by Sarah Joannides – Managing Director, Alternative Ownership Advisors
Everyone seems to be talking about stakeholder capitalism as an idea whose time has come, an antidote to the many problems facing society today.
But what are they talking about? And how serious are they?
Stakeholder capitalism is a two-part idea:
- Companies should serve the interests of all stakeholders (e.g. employees, suppliers, customers, communities, ecology), as opposed to only shareholders.
- Companies should do this not only because it is the right thing to do, but also because it is essential to the long-term success and health of a business. In addition to being the ethical choice, it also represents a pragmatic business decision.
As we speak to purpose-driven founders and owners every day, we find that nearly all believe in the ideas behind stakeholder capitalism, but many are unsure how to integrate it into their businesses. When we talk to them about how they can embed the principles of stakeholder capitalism directly into their ownership structure, it is often a lightbulb moment.
For some, embedding stakeholder capitalism into their business means redesigning their ownership and governance to be multi-stakeholder in approach.
Often, however, we hear that the driving reason for an exploration of alternative ownership comes from a desire to protect and/or benefit their employees. These are heartfelt expressions of gratitude to the workers who have made their business a success, and an acknowledgment that traditional ownership doesn’t always provide a durable and secure framework for shared prosperity.
The movement towards employee ownership has grown rapidly in the US, fueled over the last 40+ years by Employee Stock Ownership Plans, or ESOPs. The rise of ESOPS has been in no small part due to the tax benefits that accrue to the selling owners. Regardless of the reason for establishing an ESOP, statistics show that they work, both for businesses and for employees. They act as a critical engine of wealth accumulation for workers and improve retention and loyalty by deepening the sense of purpose and engagement, which in turn fuels productivity and innovation.
While ESOPs are the most common methodology, we are also drawn to the democratic and inclusive cultures that can be created under worker cooperatives. In these environments, worker ownership not only enables employees to build personal wealth but also to have an equal voice in steering the company’s operations under the “one worker, one vote” philosophy.
Steward Ownership has a contribution to make in the quest for more broad-based employee ownership – the Employee Ownership Trust.
While not as well-known as ESOPs or cooperatives in the US, experience from Europe tells us that it can be a powerful tool – flexible to design, inexpensive to install and administer, and able to deliver on the fundamental promise of steward ownership – a permanent lock on mission and independence.
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Sarah Joannides is a champion for change and using business as a force for good. Prior to joining Alternative Ownership Advisors, Sarah spent 12 years at New Seasons Market, most recently as VP of Social Responsibility. She was their steward of social cause and mission-related practices, including community engagement, operational sustainability, B Corp certification, and public policy advocacy.