Ownership matters. Too often we forget that.
Ownership involves responsibilities as well as rights.
To be a shareholder is to be a steward of a company. That’s hard for individual investors in a public company. It is essential for investment institutions.
Tomorrows Company made that case in 2014, just before the financial crash, and that experience convinced the UK government to establish the worlds first Investor Stewardship Code.
Yet between them the worlds investment institutions have just poured $75 bn into a company where the (admittedly brilliant) dominant individual has unrestrained power and no accountability to other shareholders.
In January, SpaceX granted Elon Musk, its founder and chief executive, a pay package that eventually totalled 1.3 billion restricted shares. The award was contingent on the rocket company’s establishing a colony on Mars with one million inhabitants and launching high-powered data centres into space.
Mr. Musk has not achieved those goals. Even so, he can vote those 1.3 billion shares in shareholder decisions, according to SpaceX’s offering prospectus, which was released on Wednesday. In other words, we are told by the New York Times the company is allowing Mr. Musk to vote with shares he has not yet earned.
“I have never heard of this,” said Ann Lipton, a law professor at the University of Colorado, Boulder. “He basically found a way to hack the normal rules of corporate organization.”
Ownership Matters.
AI can be a force for good and it has the potential to be a force for evil as Will Marshall argues this week in The Economist.
This is another context in which ownership matters.
That’s why the founders of Open AI initially set it up as a charity, saying ‘Our goal is to advance digital intelligence in a way that is most likely to benefit humanity as a whole’.
That’s why the founders set up Anthropic as Public Benefit Corporation.
Try thinking about a listed company that you truly admire for its long term approach and its good stewardship.
When I did this, I kept finding that the listed companies I named had a hybrid form of ownership, usually with an anchor shareholder. Ayala in the Philippines; Novo Nordisk and Renishaw in the UK; the different Tata companies originating in India.
No coincidence. It’s because ownership matters.
Think about the recent news that the slimming drug Wegovy has now been so successful that it is to be available to people on the NHS ownership matters. Novo Nordisk would have disappeared into jaws of a more transactional company if it were not for its special constitution with an anchor shareholder. Anthropic has been in dispute with the US government and anthropic has refused to bend. This is because it is protected itself even before it becomes a public company by creating its constitutional status as a public benefit corporation
It’s Employee Ownership Day today. It’s great to celebrate this form of ownership. Yet let’s acknowledge that there is no one model for good stewardship. There are many forms of ownership and governance which allow the business to endure beyond the era of the founder.
In the UK and beyond we need to hear a combined voice that speaks for the principles of stewardship applied across many different forms of ownership – even including listed companies.
There is now a growing discussion of steward ownership, championed by The Purpose Foundation. In Silicon Valley, Erik Ries has just written Incorruptible, an important book about ‘why good companies go bad and how great companies stay great.’ Building on experience with Indian companies, The Living Machine Institute, which builds on the experience of Indian companies, is focused on the ‘bleeding insolvency’ which occurs in transactional companies which do nothing to regenerate their inner strengths.
To mark Employee Ownership Day, Friday 19 June, and to celebrate the 75th Anniversary of its foundation as an employee ownership company, the Scott Bader Commonwealth has invited me to give a lecture. I have called it ‘Balancing Entrepreneurship and Stewardship – lessons from long Lived Companies’.
I talk about the need to understand wealth creation in terms of company life cycles and call for government policies that start with an understanding of the Seven Ages of the Company and achieve the necessary balance between entrepreneurship and stewardship.
If you would like to attend here are the details.
Online link: Scott Bader Commonwealth Lecture. To attend in person email commonwealth.office@scottbader.com
If you would like a recording or copy of the lecture, contact mark@tomorrowscompany.com
Mark Goyder is Founder of Tomorrows Company and the author, with Ong Boon Hwee of Entrusted – Stewardship for Responsible Capitalism World Scientific 2020.