Hi Bruce - I couldn't have asked for a better set-up question! This series will cover broadening decision-making control; in the report coming out from Oxford this fall, we put that forward alongside (2) broadening financial participation, and (3) locking in purpose.
If I'm reading your question right, it points to what I am most excited about, which is what happens when a company has a "common purpose," one mutually determined by and mutually beneficial to its stakeholders. Is that the direction you're pulling, too?
The short answer is that what I am circling is more than or different from shared or common purpose. For lack of a better phrase, I am using “shared fate” as the best descriptor. There is no greater predictor of performance or connection than the idea that we are in this together. Manage meaning as in “why are we here?” and maximize connection as in “how are we in this together?” These are the questions I’m asking. Who decides is actually quite easy. Each of us decides for ourselves and only ourselves. Thanks for the invitation by asking.
I agree with Peter's comment and I'd push back on collapsing EOT control rights down to "without any control rights, except via the trust enforcer". In practice, control rights in an EOT are typically distributed across several mechanisms: the Trust Stewardship Committee, the trust enforcer, and the corporate board. Within those, there are a variety of strategies (Peter gave several examples which we also commonly see). Which combination a company chooses varies pretty meaningfully depending on the goals and what kind of alignment they are trying to drive. I'd reframe your description to: "EOTs typically codify economic rights into profit-sharing plans, while control rights are typically codified through a mix of mechanisms, ranging across the roles and rights of the Trust Stewardship Committee, the trust enforcer, and the corporate board."
When I think about the structural vs cultural layer you are looking to tease apart, I also think there is real nuance between: (a) what's structurally required , (b) what's technically possible, and (c) what's becoming market standard. (a) is set by law, (b) is expressed as a governance strategy selected by a particular company from many possible configurations, which is where EOTs allow a wide degree of variety and customization, and (c) points to the conventions that are emerging as more companies make these choices, which in turn are likely to begin to shape what future companies default to (although I'd say we are still in the very early innings, so we should be mindful about what conclusions to draw). All 3 of those live at the structural level, but depending on which lens you are looking through could lead to a very different set of conclusions about how control is determined in EOTs, so I think the distinction is an important one to consider. And then the fourth dimension you rightly called out is the informal/cultural layer, which is not structurally protected (like the first 3), but is often the most frequently felt expression of "who decides" in the day to day operations of a business.
"Employee ownership trusts typically codify economic rights into profit-sharing plans without offering any control rights, except via the trust enforcer."
Some Employee Centered Purpose Trusts (my preferred term to EOT), do designate specific employee seats on the Trust Stewardship Committee and/or corporate board, and/or they offer employees the opportunity to nominate and/or elect TSC members.
What is the purpose or the why of the system being created? Who decides this?
Hi Bruce - I couldn't have asked for a better set-up question! This series will cover broadening decision-making control; in the report coming out from Oxford this fall, we put that forward alongside (2) broadening financial participation, and (3) locking in purpose.
If I'm reading your question right, it points to what I am most excited about, which is what happens when a company has a "common purpose," one mutually determined by and mutually beneficial to its stakeholders. Is that the direction you're pulling, too?
The short answer is that what I am circling is more than or different from shared or common purpose. For lack of a better phrase, I am using “shared fate” as the best descriptor. There is no greater predictor of performance or connection than the idea that we are in this together. Manage meaning as in “why are we here?” and maximize connection as in “how are we in this together?” These are the questions I’m asking. Who decides is actually quite easy. Each of us decides for ourselves and only ourselves. Thanks for the invitation by asking.
I look forward to reading and learning more. Thanks for reading and engaging!
I agree with Peter's comment and I'd push back on collapsing EOT control rights down to "without any control rights, except via the trust enforcer". In practice, control rights in an EOT are typically distributed across several mechanisms: the Trust Stewardship Committee, the trust enforcer, and the corporate board. Within those, there are a variety of strategies (Peter gave several examples which we also commonly see). Which combination a company chooses varies pretty meaningfully depending on the goals and what kind of alignment they are trying to drive. I'd reframe your description to: "EOTs typically codify economic rights into profit-sharing plans, while control rights are typically codified through a mix of mechanisms, ranging across the roles and rights of the Trust Stewardship Committee, the trust enforcer, and the corporate board."
When I think about the structural vs cultural layer you are looking to tease apart, I also think there is real nuance between: (a) what's structurally required , (b) what's technically possible, and (c) what's becoming market standard. (a) is set by law, (b) is expressed as a governance strategy selected by a particular company from many possible configurations, which is where EOTs allow a wide degree of variety and customization, and (c) points to the conventions that are emerging as more companies make these choices, which in turn are likely to begin to shape what future companies default to (although I'd say we are still in the very early innings, so we should be mindful about what conclusions to draw). All 3 of those live at the structural level, but depending on which lens you are looking through could lead to a very different set of conclusions about how control is determined in EOTs, so I think the distinction is an important one to consider. And then the fourth dimension you rightly called out is the informal/cultural layer, which is not structurally protected (like the first 3), but is often the most frequently felt expression of "who decides" in the day to day operations of a business.
"Employee ownership trusts typically codify economic rights into profit-sharing plans without offering any control rights, except via the trust enforcer."
Some Employee Centered Purpose Trusts (my preferred term to EOT), do designate specific employee seats on the Trust Stewardship Committee and/or corporate board, and/or they offer employees the opportunity to nominate and/or elect TSC members.
Totally right! I'm thinking here about the base edition of each model, all of which display a ton of interesting variation within them.