concept, either transitioning to steward-ownership or building on its principles. We see an increasing number of employees working in steward-owned companies, more investors curious to learn about and to invest in this type of company and a growing amount of organisations in various regions of the world are dedicating their work to the idea and movement. 

In light of all the progress and learnings over the last ten years, we want to share our current thoughts on what shapes the core principles of steward-ownership. We hope it will inspire discussion and exchange.

Two Levels of Consideration

In order to approach the question of what exactly steward-ownership is, we distinguish between two levels. First, there is the level of principles – the core notion and the two fundamental principles on which the concept of steward-ownership is built.

Second, we describe how many companies interpret the principles for themselves – in other words, how the principles are implemented in concrete terms by these companies. After all, it is this technical implementation that determines whether the intended principles — and, with them, the entrepreneurial attitude behind them — can come to life.  On this technical level, there are common elements that have become a recurring pattern across cultures and legal contexts.

What we are sharing is not entirely new, but offers a more nuanced version of the principles and their technical interpretations, which we hope will provide orientation and inspiration for those looking to better understand, work with or adopt steward-ownership.

The Principles

Stewards-owned companies are guided by two principles:

Self-determination: The company cannot become an object of speculation but remains self-determined and independent in the long term. The steering wheel always remains in the hands of people who are connected to the company and its mission.

Purpose orientation: Profits are a means to an end, not an end in themselves. They serve the company’s mission and development or can be used to fund charitable activities. The value created within the company cannot be extracted by the company owners for their personal benefit.

These principles, together with their (legally) binding implementation, constitute the very core of steward-ownership. They express the entrepreneurial attitude at the heart of the idea. Depending on the cultural, historical, regional, and legal context, they can be brought to life in different ways: from 'the Danish model' – large corporations majority-owned by foundations, yet with a stock-market listing, like Novo Nordisk – to foundation/trust-owned enterprises such as Bosch (Germany), John Lewis Partnership (UK) or Patagonia (USA), to startups that implement the principles using veto share models. The diversity of ways of technically implementing the principles is certainly one of the concept’s strengths. The principles leave it up to each entrepreneur, as an individual, to find the technical derivation and implementation that is appropriate for the respective company. 

Nevertheless, or precisely because of this, the question remains relevant: What do all these diverse models have in common on a technical level, beyond the principles mentioned?

Implementation at the Technical Level

We observe that among companies guided by the principles, certain common design patterns have been established and are implemented in a legally binding manner:

Self-determination: Control [1] over the company cannot be inherited or bought/sold in any form. It is held and passed on in trust by individuals.

Capital lock: Those who hold control over the company do not have access to its assets and value [2] for private consumption. They can be compensated at market-appropriate and risk-adjusted levels for their work. Profits serve the company (reinvestment), society (donations) or are used to repay investors (capital costs), whose economic claims are limited in terms of time, amount or influence. 

Beyond these patterns, there are – depending on the model – additional technical aspects that individual companies consider central for implementing steward-ownership and which can also be derived from the principles. One example is a further interpretation of self-determination, which, in addition to the aspects mentioned above, also ensures that control always remains specifically with the employees and managers of the company. This can be considered as another expression of the principle of self-determination.

A Method for Classification and Orientation

In everyday work with steward-ownership, one question that repeatedly arises is: Can company XYZ be classified as a steward-owned company or not? It is tempting to try to create a technical definition that allows for this question to be answered easily and clearly, almost mathematically, for everyone at any time. 

However, our experience shows that each company must ultimately be evaluated individually. We do this with the help of the basic entrepreneurial attitude and mindset described above in the principles, as well as by considering the respective technical interpretations.

Taking a look at the specific implementation of the two principles in each case is decisive for our conclusion. We also stay continuously open to considering new technical forms of implementation outside the existing models and examine them through the lens of the principles. Examples of such individual considerations are our analyses of the Patagonia and OpenAI cases.

Despite the variety of ways the principles are implemented, there is a clear distinction from other business concepts and philosophies, such as shareholder value primacy and its basic principles. Thus, from an ownership perspective, we see a broad range of companies: from those that implement steward-ownership in accordance with the principles and give the concept their own flavour in their technical interpretation, to others that only implement certain aspects and are closer to or further from the principles, to those that clearly base themselves on other entrepreneurial philosophies and may be diametrically opposed to the concept. 

What This Means for Companies

So, what does this mean for all the companies that are engaging with the principles or are considering applying them to their own businesses?

They have the wonderful and admittedly challenging freedom that comes from engaging with the principles to choose an ownership, governance, and financing structure that reflects the will of the people involved and is appropriate to the respective enterprise. It is this exercise of freedom, combined with the uniqueness of organisations, that gives rise to the inspiring diversity of solutions we see in the context of steward-ownership. A diversity whose common denominator lies in the principles of self-determination and purpose orientation, as well as their technical interpretations, forms, and variations.

We hope that our contribution will provide some orientation and inspiration. The discussion and the pursuit of clarification is certainly not over. This text is intended more as a starting point. It reflects the Purpose Group's current answer to the question: Steward-ownership – what exactly is that again? We, for our part, will continue to revisit and reflect on this central and important question again and again, and warmly welcome your questions, contributions and input.

[1]  Control means being able to make all essential entrepreneurial decisions independently – including those concerning the design and assignment of the role of the steward-owner(s). Therefore, this does not only involve voting rights but also all decision-making, approval, control and oversight rights.

[2] “Access to value and assets” refers in particular to the following rights: the right to participate in profits; the right to access liquidation proceeds; the right to sell or transfer shares for personal gains; the right to acquire new shares in the event of capital increases; the right to compensation.