This article discusses the structure of ownership under Teal and the implications for the types of owners of Teal organizations.
Una Nuova Prospettiva
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:
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.
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.
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.
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.
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.
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.
FAQ Domande Frequenti
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?
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.
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.
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.
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.
Casi concreti a cui ispirarsi
A multinational loses its momentum after a corporate takeover.
BSO/Origin was founded in 1973 by Eckart Wintzen in the Netherlands. In the following 20 years, he grew the company to 10,000 people, setting up shop in 18 countries in Europe, South America, and Asia. The company’s structure consisted entirely of self-managing units, with virtually no headquarters and no staff functions. In 1994, the company established a joint venture with a Business Unit from Philips, a large publicly held company, that took majority ownership of BSO/ Origin two years later. In a matter of mere months, BSO was radically transformed as traditional management practices were brought in.
Wintzen recounts a decade later in a book :
I (became) a board member and gave powerful speeches to leave the system in place. But unfortunately - though not surprisingly given the perspective they came from - my colleagues from Phillips on the board pronounced the word "unacceptable" regularly and forcefully. In the eyes of Phillips it was ' "a deadly sin" ' to give people the authority to hire personnel or even just give away tickets for a musical. I believe that once we literally shouted over the issue until our faces turned red. The two worlds collided, one of strict financial procedures combined with "check, check, double check" with one of "have trust, have trust"
A publicly held company reverses its ways during difficult times.
AES, an energy generation and distribution powerhouse was co-founded in 1982 by Roger Sant and Dennis Bakke. Under Sant’s leadership as CEO until 1994, and then with Bakke at the helm, it grew from a two-person firm into a global energy producer employing 40,000 people in plants located in more than 30 countries around the world.
AES became a Wall Street darling after it was publicly listed in 1991. For years, while the company was going from success to success, the board members were supportive of AES’s radically decentralized and trust-based decision-making. And yet as Bakke commented, “Most board members loved the AES approach primarily because they believed it pushed the stock price up, not because it was the ‘right’ way to operate an organization.”
AES’s fortunes turned in the early 2000’s. Following the dotcom bubble burst, the 9/11 terrorist attacks and the Enron bankruptcy, which caused near panic among energy investors, AES’s stock price, which had peaked at $70, declined to as low as $5. AES’s earlier decisions to invest in “merchant plants” that sold electricity in the spot market as opposed to under long-term contracts and to finance much of its growth with debt no doubt contributed to its troubles. However, these decisions could not be attributed solely to its decentralized structure as they had been discussed and agreed to all the way up to the board level. Nevertheless, fear took over among board members, and they imposed greatly increased oversight including the hiring of lawyers and consultants as well as a co-CEO whose directives Bakke was asked to carry out. After nine frustrating months, Bakke left, which freed the board to direct the conversion of AES to traditional management practices.
A privately held company grows without diluting its ownership.
Chris Rufer founded Morningstar in 1970 and to this day owns 100% of the company and is its sole board member. Recognizing the potential hazards of having partners who might not unconditionally support his pursuit of self-management, he has foregone taking in new investors but rather has relied on loans to fund his growth. Growing in this way from a single truck operation to the world’s largest tomato processor (a traditionally low margin as well as capital intensive business) is extraordinary, but perhaps Chris would argue, essential to its success..
An example of outside investors compatible with Teal
Through careful selection of investors, Tami Simon has been able to bring in outside equity capital without sacrificing the company’s commitment to Teal practices and to multiple bottom lines. These investors are considered to be one of its key stakeholders: “We are committed to growing the long-term value of the business through careful planning and re-investing our profits into innovation and growth.”
A public company since 1997 holds its commitment to Teal.
Sun Hydraulics, a company that was founded in 1970 by two engineers, designs and manufactures hydraulic cartridge valves and manifolds. It has been a publicly owned company since 1997 with factories in Florida (where it is headquartered), Kansas, England, Germany, and Korea. Its shares are traded on NASDAQ, and as of June 1, 2016 Sun had a market capitalization of nearly $800 million. While the founder’s family still has a significant stake in Sun, they do not exercise majority control. Sun would seem to be an important case of a company able to maintain a commitment to Teal despite a traditional corporate structure and a dispersed and fluid ownership. Maybe Teal organizations and non-Teal ownership can be compatible after all?
A privately held company formalizes its practices.
Patagonia, the outdoor apparel maker, is 100% owned by its founder, Yves Chouinard and his wife. Mr. Chouinard can therefore presumably do whatever he wants with Patagonia, and this no doubt has given him great freedom to guide the company into a Teal organization. Interestingly though, Patagonia has gone to the trouble of attaining benefit corporation status, perhaps as a result of Chouinard’s desire to give the company some protection from potential future owners or perhaps out of a desire to make a symbolic gesture. Patagonia has gone even further by becoming the first Californian company to achieve “B Corp certification” at the beginning of 2012 (while often confused, “benefit corporation” and “B Corp” are not the same). B Corp certification is a private certification issued by B Lab, a global non-profit, to companies which meet its standards of “verified, overall social and environmental performance, public transparency and legal accountability.”
Note e riferimenti
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. ↩︎
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. ↩︎
Laloux, Frederic. Reinventing Organizations. Nelson Parker (2014), pages 252-253 ↩︎
Laloux, Frederic. Reinventing Organizations. Nelson Parker (2014), pages 253-254 ↩︎
Laloux, Frederic. Reinventing Organizations. Nelson Parker (2014), page 289 ↩︎
As of March 1, 2016, Christine L. Koski, the daughter of the deceased founder of the Company, Robert E. Koski, is a member of the board of directors, and she, along with other family members, own or control approximately 14% of the outstanding shares of Sun’s common stock. Source: Sun Hydraulics Corporation 10-K filed March 31, 2016; p. 11. ↩︎
Patagonia's Founder Is America's Most Unlikely Business Guru; Wall St. Journal Magazine; April 26, 2012 ↩︎