Capital Incluyente, an organization based in Mexico, not only focuses on promoting inclusive capitalism but also advocates for businesses that prioritize both profits and the well-being of workers, communities, and the environment. Their work emphasizes employee ownership and cooperative business models as central strategies for creating a more sustainable and equitable form of capitalism.

The idea of employee ownership challenges “traditional” business structures, where the primary goal is often to maximize profits for shareholders. In contrast, employee-owned businesses tend to place greater emphasis on long-term sustainability and social impact. Employee ownership and social responsibility are not just connected, they are mutually reinforcing. Capital Incluyente, for example, operates as a catalyst for transforming capitalism into a more inclusive and socially responsible system. They’re guided by a philosophy that businesses should serve not only the interests of shareholders and owners but also the needs and rights of employees and the broader community. By championing employee ownership and cooperative models, Capital Incluyente is working to ensure that businesses are held to a higher ethical standard, where social responsibility is embedded into the very structure of the company. Looking closely at how this works in practice:

Increased Accountability and Transparency: Both transparency and accountability are fundamental to social responsibility and employee ownership. In companies, where employees have a stake in the decisions being made, they are no longer just employees, but co-creators of the company’s future. This shared responsibility can also likely mean that leadership is held to a higher standard, and the result is a better system of checks and balances.

Alignment of Interests: “Traditional” models of business ownership often create a tension between shareholders and employees, where profit maximization is often prioritized even at the expense of worker welfare. In contrast, employee ownership realigns these interests. When employees own a stake in the company, their goals will often align with those of the business: long-term growth, ethical practices, and sustainable profitability. This alignment is crucial to avoid exploitation and also helps create a more purpose-driven workplace where economic performance and human dignity go hand in hand.

This is just a glimpse into the transformative potential of employee ownership and socially responsible business models. Capital Incluyente, like many other organizations around the world, is championing a more inclusive and equitable form of capitalism, one where profits and people are both valued.

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The owners of Concept2, brothers Dick and Pete Dreissigacker, founded the company in 1976. Given that they are about to hit their 50th anniversary and are approaching retirement age, they had to approach a succession plan for their customer base. Although they could have sold the company before “stepping away from day-to-day operations,” they transferred 100% of the ownership to the Concept2 Perpetual Purpose Trust (PPT) with support from Purpose Owned and Lumo Group.

Understanding a Perpetual Purpose Trust

A Perpetual Purpose Trust (PPT) is similar to a regular trust in that it manages assets according to a legally binding agreement. Unlike traditional trusts, which often distribute assets to beneficiaries after a set period, a PPT is designed to exist indefinitely and to serve a specific mission rather than individual owners or heirs.

For example, in 2022, Patagonia’s founder, Yvon Chouinard, transferred ownership of the company into a purpose trust to ensure that it would permanently prioritize environmental protection. Under this arrangement, Patagonia continues to operate as a for-profit business, but its majority profits are now legally required to be used for combating climate change and protecting natural ecosystems.

Concept2’s Purpose Trust

Concept2’s purpose that was put in its PPT is to “direct the management and operations of Concept2 in a manner that maintains continuity.” Rowing YouTuber Shane Farmer presented a great example of how the perpetual purpose trust reinforces their company’s methods and policies. Concept2 ensures that their performance monitors can function with any of their machines so users are not forced to purchase a new one. In addition, their software is continuously updating for the best customer experience. Concept2 breaks even on selling individual parts if something breaks. Protecting the customer’s best interests was important to the Dreissigacker brothers, and selling the company to a private equity firm was only going to lead to a focus on shareholder profits rather than long-term development. The implementation of a PPT prevents future leadership from selling the company or shifting its focus away from its operational continuity-based purpose.

A Growing Trend

Concept2 is just a small part of a growing trend of employee ownership in manufacturing firms. New Mexico-based Bicycle Technologies International is another PPT-owned sporting goods company. Other PPT-owned manufacturers include Optimax, ACP International, Shopbot Tools, and Breaking Ground, and ShopBot Tools.

Concept2 is based in Vermont, which has a long history of alternative ownership. Bernie Sanders initiated the Burlington Community Land Trust in 1984 to combat housing costs for citizens, and Vermont ranks among the top states for ESOPs per capita. Compared to the workers across the U.S., Vermont workers are more engaged with their work, happier due to increasing remote work, and have a low unemployment rate. Vermont also has a long history of worker cooperatives. A bill currently under consideration would create a framework for stewardship trusts. Embedding PPTs and employee ownership structures in companies like Concept2 ensures better outcomes for customers and employees while maintaining a legacy.

Thanks for reading this week!

Anthropic, the creator of rival AI chatbot Claude, was set up as a long-term benefit trust (LTBT) in 2021, “to address the unique challenges and long-term opportunities” that AI presents. The corporate governance structure of Anthropic deviated from other AI companies, stressing safety and societal well-being rather than prioritizing the production of shareholder value. Check out Tiffany’s insight into the key components of Anthropic’s LTBT. So where are we now?

Anthropic started with seven former OpenAI employees who had a different vision in the “AI wars.” Anthropic CEO Dario Amodei left OpenAI to prioritize safety and make his mark on the AI ecosystem through his vision.

In September of 2023, we learned some of Amodei’s vision through an announcement that details the LTBT and Anthropic’s governance structure. This includes:

• Independent Ownership: The LTBT has five trustees with “backgrounds and expertise in AI safety, national security, public policy, and social enterprise” to protect the interests of the public

• Board of Directors: The trust grants itself the authority to elect and remove its directors

• Public Benefit Corporation: Anthropic is set up as a Public Benefit Corporation (PBC), which legally requires itself to consider impacts on society, environment, and stockholder interests

• Mission: Overall, it addresses the long-term mission of developing AI for the benefit of humanity, with safeguards in place for potential harms that could interfere with the economy and national security

Since its announcement in 2023, there have been no public updates on the maintenance or enforcement of Anthropic’s LTBT. As AI companies continue to evolve, it’s worth considering how major investments from tech firms might intersect with the company’s long-term governance. Critics have raised concerns about the LTBT’s transparency, citing, for example, the uncertainty surrounding the election of a fifth trustee. Billy Perrigo is similarly interested in the potential that the LTBT can be rewritten by a supermajority of shareholders without the consent of the five trustees. For its part, Anthropic wrote this into the LTBT as a “failsafe” for fixing existing structural issues and that the classification of stocks given to shareholders provides different voting rights in decision-making.

Anthropic’s dedication to responsibility within the AI field is present: last October, their Responsible Scaling Policy went into effect, implementing safeguards to mitigate risks of AI models causing harm. Additionally, their Internal and External Risk Assessments indicate (to me) that they are doubling down on their commitment to public safety through AI advancements. However, ensuring transparency around governance structures like the LTBT would further strengthen confidence in their long-term commitment to responsible AI development.

More to come (hopefully)!

This is where steward-ownership comes in. Steward-ownership is a “corporate ownership structure that presents an alternative to shareholder value primacy.” This means that steward-owned companies are legally obligated to prioritize their purpose over the maximizing of potential returns.

How This Is Done

Steward-owned companies prioritize two principles: self-determination and purpose orientation. Self-determination refers to the power structure of companies, where the employees (or stewards) who directly assist in operating the company function as the decision-makers. Purpose orientation refers to prioritizing the purpose through reinvesting profits or directing them toward the “purpose.” In steward-ownership models, these principles are legally bound to protect them from being infringed upon.

Steward ownership can be implemented through several different models:

• Double Foundation Model

  • Legally separates money and power. The managers act as the stewards for the company while another charitable organization holds economic rights and shares of the company

• Single Foundation Model

  • All voting and economic rights are held by a “self-governing non-profit foundation.”

• Veto Share Model (or Golden Share Model)

  • Guiding principles are included in the company’s “articles of association.” Stewards hold 99% of control rights but no economic rights, while the 1% is given to an independent non-profit. This places a check on the company to ensure all principles in the articles are being followed

• Perpetual Purpose Trust

  • Set up for the benefit of a purpose rather than a person. Steward owners are in control but cannot extract value from the company.

• Employee Ownership Trust

  • Shares of a company are held by a trust that ensures the employees control or benefit from the company.

Examples of Steward-Owned Companies

• Patagonia

  • A trust controls the company’s values, and the non-profit uses the profits from the company to fulfill the values in the trust

  • For Patagonia, this means they are legally obligated, through their trust, to fulfill their mission to “save the planet”

• Bosch

  • 92% of the company is owned by the Robert Bosch Foundation, which continually reinvests profits into charity

  • 93% of the shares with voting rights are held by 10 steward owners that cannot be sold

• Novo Nordisk

  • Their mission is to defeat diabetes by preventing obesity and type 2 diabetes, and providing affordable healthcare

  • Private investors have around 23% of votes and 72% of capital of their “B Shares” while the Novo Nordisk Foundation holds 78% of votes and 24% of capital

• Wildplastic

  • Their mission is to solve the plastic crisis

  • They gather “wild” plastic waste to produce recycled trash and parcel bags

  • 1% of Wildplastic’s voting shares is held by Purpose Foundation to protect the ownership and financial structure, while the rest of the shares are divided between investors (with no voting rights) and stewards (with all the voting rights)

Overall, steward-ownership is a promising approach to keep companies accountable for the promises they make to the public. Additionally, it often gives the individuals that carry out the mission ownership to continue fulfilling it in the long term. By shifting power away from profit-maximizing shareholders and toward stewards who prioritize purpose, companies can ensure that their commitments—whether to sustainability, social responsibility, or ethical business practices—are not just marketing tools but legally embedded principles.

Worker Cooperatives in Prisons

Prison systems around the world have successfully implemented worker cooperatives as a means of rehabilitation and economic empowerment. This includes countries like Ethiopia, South Africa, England, Brazil, and Puerto Rico. Director of the Let Us Contribute Initiative (LUCI), Kelton O’Connor, is trying to incorporate worker co-ops in California today. His idea is that inmates could be “expert regenerative farmers, sea urchin foragers, and kelp forest restorers.” The products that these types of work generate could then be sold to Bay Area food purveyors. This then would assist inmates to earn a better income (beyond the estimated 8 to 74 cents per hour many of them get for “work assignments”) to have a safety net after finishing their time in prison or to send home to family members while finishing their sentence.

Additionally, other countries have taken similar routes to combat recidivism. Norway places an emphasis on the normalization of incarcerated life to free life through more inhabitable living spaces, locating prisoners closer to family, and increasing visitation availability. They now only have a 20% recidivism rate. In Puerto Rico, inmates at the Guayama Penitentiary formed the worker cooperative Cooperativa de Servicios ARIGOS, aimed at art, solar, technology, and sewing. After 10 years of existence, only 6% of those workers were rearrested, while Puerto Rico’s recidivism rate is at a high 50%. Worker cooperatives in the United States can assist with this normalization process for prisoners, but it is not possible quite yet.

Legislation for Worker Cooperatives

Getting legislation passed for prisoners has historically been challenging, whether that was to increase wages in prisons, improve access to healthcare, expand educational opportunities, or establish stronger protections against forced labor and inhumane treatment. Worker cooperatives would need legislative action to be possible for prisoners, but LUCI believes this is possible. The draft legislation that LUCI developed with the Sustainable Economies Law Center (SELC) is designed to operate without state funding, with 40% of the revenue generated by these cooperatives being allocated to community-based job programs. This would help reinvest in local communities to reduce first-time offender rates.

Incorporating worker cooperatives into the U.S. prison system presents a promising approach to reducing recidivism and improving post-incarceration outcomes. By providing incarcerated individuals with meaningful work, fair wages, and the opportunity to develop valuable skills, these cooperatives can help break the cycle of reoffending that is largely driven by unemployment and lack of stable housing. Thanks for reading!

Why Does This Matter?

Many neighborhoods suffer from disinvestment, leading to a lack of resources and support to revitalize communities. This often affects single-family homes or smaller units, which already don’t receive assistance from state or national programs. When neighborhoods do get support, it often leads to marginalized communities getting disproportionately affected by gentrification. Additionally, housing prices hit record highs in 2024. Although some other programs and laws attempt to address these issues, such as the Biden administration’s combat against rent gouging, they fall short. This is where the Trust Neighborhoods solution—Mixed Income Neighborhood Trusts, or MINTs—come in.

How Does It Work?

Mixed-Income Neighborhood Trusts partner with an existing community-based organization (CBO) in a targeted neighborhood. Trust Neighborhood assists with establishing a rental house portfolio for these communities and raising capital for the community-controlled MINT. That community then acquires, renovates, and builds the collection of properties. With the MINT, two thirds of those properties will be as affordable as possible, forever. As the community revitalizes, the last third of the properties, which are kept at market-rate rental prices, help keep the remaining two-thirds of units affordable.

Like worker cooperatives, neighborhood trusts work together to benefit the community as a whole. In turn, this allows stability, cooperation, relationship building, and a higher standard of living for mixed-income neighborhoods. Community members oversee all operations of the MINT, keeping the decision-making in the hands of residents.

Current MINTs and Looking Forward

There are currently five active MINTs. The first MINT was established in the Lykins Neighborhood Association in Kansas City in 2020. Neighborhoods in Fresno, Tulsa, Boston, and Denver have also established MINTs. The East Colfax MINT in Denver aims to expand to 100 units in the next year and 1000 in the next decade.

Some Questions

New to purpose trust ownership, I had a few questions as I was learning about MINTs for the first time.

• What happens if property values in the area drop significantly—how would that impact the community’s ability to sustain the trust? Are there other revenue streams that could keep the trust sustainable?

• Would trust ownership make disaster recovery easier or more complicated?

With only five MINTs in the country so far, it’s hard to imagine them scaling quickly enough to solve America’s housing crisis. But it seems like a great solution to revitalize communities and establish more equitable rental prices in individual neighborhoods. Thanks for reading!

In the public announcement, we hear from the Deputy Secretary of the Treasury:

“We know that entrepreneurs and small businesses in underserved communities have long lacked equal access to resources and capital to reach their full economic potential,” said Deputy Secretary of the Treasury Wally Adeyemo. “Through the Capital Readiness Program, the Minority Business Development Agency—tasked with promoting growth and competitiveness of our nation’s minority-owned businesses—will help enable entrepreneurs and business owners to obtain the information they need to access funding through small business support programs. When entrepreneurs and small business owners in all communities have a chance to compete and thrive, it increases our country’s entire economic potential and growth.”

This made me wonder about some of the challenges minority entrepreneurs face with employee ownership. Some of the main ones:

• A need for educational resources

• Access to capital

• Economic inequality

• Lack of awareness

What Can We Do About This?

• Continue creating workshops and seminars specifically tailored to help minorities looking to learn about employee ownership

• Partner with universities or other higher education institutions to host employee ownership courses or collaborate to host workshops for the community

• Raise awareness

Some resources dedicated to helping minorities and other underserved people start up their businesses and grow:

• VBOC - Veteran Business Outreach Center (at UT Arlington!)

• The Center for Women Entrepreneurs

• Find local assistance and training for small businesses and aspiring entrepreneurs on the SBA’s Local Assistance page

• Ascent’s free learning platform for entrepreneurs

• The Texas Department of Transportation offers several disadvantaged and small business enterprise programs

Something cool I stumbled upon as I was doing some research: The 2020 ABS geographic feature categorizes firms by urban and rural locations and found that there were more minority-owned businesses in urban (1,010,744) than in rural areas (56,865).

Related content worth checking out:

• San Francisco Entrepreneurs of Color Fund: Creating a Continuum of Capital and Consulting | The Aspen Institute

• Bridging the Divide: How Business Ownership Can Help Close the Racial Wealth Gap | The Aspen Institute

• Prison to Proprietor: Entrepreneurship as a Re-Entry Strategy | The Aspen Institute

Background: Over the weekend, I listened to an Oxford-style debate between Harvard’s A. Lucian Bebchuk and Oxford’s Colin Mayer.

• The question at hand: Should business be governed and run for shareholder or stakeholder interests? 

The conversation came in the wake of a 2019 announcement by The Business Roundtable, a lobbying group made up of large CEOs of large companies. In that announcement, they redefined the purpose of a corporation.

• Why it Matters: For decades, The Roundtable adhered to economist Milton Friedman’s position that the sole legitimate purpose of a corporation is to maximize shareholder value. TBR’s announcement, a real departure from economic orthodoxy, came as a shock.

• But Bebchuk and other critics argued that this was mostly PR.

The Rise of Steward Ownership: At the same time the Roundtable was reconsidering the purpose of a company, a movement was growing in Europe in support steward ownership. In a post, the nonprofit Purpose Foundation argued:

We need to ask ourselves: who holds power and what is motivating their decisions? To create new solutions that harness the potential of capitalism (entrepreneurship, innovation, competition, a decentralized economy) and move beyond its failures (greed, consolidation, inequality), we must challenge one of the fundamental paradigms of capitalism: the understanding and definition of corporate ownership.

Toward the end of the Oxford debate, Bebchuk argued something similar: we can’t blindly trust business leaders to make decisions on behalf of stakeholders. If stakeholder benefit is what we are after, we need a different kind of corporate governance.

Where do things stand? Today marks five years since the Rountable’s announcement, which the commemorated last week in a blog post. And their Purpose of a Corporation document is still linked from the About Us section of their homepage.

• But the most exciting developments of the last five years have not come from the CEOs of major companies or regulation, but from the small group of companies that have taken up Bebchuk’s call to rethink corporate governance in pursuit of purpose.

Watch the debate here:

Background: Last week I went to Atlanta, Georgia, to help facilitate a convening on shared ownership put on by The Rutgers Institute, The Atlanta Wealth Building Initiative, Goizueta’s Business & Society Institute, and The Georgia Social Innovation Collaborative. The Georgia Center for Employee Ownership led a 101 session, too.

The hosts are still gathering notes and resources from the day, but here are some quick takeaways and resources.

• First, our read-ahead has the agenda for the day, the list of participants, and background on shared ownership, employee ownership, and business ownership by women and people of color in Georgia. The read-ahead proved even more useful than we’d hoped in getting participants up to speed on a tangle of topics.

  • If you look through the agenda, you won’t find a lot of content there. That’s by design—we wanted the day to be conversational, generative, and inclusive as we could make it.

• We also put up a shared Google Drive (email me for the link!) for participants to upload their own resources, share upcoming events, and post more about their organization’s work.

• We built out our invite list from the networks of our local partners, then from our invitees’ networks. We had hoped for 15-20 participants, which ballooned to 60 (!). I wouldn’t be surprised if there were similar latent interest in other cities around the country.

• We hosted the event at one of Emory’s flattest classrooms, also by design.

A few scattered takeaways:

• There is a tremendous amount of activity going on in Georgia, as you’ll see in the read-ahead and as you can tell from the list of participants. This may have been the first convening of its kind in Georgia, but it isn’t where the work started.

• A lot of what this ecosystem-building work requires is just time. One of the participants pointed out that it took almost a decade of beating the drum about B Corporations before he had to stop explaining them to every person he met.

• Having a university host the event was critical. The Emory team organized meals from local Black-owned business; managed a registration page; set up a Google Sheet to track invitations, registration responses, and dietary restrictions; organized supplies for the day; and a thousand other things I wouldn’t have thought about until the morning of the event.

• Having a specific focus helped us curate the day. Our focus was on the role shared ownership could play in addressing the racial wealth gap. But in another city (and in Georgia, too!), that focus could be nudging large employers toward worker voice or employee ownership, or protecting vulnerable communities through neighborhood trusts, or preserving and developing rural economies, or supporting women-led businesses.

• One of the big questions in the room was how to use these models—or create new ones—to benefit Black business owners. But according to AWBI research, over 90% of Black-owned businesses have zero employees. The group just began to crack open whether/how secondary cooperatives, shared service cooperatives, or multi-business purpose trusts could address their needs.

Watch this space—and keep an eye on Georgia!

A Brief Introduction to Shared Ownership 

Across the country business owners, investors, philanthropists, and policymakers are exploring how alternative forms of ownership might address some of the critical problems facing the US today, and in particular racialized wealth inequality and the coming wave of business closures as Baby Boomer small business owners retire, known as the silver tsunami. 

Here is some of what shared ownership includes:

• Employee stock ownership plans (ESOPs) are the most common form of employee ownership in the United States. Worker cooperatives come next, followed by a relatively new legal form called an employee ownership trust that has taken off in the United Kingdom. Even more recently, private equity firms have started deploying a form of employee ownership in their acquisitions. 

• Worker cooperatives are one type of cooperative. Producer cooperatives have a long history in the United States, especially in agriculture, and there are some companies structured as consumer cooperatives like REI. 

• Steward ownership refers to a handful of legal forms that center a company’s purpose or empower its stakeholders, in an even more legally binding way than benefit corporations (B Corps). Perpetual purpose trusts are one way that can happen in the United States. 

• Most of the models above are about ownership of companies. Neighborhood trusts are designed for the ownership of real estate, as is cooperative land ownership. 

• Each of these models alters some aspect of how companies or real estate are owned. Some of them, like worker cooperatives, also change how decisions are made, incorporating workplace democracy. In the US it usually describes the work of labor unions, but many organizations incorporate some form of democratic decision-making. The Great Game of Business network, for example, trains companies in open book management. 

• B Lab has long supported companies that want to commit themselves to purpose, and they are exploring what it means for their network of companies to lock their mission into their governance. 

What all of these models  have in common is that they are alternatives to the way that most firms are owned and managed. Umbrella groups that support this work variably use the phrases shared ownership; shared, inclusive, conscious, or stakeholder capitalism; alternative ownership enterprises; and the shared or ownership economy.

Shared Ownership for Business Owners of Color 

The focus of the Georgia gathering was the potential for shared ownership in businesses led by people of color and, in particular, the potential of employee ownership to bridge the wealth gap by allowing marginalized employees to gain financial stakes and ownership in their companies, thus promoting economic equity. 

• The Kensington Corridor Trust (KCT) is a neighborhood redevelopment in Philadelphia, where the average household annual income is $20,505. With luxury development on the rise, KCT is dedicated to maintaining affordability, attracting businesses that meet local needs, and increasing job opportunities. 

• APIS & Heritage, is an investment fund that helps businesses of color convert to employee ownership. 

• The Rutgers Institute’s Employee Ownership Online Education Program was put in place to help business owners of color and learn about employee ownership strategies for business succession planning. 

• Last year's Congressional Black Caucus Foundation gathering focused on increasing black ownership, as well. The CBCF also partners with the Urban Institute and the Federal Home Loan Bank to tackle obstacles to Black homeownership.

• Rutgers Institute Fellow Oyindmola Ijewere’s Building Black Wealth addresses the challenges and opportunities of black business owners, highlighting the need for succession planning to preserve Black wealth. 

• New Majority Capital’s supports entrepreneurs of color to engage in entrepreneurship-through-acquisition.

• Supported by AWBI, Project Equity and Morehouse have produced two papers on employee ownership and the racial wealth gap: Strategies to Advance Black Employee Ownership and Employee Ownership for Black Workers: Closing the Racial Wealth Gap. 

• EO+WD, a research initiative, covered some of these topics recently in Building Black Wealth Through Employee Ownership 

Going Deeper: What to Read and Who to Know 

• To get a sense of how many of these forms overlap and read some case studies, check out Transform Finance’s report on Alternative Ownership Enterprises. The Predistribution Initiative does similar work, focused on investors. 

• For an overview of employee ownership models, check out the website EO=, the Georgia Center for Employee Ownership’s Employee Ownership 101, and this Harvard Business review article making the case for employee ownership. Project Equity provides educational materials on different forms of employee ownership, and the Aspen Institute EOP provides a wide range of resources on employee ownership.

• The National Center for Employee Ownership and the ESOP Association are two of the largest groups promoting ESOPs. The Rutgers Institute has for decades been the home of academic study of employee ownership, and ESOPs in particular. The National Center for Employee Ownership (NCEO) also provides comprehensive information and case studies on employee ownership, particularly on ESOPs.

• To learn about employee ownership trusts and perpetual purpose trusts, check out our recent publication in Harvard SIR, this book by investment fund Common Trust, this book by the National Center for Employee Ownership, and this podcast with Mark Hand and Jenny Everett from EO+WD. 

• Two leading organizations on worker cooperatives are the US Federation of Worker Cooperatives and the Democracy at Work Institute. Newer voices include Zebras Unite and Start.coop. 

• Tandem promotes direct ownership, and Ownership Works promotes employee ownership in private equity transactions. 

• Trust Neighborhoods is the leading developer of neighborhood trusts, which they call Mixed-Income Neighborhood Trusts. 

The NCEO maintains a database of state-level employee ownership policies. EO+WD and Common Trust recently published policy recommendations on purpose trusts. Colorado, California, and Washington have well-established employee ownership policy, and the federal government caught is somewhere between passage of and appropriations for a federal program that would fund state-level advocacy of employee ownership. For more on legal aspects of worker cooperatives and employee owned businesses, Co-op Law.org covers policy, nonprofit support, governance, taxation, and co-op basics.

What did we miss?

Let us know in the comments or by email!

Background: Supported by a grant from Schmidt Futures, in partnership with Sandra Raafat from Common Trust, and with feedback from many of you dear readers, the EO+WD team has been gathering policy recommendations to support the growth of purpose trust ownership in the United States.

In context: As was clear from this year’s Employee Ownership Ideas Forum, employee ownership has some serious policy momentum.

• The ESOP Association, Lafayette Square Foundation, and the National Center for Employee Ownership push forward policy changes in support of employee stock ownership plans (ESOPs).

• The Democracy at Work Institute, The US Federation of Worker Cooperatives, and Project Equity focus on policy supportive of worker cooperatives.

The gap: Purpose trust ownership has lacked dedicated policy support, though the actors listed above have worked to include employee ownership trusts in their broad-based employee ownership legislation.

• One notable exception: Purpose Owned and Susan Gary worked together to codify stewardship trusts in Oregon and have supported legislative changes in Illinois and Texas.

• This report aims to fill that gap by offering recommendations to leaders of federal agencies, state-level policymakers, and local-level advocates.

In brief: Below is what we recommend; you can read the rest of the white paper here. Don’t miss the appendix on existing state-level policies.

Federal Policy Options

• Clarify IRS tax criteria for purpose trusts

• Enable seller participation in governance without estate tax impacts

• Implement estate and gift tax reductions and capital gains exemptions

• Fund SBA research into purpose trust impacts and best practices

• Issue clarifications on using SBA loans for transitioning to these structures

• Update the SCORE Mentor program to focus on business succession

• Pilot an SBA program offering loans for purpose trust transitions

• Exempt purpose trusts from personal loan guarantee requirements

• Ease CDFI lending to purpose trusts

• Embed employee ownership into well-funded workforce development programs through the upcoming WIOA reauthorization

State and Local Policy Options

• Waive rules against perpetuities and allow trusts without ascertainable beneficiaries

• Explore state-specific legislative models for purpose trusts

• Relax ownership requirements for purpose trust professional service businesses

• Extend employee ownership conversion tax credits to purpose trusts

• Include look-through provisions for purpose trusts in state contracting

• Establish employee ownership offices/commissions within economic development agencies, providing purpose trust transition resources and connections

• Boost awareness and adoption through local campaigns, workshops, incentives, and highlighting successful examples of purpose trust ownership

Go Deeper: Read the full white paper here. And for the design-minded readers in our audience, stand by for a more beautiful version—we just couldn’t wait to get it in your hands!

At least one film company is set to take up the charge, and is organizing their employees in a creative way on the forthcoming A24 movie Sing Sing. According to Hollywood Reporter,

… everyone working on Sing Sing, which was produced and financed by Black Bear, from Domingo to the production assistant, was paid the same rate — based on SAG weekly or daily minimums, depending on how long they worked on the production — and everyone gets equity in the film. Says Kwedar, who used a similar pay structure on Jockey, “We’re trying to erase the line between above- and below-the-line talent.”

In the agency-driven world of Hollywood hiring, the model is a rare innovation. And it paid off, according to Director Greg Kwedar:

“A traditional hierarchical pay structure — where only a few at the top held all the ownership and were paid at a hugely stratified rate — would find its way into the experience on set. I don’t know that we would’ve had as open and as warm and as honest of a set. It directly impacts the storytelling. Everyone is actually a partner versus an employee.”

The movie, its creators say, “… is not just a movie. It’s a movement.” And if successful, each of the contributors to the film—including the formerly incarcerated Americans whose story it tells—will benefit financially from that success.

Read more: How the Formerly Incarcerated Cast of ‘Sing Sing’ Found Shooting the Prison Drama “Cathartic.”

The symbol means that the company has been evaluated by the B Lab, a third-party certification company that ensures that companies are living out their commitments to “an inclusive, equitable, and regenerative economy.” I remember seeing the logo for the first time in 2010 at GrayMatters Capital, which I think was the first B Lab-certified investment fund.

In the last few months, I’ve thought a lot about B Lab. It has seemed to me that employee ownership and B Lab movement grew in parallel, and that they had much more in common than has been taken advantage of, yet.

You can imagine I was excited, then, that B Lab sent a representative to our Purpose Trust Ownership Convening last month. And I listened intently this morning to this week’s episode of the ESOP Podcast featured Brian Taussig-Lux, former CEO of UnTours, the very first B Corporation:

To Brian’s knowledge, there were only two employee-owned B Corporations: King Arthur Baking Company (an ESOP) and Namaste Solar (a worker cooperative). Natural Investments became another when it converted to perpetual purpose trust ownership in 2023. A recent article from B Lab and an older one from NCEO point to even more.

Later this morning, I learned about the newest: Evenlode Investment, an employee-owned investment manager in the England, announced this week that it had a B Corporation. I also learned that last year, B Lab Europe hosted its own event focused on employee ownership.

If B Lab is about helping companies live out their values, and shared ownership is about making sure that the value created by a company is locked in and shared widely, might they be able to build off each other more strategically? RSF Finance’s Jasper van Brakel tackled this question in a February article worth reading in full. He starts swinging:

“If ESG is a foot in the door to an economy built around sustainability, inclusion and equity, then governance is the power that’s going to kick that door wide open and make way for real progress on corporate environmental and social performance.

… “We need to change who makes decisions more broadly, along with the interests they’re accountable to and the incentive structures they work within. If we want stakeholder capitalism, we need stakeholder governance.”

I took at look at the B Lab’s most recent draft standards to see how they are thinking about governance. Here are B Lab’s criteria for Purpose & Stakeholder Governance:

• The company has a defined public purpose contributing to a material positive impact on society and the environment.

• The company considers impacts on stakeholders in decision making.

• The company has adequate grievance procedures to receive, respond, and seek resolution to stakeholder grievances.

• The company manages marketing and communications activities responsibly.

• The company’s highest governing body has an explicit oversight role in monitoring the company's social and environmental impact and stakeholder considerations.

• The company is transparent about its social and environmental performance and its progress against the B Corp requirements.

It struck me that this section might be where the shared ownership rubber could meet the B Corporation road. Here are a few options based on principles from steward ownership and workplace democracy—offered humbly, as I know how hard it is to put together frameworks like this:

• The company's legal structure and governing documents explicitly incorporate its stated public purpose and commitment to stakeholder consideration.

  • This could be through a benefit corporation (which B Lab helped develop), purpose trust ownership, or other forms of steward ownership

• The company's highest governing body (e.g., board of directors) includes representation from stakeholder groups directly affected by the company's operations, such as employees, local communities, or relevant special interest groups.

  • This could be through purpose trust ownership or codetermination (stakeholders having board seats, like in Germany)

• The company implements democratic decision-making processes that give stakeholders, especially employees, a formal role in shaping policies, practices, and strategic directions that affect them.

  • This could include open book management or other expressions of workplace democracy

• The company's executive compensation and incentive structures are aligned with the achievement of its stated public purpose and stakeholder considerations.

  • This probably mean equity-sharing and/or profit-sharing

What would you change or add, dear reader? If you’d like to learn more, some other links I’ve found at the B Lab ↔ employee ownership intersection:

• The Employee-Owned B Corp: An Enterprise Design for the 21st Century (from 2018)

• Benefit corporations and employee ownership: A legal and ownership structure for the future (from 2022)

• Two purpose trust experts, Natalie Reitman-White from Purpose Owned and Greg Curtis from Patagonia, sat on a SOCAP panel with B Lab’s Sarah Schwimmer last October

At the heart of the dialogue were profound conversations surrounding the implementation of Employee Ownership Trusts (EOTs) and Perpetual Purpose Trusts (PPTs), underscoring the enduring commitment to long-term employee ownership and stewardship. Participants delved into the transformative potential of community-driven initiatives and the profound impact of sharing success across diverse industries.

Central to the discourse was the looming “silver tsunami,” a term describing the imminent wave of retirements among business owners. This impending demographic shift looms large, necessitating proactive strategies to ensure continuity and sustainability in the business landscape. 

The participants, including Ocaquatics Swim School, Text-Em-All, Optimax, and Clegg Auto, came from a wide range of industries.

In a LinkedIn post, Common Trust shared some of their insights on the future of business ownership and employee engagement. “As we stand on the brink of a generational shift, where 3 in 5 small businesses look towards transition, the group at Stewards Circle 2024 demonstrates the massive potential of trust ownership to redefine success, community, and legacy.” You can read more from Dr. Hand about Stewards Circle here.

On April 3rd, 2024, Transform Finance hosted a discussion on investing in alternative ownership enterprise funds. The panel included Demetric Duckett, Managing Partner at Known; Humaira Faiz, Mission Investment Officer at W.K. Kellogg Foundation; Thomas Knowles, Managing Partner of Gratitude Railroad; and Ishita Shah, Director of Catalytic Capital at Align Impact.

Transform Finance’s Curt Lyon kicked off the conversation introducing the topics at hand, which included delving into investments in alternative ownership enterprise funds, exploring how enterprise models can serve as catalysts for mitigating the racial wealth gap, and discussing financing options for conversions.

Prior to delving into the discussion among the four panelists, Curt provided a brief overview of Transform Finance, founded approximately a decade ago, and which operates as a research education, and implementation partner within the finance transformation movement. Anchored by three core principles—community, control, and governance—the organization endeavors to transcend traditional financial paradigms. They work to add more value than what investors are extracting and also work to balance risks and returns fairly across stakeholders. 

Julie Menter of Transform Finance also shared how Transform Finance defines alternative ownership enterprises, firms that significantly shift economic value and decision-making power toward the non-investor stakeholders they impact such as workers, consumers, producers, members, or even nonfinancial purposes. According to Julie, there are a dozen models of alternative ownership enterprises that encompass a broad range of approaches. 

Some of the key points from the panelists:

Introducing Align Impact, Ishita Shah shared that alternative ownership models are a core part of what wealth means for an individual or a household. She asked how a family could build savings and assets for retirement even as they attempt to break intergenerational poverty traps, and argued that employee ownership could play a significant role in establishing financial stability. 

Humaira Faiz introduced the W.K. Kellogg Foundation, which she said has a deep commitment to racial equity. She said children, families and communities are at the heart of everything they do. She also discussed research that shows the current economic system is not working, especially for employees of color and their communities. She said employee ownership is one answer to this issue. 

Demetric Duckett introduced himself as Managing Partner at Known for Living Cities. He primarily focused on answering the question of how we might close the racial income and wealth gaps. He said one of the ways is through alternative ownership enterprises. He pointed to several models that have led to remarkable outcomes for lower income populations. 

Thomas Knowles introduced himself as Managing Partner of Gratitude Railroad, which works with individuals and families coming from traditional finance and business and entrepreneurial endeavors. He said they work off these models and experiences and primarily invest in venture and private equity. He said business owners ask questions about what will happen to their employees, communities, and the mission of their organizations, questions that alternative ownership can address.

If you’re interested in hearing more about this conversation, watch the video linked above!

TLDR: Last week at the Aspen Institute, we co-hosted the first Purpose Trust Ownership Convening, pulling together the investors and lawyers and consultants that are helping convert companies to purpose trust ownership.

Background: Last year, my colleague Jenny Everett and I started interviewing experts in purpose trust ownership.

• We joined up with Project Equity and Purpose Owned and, with the support of Aspen EOP and the Rutgers Institute, started planning for a one-day gathering of those experts. (Thanks to all our sponsors, listed there!)

• For many of these experts, it was the first time meeting or even hearing about the other people around the country working on similar structures.

• The purposes of the day, facilitated by my inimitable Liminal Advisors colleague Molly Alexander, were to learn about each other’s work, interrogate the uses and dangers of purpose trust ownership, and explore ways to build the field together.

The State of the Field

The team asked me to share a “state of the field” at the start of the day. Some of what I shared:

Where Things Stand: As best I can tell, the first employee ownership trust (EOT) in the United States was actually in the UK: With the help of Fieldfisher’s Graeme Nuttall, WATG converted to an EOT in 2014, ten years ago.

• According to our database, for the couple of years Chris Michael facilitated many of the conversions to EOTs in the US. In 2018, Organically Grown Company became the first perpetual purpose trust (PPT).

• Today, ten years later, we’ve come across 45 purpose trusts in the US (more on definitions in a moment), with 4,000-12,000 employees, based on LinkedIn searches. The majority of them are on the West Coast, and the largest number of them are in food and agriculture, followed by manufacturing and software.

• Oregon now has a statute recognizing stewardship trusts, and Illinois is on its way to creating one recognizing virtuous trusts. According to Susan Gary, 12-14 states have started down the path of adjusting their statues and trust codes to allow for purpose trust-based ownership of companies.

Five Tensions: I also shared what I see as five tensions within the purpose trust ownership field that need to be resolved or managed:

• Getting clarity on language. There’s not agreement on what to call these things, yet. As best I can tell, we’re talking about directed, long-term--maybe perpetual--non-charitable purpose trusts without an ascertainable beneficiary, that own corporate and/or real estate assets, and whose purposes include the benefit of employees, communities, the planet, or other stakeholders; and in which the governance of the trust likely includes some governance by those stakeholders by way of a stewardship committee.

  • I’ve heard these called employee ownership trusts, perpetual purpose trusts, stewardship trusts, virtuous trusts, business purpose trusts, employee-centered benefit trusts, etc. Personally, I’m warming to stewardship trusts, but that’s just me (and Oregon).

  • Uncertainty about this is reflected in uncertainty about what to call the wider fields they belong to: alternative ownership, shared ownership, steward ownership, distributed ownership, broad-based ownership, etc.

• Balancing the technical and the mimetic. Related to this tension is one between getting technical clarity on what these trusts are and how they operate, along with what Zoe Schlag called the mimetic way of talking about them.

  • In other words, what are the simple articulations of these models that business owners and their lawyers and advisors, who don’t initially care about the technical details of them, will hear about and get interested in?

  • It seems to me that one answer is in the (maybe technically incorrect) phrase employee ownership trust, which seems to get owners thinking about employee ownership, also thinking about purpose trust ownership.

• Balancing competition and collaboration. Both these things can be good, and they need to be balanced in two ways.

  • Among purpose trust ownership advocates, there can’t be too much collaboration. It is an industry after all, and then we’d be a cartel! Plus, competition is generative, and to grow an industry in a capitalist system, people need to make money.

    • But there are ways that competitors can collaborate. This happens all the time, across industries. Hence our Purpose Trust Ownership Convening!

  • The same tension exists in purpose trust ownership’s relationship to ESOPs and worker cooperatives, the more well-known versions of employee ownership.

    • The tension: how might we work ecumenically to contribute to the growth of employee ownership more broadly, while also carving out a niche for purpose trust ownership?

• Balancing speed, scale, and quality. The US and the world face big challenges. If purpose trust ownership is to help address them, we have to move quickly, and we have to get to scale fast. But when we’re setting up something this long-term, we also can’t afford to move fast and break things.

  • The field has to figure out how to scale quickly, with quality tools and documents and best practices.

• Determining how to organize ourselves. Nobel Prize-winning political scientist Elinor Ostrom discovered in her work that when groups of people have time and space to build trust with each other through repeated interaction, they can overcome a lot of otherwise intractable problems.

  • More recently, sociologists have argued that in movement-building, it doesn’t make sense to seek too much alignment before starting to act together.

  • Put simply: talking → aligning → acting isn’t as effective as acting → talking → aligning.

What’s Next: My hope is that after ten years of action, this week’s talking generates just enough alignment for ad hoc working groups to sprout up to take advantage of some of the opportunities we surfaced.

• There is so much coming. Up next, as best I can tell, are:

  • Project Equity’s Employee Ownership Equity Summit on May 6th

  • The next EOT Peer Gathering, hosted by NCEO, on May 8th

Watch this space!

NYTimes author Ezra Klein’s most recent podcasts tackle the long term societal implications of generative A.I. This week he interviews Dario Amodei, cofounder of Anthropic. It has some jaw-dropping moments in it, I have to admit.

Anthropic is the creator of Claude.ai, the serif-fonted cousin of ChatGPT. In the A.I. wars, Anthropic is aligned with one of its major investors, Amazon, whereas ChatGPT is owned (sort of) by Microsoft.

Last year, OpenAI’s “capped profit” governance structure became national news when CEO Sam Altman was fired and rehired within the span of a couple of weeks. Derek Thompson, another favorite podcaster of mine, summed up my knee-jerk reaction: this was a story about the failure of OpenAI’s experiment in corporate governance.

What Klein’s podcast and Thompson’s article both missed, and which our friends at Transform Finance pointed out, is that there is an alternative to OpenAI’s convoluted ownership structure, one already in place at its competitor, Anthropic. As EO'+WD’s Tiffany Vargas discusses, Anthropic is now a long-term benefit trust, a version of the purpose trusts that we write about here at EO+WD.

For more, check out Tiffany’s article and the case study put together by John Morley and the other attorneys who helped created the trust.

When Yvon Chouinard, founder of Patagonia, transitioned the company to a purpose trust in 2022, it made headlines around the world and brought attention to an emerging form of corporate ownership. Patagonia, long hailed as a model for how to operate a company to the benefit of society and the planet, now exemplifies how to align a company’s ownership with its purpose.

Patagonia’s conversion is part of a broader movement to rethink the fundamentals of corporate ownership. A few years prior, Organically Grown Company, a large wholesale produce distributor out of Oregon, had done the same thing. In 2023, Clegg Auto, a retail service chain in Utah, did too. These very different companies faced the same problem: How could founders retire while perpetuating the intent of what they’ve built? How could they ensure the people who are creating the value, including workers and communities in which they operate, also share in the benefits? How could they grow without “selling out,” and enshrine their values for the long-term?”

Read the rest of our paper on the Harvard Advanced Leadership Initiative’s website.

• Some 50-60 people gathered to swap stories and advice, including leaders from Equity Atlas, ACP International, Clegg Auto, Optimax, Organically Grown, CodeWeavers, ShopBot, RDA, and Ocaquatics (for a full list of trusts in the US, see our database).

Key takeaways: Rightly, the day focused on the stories of owners and workers, with companies getting to share their story from the stage, in interview, in Q&A sessions, and at roundtables.

• Topics at the tables included establishing and ownership culture; organizing financing for purpose trust transitions; managing the company after the transaction; handling leadership transitions; and good practices in profit-sharing.

Derek Razo from Common Trust summed it up well: everyone in the room had come in thinking they were winging it, only to discover that everyone else was, too—the result being a stock of hard-won wisdom shared back and forth in a short few hours.

Some of the most memorable moments were hearing owners talk about their motivations and logic in selling their company to a trust.

• “How much money did I really need?” was a common question from owners considering how to eventually leave their companies.

• One owner had seen friends sell companies to private equity firms, only to end up with “fat wallets and broken hearts.”

• Said another: “Making all that money came at too high of a price.”

• These business owners were not liberal squishes. Each of these owners had spent years, if not decades, building up their companies. And as one owner put it, “we think we’ve built something worth protecting.”

The bigger picture: Common Trusts’ event was the first of its kind, and also one of a string of recent gatherings on shared ownership.

• The Purpose Foundation’s October Day of Steward Ownership, the Pre-Distribution Initiative’s November Convening, the ongoing EOT Peer Gatherings by National Center for Employee Ownership (NCEO), EO+WD’s breakfast at the Neighborhood Economics conference, Transform Finance’s conferences and webinars and our April event on purpose trust ownership after the Employee Ownership Ideas Forum—together these reflect serious interest among philanthropists and policymakers in shared ownership.

  • This builds on decades of work by the Rutgers Institute and others to support and expand employee ownership by way of employee stock ownership plans (ESOPs) and worker cooperatives.

What’s next: More! And quickly.

• Expect to see more purpose trust content at NCEO and Rutgers Institute events, and at impact investing events like SOCAP.

• I imagine Common Trust will host more events like the Stewards Circle. It was clear owners wanted more content like that and time with each other, and were interested in supporting this activity with their time and resources.

• Look for the increased inclusion of employee ownership trusts in outreach and policy advocacy efforts by state level employee ownership centers, including at TXCEO.

• As for EO+WD, keep an eye out this week for a policy brief on purpose trusts in conjunction with Common Trust; and a Harvard Social Innovation Review article in partnership with Purpose Owned.

  • In the long term, this is the kind of work that a university-based academic center might take on, given a few more resources than are available to our humble EO+WD research cluster.

Self-determination empowers individuals directly involved in the company's operations and mission. Purpose orientation dictates that profits are reinvested in the company in order to cover capital costs, or be donated rather than used for personal gain. Companies such as Novo Nordisk and Lundbeck in Denmark exemplify steward ownership. Patagonia, based in the US, transitioned to steward ownership in late 2022.

Hensen then distinguishes steward ownership and employee ownership. The difference lies in the potential for personal gain through the sale of the company in the latter. Nevertheless, both models prioritize empowering workers, be it through investing in employee ownership or creating employment security in steward ownership. Ownership approaches vary according to individual plans and circumstances, to make the best decision owners should be aware of all ownership options.

Go Deeper:

• Read the original article on Pioneer’s Post

• Read my article on exploring three employee ownership options

• Check out Tiffany Vargas’s article on Jefferson and Madison on employee ownership

The Founders Knew It: I particularly enjoyed Romeo’s article “The Founders Knew It: A Country or a Company Owned by Its People Is Best,” in which he points out that people thinking hard about ownership—John Locke, the American founders, and even the 19th century industrialists—have all understood the value of widely distributed ownership. One quote that jumped out at me about one of today’s giant companies:

[The US economy would] look very different if major companies had even modest levels of employee ownership. If Amazon’s employees in 2018 had owned as much of their employer’s stock as Sears department store employees did in the 1950s, each Amazon worker [half a million of them] would have owned shares worth $381,000.12.

Go Deeper:

• A couple of weeks ago, I highlighted a paper and podcast by Chris Mackin, a veteran author of employee ownership. Mackin highlighted American Founders’ interest in an industrial republic as a corollary to a political republic.

• The introduction to Joseph Blasi’s The Citizen’s Share includes a wonderful story about cooperatives in early America.

Romeo’s book: