In other cases, the mission is preserved through governance designs that feature nonfinancial stakeholders. At CROPP (Organic Valley), for example, governance by a central board is supplemented by a network of regional farmer pools, each with staff support. In still other cases, for instance, with cooperatives, governance design is shaped by laws that stipulate a policy of one person, one vote, as contrasted with one share, one vote. Diversity is the hallmark of these governance innovations. For if capital is the only group with a seat at the table, capital’s view of the corporation is likely to prevail: The company will be seen as a piece of property whose worth is measured by stock price.
Meeting the Mainstream
Leaders of traditional firms may recognize the opportunities in these new forms. They can achieve a broader array of goals by adopting a for-profit philanthropic division, as Google has, or attempt a social–business joint venture, along the lines of Grameen Danone Foods. They can rapidly improve their operational excellence through the engagement inherent in employee ownership, as founder and CEO Jack Stack has at Springfield ReManufacturing. A few may even attempt to transition to a mission-controlled design, like that employed by Interface.
Such models will have to overcome long-standing, deeply embedded cultural traditions and legal imperatives. But as nascent alternatives to the conventional structure quietly succeed, options may continue to open in coming years, particularly among business startups. “It is the entrepreneurial spirit that has always led the evolution from one age to the next,” said Mike Thomas, a former executive with Granite Construction Company who is now a senior partner at the Monterey Institute for Social Architecture in Monterey, Calif.
In certain cases, alternative enterprises best serve their social mission by keeping profits low. On the other hand, some alternative models can be very economically competitive. Studies have shown, for example, that employee-owned firms modestly outperform their peers, and that when these companies have high employee involvement, they do even better. In a 2002 paper, Steen Thomsen and Caspar Rose of the Copenhagen Business School found that foundation-owned firms — common throughout northern Europe — perform no worse than and even slightly better than traditional firms. The critical difference is that these companies do not set making money apart from other goals; there is no false choice between making a profit and fulfilling other missions. The design of the company is aimed at accomplishing multiple goals at once.
We live in an age when short-term pressures have allowed speculation to overtake the more traditional, human functions of business. Alternatively designed companies offer important lessons in how corporate ownership and governance can evolve differently. And they’re important in their own right as well, for they are likely to prove better adapted to the cultural and ecological demands of the 21st century than the industrial age models they might one day replace. Such businesses may seem like anomalies today. But they more closely reflect the priorities that have engendered the longest-lasting businesses throughout human history.
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Marjorie Kelly is a senior associate with the Tellus Institute in Boston and is writing a book with the working title Economic Genesis, from which this article is adapted. Formerly the editor of Business Ethics, she is a cofounder of Corporation 20/20, a multi-stakeholder network working to envision and advance alternative designs.