For The Better - Email 5/23

For the Better comes to you bi-weekly with ideas about how and why to build companies focused on human flourishing and stories of the people who are doing it. Other enthusiasms may occasionally appear.

Company Control Doesn’t Have to Be A Zero Sum Game

I've spent a lot of time in recent years looking at corporate governance models. The reality is that in the U.S., most founders default to the standard one recommended by all kinds of lawyers for all kinds of reasons. What they don't realize is that this model is actually designed to give control to people outside of the company by prioritizing fiduciary duty to shareholders. To put it more starkly, the charter most companies draft up is made to gut its mission before it even gets going.The good news is that there are other ways to structure that place power in the hands of people who will keep purpose front and center for the long-term. Among them is the industrial foundation, in which the majority of shares are held by an independent foundation, funded by dividends from those shares, that has oversight over all of the company's actions. While it may sound arcane, many familiar companies are run this way, including Ikea, NovoNordisk, Bosch, and Rolex, to name just a few. In the US, Hershey is one of the few long-time foundation-owned companies, but many European corporations use it and the model is especially prevalent in Denmark.Not only does foundation ownership ensure long-term commitment to mission, it's also proven to be financially sound, and even advantageous. This piece dives into the implications and benefits for companies that convert to this model, including Patagonia. If we're going to build a better future, we need many more companies to join their ranks.

Eric