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Published: February 24, 2009

 
 

Not Just for Profit

Mission-controlled Companies
A little-appreciated but powerful for-benefit model can be found among companies that manage to be publicly traded while keeping control in mission-oriented hands. Take Interface Inc., for example. This Fortune 1000 flooring company, with 2007 revenues of $1.1 billion, is well on its way to meeting its ambitious 2008 pledge of “Mission Zero by 2020” — a pledge to have zero negative impact on the environment within 12 years. This means eliminating waste and switching entirely to renewable energy, as part of the company’s larger vision of being the first company that, as founder and CEO Ray Anderson puts it, “shows the entire industrial world what sustainability is in all its dimensions.”

Other publicly traded companies have tried to make this kind of long-term commitment, but have had to soften the goal through the ups and downs of the stock market. What supports Interface’s mission is a rarely mentioned but vital element in its social architecture: a dual-class governance structure that puts super-voting shares in the hands of Anderson and a few other top executives, giving them control of 72 percent of votes for the board, although they own far less than a majority of publicly traded shares. Super-voting shares are generally unavailable to the public, which insulates the company from hostile takeovers. In effect, it allows Interface to be a mission-controlled enterprise, one whose governance structure reflects both the need for ongoing sufficient profit and a broader social priority.

Mission control allows capital to trade freely, even as it ensures that the mission is not for sale. It allows leaders to focus the company so that mission becomes the focal point while profits are energetically pursued.

There are other companies with publicly traded stock and revenues greater than $1 billion that are similarly mission controlled. They include the family-controlled New York Times Company, with its mission of serving an informed electorate; foundation-controlled Novo Nordisk A/S, a Danish pharmaceutical company with a mission of defeating diabetes; and trust-controlled Grupo Nueva SA, headquartered in Chile, with a mission of contributing to a sustainable Latin America. Perhaps the most notable recent example of mission-controlled architecture is Google, which adopted a two-tier stock configuration, vesting power with its founders, when it went public in 2004.

In the best of these designs, the mission’s control of voting shares is strengthened by an explicit commitment to mission in the company charter and in the design of governance procedures. Novo Nordisk, for example, has adopted an ambitious charter that spells out the com­pany’s values and commitments, including a commitment to ensuring that all products and services “make a significant difference in improving the way people live and work.” Each year the company board must report to the foundation board on how it is ensuring that operations are “economically viable, environmentally sound, and socially fair.” The foundation board includes an electrician, scientists, a physician, and a lab technician, so that participants represent many relevant points of view. Without design elements like these to keep the mission in focus, super-voting share structures run the risk of creating company monarchs unanswerable to anything but their own whims — which may or may not remain benign over the long run.

Mission-controlled architecture can offer a solution to the challenge that socially responsible companies face as they struggle to keep their social mission alive after founders depart or sell their shares. It is rarely sustainable for the mission of a company to be embodied in the personality of a single individual. Research shows that once founders depart, the company mission often shifts — and in the absence of thoughtful for-benefit design, the pressure of mainstream cultural norms and financial practices makes it easiest to revert to short-term results as the primary goal.

 
 
 
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Resources

  1. Arvind Ashta and Matthew Bush, “Ethical Issues in Sustainability, Outreach, and Impact of Microfinance: Lessons in Governance from the Banco Compartamos IPO,” 2008: Case study review of this Mexican microbank.
  2. John Elkington and Pamela Hartigan, The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World (Harvard Business Press, 2008): A guide to social enterprises around the world.
  3. Marjorie Kelly and Allen White, “Corporate Design: The Missing Business and Public Policy Issue of Our Time (PDF),” Tellus Institute, November 2007: Principles for corporate architecture accountable to broader societal interests.
  4. Art Kleiner, “Jack Stack’s Story Is an Open Book,” s+b, Fall 2001: Profile of the founder of one of the most innovative cooperatives, Springfield ReManufacturing Corporation.
  5. Riccardo Lotti, Peter Mensing, and Davide Valenti, “A Cooperative Solution,” s+b, Summer 2006: Describes why some of the most successful companies in Europe, including Rabobank and Italy’s COOP supermarket chain, are stakeholder-owned.
  6. Dana Brakman Reiser, “For-Profit Philanthropy,” 2008: Includes an analysis of Google’s boundary-breaking innovations in for-profit philanthropy.
  7. Corey Rosen and Ed Carberry, Ownership Management: Building a Culture of Lasting Innovation (National Center for Employee Ownership, 2002): Offers concrete, specific ideas on how to structure plans and get employees involved in decisions.
  8. Muhammad Yunus, Creating a World without Poverty: Social Business and the Future of Capitalism (PublicAffairs, 2007): Recounts the founding of Grameen Danone Foods and outlines the author’s concept of social business.
  9. The Fourth Sector Web site: Outlines Heerad Sabeti’s concept of for-benefit organizations.  
  10. The National Center for Employee Ownership Web site: Authoritative source on employee stock-ownership plans, equity compensation plans, and ownership culture.
  11. The National Cooperative Business Association Web site: Has a mission to develop, advance, and protect cooperative enterprise.
  12. Corporation 20/20 Web site: A multi-stakeholder initiative cofounded by author Marjorie Kelly, which aims to develop and disseminate corporate designs in which social purpose moves from the periphery to the core of the organization.
  13. For more business thought leadership, sign up for s+b’s RSS feed.
 
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