Ownership

This article discusses the structure of ownership under Teal and the implications for the types of owners of Teal organizations.

A New Perspective

Ownership and Teal have an uneasy relationship. Traditionally, ownership is a concept that applies to “for profit” entities. From a strictly legal perspective, the modern “for profit” organization, whether it be a sole proprietorship, a partnership or a corporation, exists primarily to provide a financial return to its owners. Indeed, the entire legal framework established around “for profit” organizations in developed countries reflects the assumption that such is their purpose. As this wiki discusses at length elsewhere, the purpose of a Teal organization extends well beyond providing a financial return to its owners.

In the Teal paradigm, purpose transcends profit. This requires expanding beyond the primacy of ownership in Orange and even the Green multi-stakeholder perspective. In Teal, while fulfilling the organization’s purpose might require financial investment, which in turn might give investors a legitimate voice in the organization and the right to a fair return on their investment, the organization does not exist solely to serve its owners.

Taking a broader perspective, the concept of ownership might be replaced by a concept such as stewardship. Can you own a living entity, like an organization, or part of it? Can you own energy that wants to manifest itself? Can you even own the assets - such as the metal that makes up a machine? We barely have begun asking these questions, and have no real answers yet. Ownership is today deeply enshrined in our legal frameworks that organizations must comply with. We have yet to invent what "stewardship" of an organization could mean (see “In practice” below).

Today, we draw a distinction between “for profit” and “not for profit” organizations. Perhaps the implementation of something like “stewardship” would blur this distinction and lead to a new more broadly applicable legal form of organization.

For a fuller discussion of a historical perspective on ownership, see below:

Red Organizations

In the Red organization, ownership is frequently a meaningless concept, as the legitimacy of its leadership stems from power more than some construct of ownership. Purpose is more closely tied to further aggregation of power than to financial return. To the extent Red organizations recognize ownership, ownership and leadership are typically fused. The leader is also the owner, or the key representative of the ownership family.

Amber Organizations

Again, in the the Amber paradigm, ownership is often an incongruous idea. Amber organizations frequently have a purpose other than financial return. There is no “owner” of the military, the church or government agencies. To the extent for-profit entities operate in the Amber paradigm, they typically balance the pursuit of financial return with some other objective such as self-preservation. Often family-owned, the owners can limit the strict pursuit of profit maximization in favor of interests like maintaining a legacy.

Orange Organizations

It is under the Orange paradigm, that the concept of ownership becomes paramount. A primary purpose of the classic Orange organization is to provide a financial return to its owners. This is reflected in the modern legal construct of a corporation, where shareholders have ultimate authority over management in proportion to their ownership. Management is legally obliged to seek a financial return for shareholders. This has resulted in widely dispersed ownership of organizations as well as ownership that can change through mechanisms like tradable shares. Each owner may have a tiny, and variable stake, but all are united in the pursuit of financial gain.

Green Organizations

The Green paradigm reacts to the Orange focus on shareholders and financial concerns by insisting on the importance of all stakeholders - employees, customers, communities, suppliers as well as shareholders. Thus, even “for profit” organizations are not solely for the benefit of owners: they ought also to take into account the plurality of interests included in its activities. The Corporate Social Responsibility (“CSR”) movement was born out of this perspective.

Generally however, for-profit Green organizations do not have a different ownership structure than Orange organizations. When the owners of a Green organization all share the Green perspective, this tends not to create a problem. However, should some owners differ in their view of the importance of financial returns, conflict can ensue.

In Practice

Ownership in Teal organizations can take a number of forms. It may be concentrated or dispersed, private or public, and this diversity has been in evidence at least to some extent in those Teal organizations that have so far come into being. Having said that, there is at least strong evidence that in whatever form, the owners of Teal organizations must understand and embrace a Teal worldview. While it is not clear that a Teal perspective is necessarily incompatible with profit and wealth maximization (one might argue that Teal can maximize these even as a by product of its evolutionary purpose), it is certainly true that many might believe this to be so. Thus, a Teal organization with owners who do not necessarily subscribe to a Teal worldview is at risk that such owners (as a result of the legal rights typically conferred upon them) can force the abandonment of Teal practices when they seem to conflict with, or be less effective in terms of pursuing the more traditional objective of profit (see BSO/Origin and AES under “Concrete examples for inspiration” below).

Certain legal developments have emerged to address this potential conflict, but they are not yet widespread. In the United States, some states recognize a “benefit corporation” as a type of for-profit entity that includes positive impact on society, workers, the community and the environment in addition to profit in its legally defined goals. In for-profit companies as we currently know them (the so-called C-Corporations), the organizations’ directors have a fiduciary duty to the shareholders, and to the shareholders only. They face the prospect of civil claims if they stray from their fiduciary duties by taking environmental or social concerns into account at the expense of shareholders. The duty of directors of benefit corporations is extended to include non-financial interests, such as social benefit, concerns of employees and suppliers, and environmental impact.[1]

A much older but still somewhat rare structure is the cooperative, where ownership is placed with members (consumer cooperative) and/or employees (worker cooperative). However, while these organizations are presumably freed from a strict pursuit of profit, their purpose is to serve a single stakeholder group.

Holacracy has drafted a constitution that a board can adopt and make binding, even to future shareholders. It gives shareholders a legitimate say in finance matters, but prevents them from unilaterally imposing a strategy, or from reverting to traditional management practices. Holacracy has done the legal footwork to make its constitution fit within US corporate law, and it is currently adapting the constitution to legal systems in other countries.[2]

Frequently Asked Questions

Wouldn't employees be more motivated, feel more part of the organization if they were to also own parts of it? Couldn't this help diminish income inequality?

  1. Employee ownership is often thought of as a way to bind employees, especially the most talented and skilled, to the organization. From a Teal perspective that makes little sense. People should be free to pursue their calling. While that calling intersects with the purpose of the organization, then let people be part of it. And let them be free to leave when it is no longer the case. Profit sharing is an easy way for employees to benefit, but without having to buy stock, or be bought out, at a good or bad time.

  2. Employee ownership is often thought of as a way to "motivate" employees. Under Teal, intrinsic motivation (such as purpose) is considered much more powerful than extrinsic factors like financial compensation.

  3. Employee ownership is sometimes thought of as a way to give employees power and a voice. If employees have voting rights, they cannot simply be ignored. A self-managing structure distributes power anyway, and removes the need to do so via voting rights.

  4. Employee ownership is sometimes seen as a way to reduce income inequality by allowing employees to share in the value creation of the organization. This is valid when it comes to young organizations that might rapidly increase in value and have limited cash resources. In more established companies, income inequality can often more easily be reduced through salary setting and profit sharing.

Concrete cases for inspiration

Related Topics

    Notes and references


    1. Laloux, Frederic (2014-02-09). Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness (Kindle Locations 5464-5467). Nelson Parker. Kindle Edition. ↩︎

    2. Laloux, Frederic (2014-02-09). Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness (Kindle Locations 5453-5457). Nelson Parker. Kindle Edition. ↩︎