Alternatives to the Traditional Corporation

Alternatives to the Traditional Corporation

One of the reasons that highroad companies like Saturn and others oftendon't get carried on is that once the founders leave,the next generation of leaders don't carry on thesame practices, and so the culture goes back tomore traditional organizations.

But there are waysto address this issue by building commitmentsto multiple stakeholders right into the bylawsof the corporation.

Let's look at some examples.

We'll consider threedifferent models.

First, let's talk about whatwe call benefit corporations.

Benefit corporations buildright into their charter three different objectives.

First, they say theyare going to commit to producing results that aregood for their shareholders, for their employees,and for the economy.

Secondly, there aregoing to consider financial and non-financialconsiderations when making key decisionsthat allow them to keep the benefits flowingto all of these stakeholders.

Third, they agreeto be transparent.

They provide annual reportson their performance and their progress inaddressing the interests of these multiple organizations.

One of the best known companiesthat is a benefit corporation is Patagonia.

Patagonia is this veryfamous clothing maker.

And its CEO andfounder, Yvon Chouinard, says, Patagonia is tryingto build a company that could last 100 years.

Benefit corporation legislationcreates the legal framework to enable mission drivencompanies like Patagonia to stay mission driven throughsuccession, through raising capital, throughchanges in ownership.

In doing so it institutionalizesthe value, the culture, the processes, andthe high standards that are put in placeby these founders.

So by doing this weget some continuity.

In fact, 22 statesnow allow companies to incorporate asbenefit corporations within their boundaries.

And we have, at this point,about 786 such companies.

Another option isemployee ownership.

You've probably heard the termESOP, employee stock ownership programs.

Well, employeeownership companies build a commitment to beingsuccessful financially both for traditional investorsand for employee owners right into the structure andgovernance of the firm.

Employees oftenhave representatives on the corporateboards of directors, but the key to successof these companies is to make employees feellike owners by building a culture of engagement, ofownership, of encouraging employees to makesuggestions for improving the operations inthe performance of the organization,and therefore aligning the incentivesthrough condensation and through the cultureof the organization.

So employee ownership companieshave spread across the country.

There are about 10,000 of them.

And you can find them almost anyindustry that you can think of.

The key to employeeownership, though, is to make sureemployees are involved, and to also worrya bit that they don't to put all oftheir financial resources for retirement intothe same company.

You also want tospread your investment a bit so that you don't comeup short if the company happens not to be as successfulas you would like.

There are other kinds ofcompanies call cooperatives.

A cooperative isa company that has lots of owners that pool theirresources to get some job they all need done done together.

So if you happenedto grow up on a farm, you may have been partof a milk cooperative where farmers pooltheir resources and create a dairy to take themilk from their dairy cows.

There are sawmills in Oregon.

Here in Cambridge we havethe MIT coop and the Harvard cooperative society, bookstoresthat sell books and reference material and clothing to ourstudents and to our faculty.

And then there's myfavorite cooperative, as my tie suggests, it'sthe Green Bay Packers.

Green Bay Packers are acommunity own football team started in the 1920s.

And how else could you havea city, Green Bay, Wisconsin, with only about100,000 residents sustain a very successful,highly competitive, and often championship football teamfor all of these years? It's because they areowned by the community and they can't be soldto some higher bidder who might make a profit off of it.

You'll also seesome cooperatives in other countries.

Probably the most famousone is the Mondragon set of industries, headquarteredin the Basque region of Spain, with companies that rangefrom manufacturing, to retail, to high tech, tofinancial institutions.

They have over 81 differentcompanies at the moment.

So we can build organizationsin different kinds of ways.

And so the takeawaylesson that I hope you will have herefrom this conversation is that it's possible.

If you are imaginative,perhaps you can invent the newforms of organizations for the future that willmeet the needs of all of their stakeholders,and will be built to last for multiple generations.

And in doing so, not only mightyou build organizations that work for investors,customers, and employees, but maybe ones that helpto sustain our planet.

Source: Youtube