Ownership

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.

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"^[3]

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.^[4]

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.^[5].

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.”^[6]

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.[[3]](https://sp--reinventingorganizations-wiki.netlify.app/cases/sun-hydraulics/#fn3) 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.^[7] 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.”^[8]

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.^[9]