Can you talk about the idea of companies being legally obligated to maximize shareholder value, as I've seen that idea frequently? My understanding is that it's not actually true[1][2], but it seems a widely held belief in many circles. Even if it's not true, do techniques like Hostile Takeovers make it so that any public company needs to be close enough to profit maximizing that some activist investor/private equity group can't come in and make some quick money by taking control and changing the approach to profit maximizing? Or does Costco's existence prove that as long as you're running the business well, you can keep a contributist approach in the long-run by just making reasonable instead of excessive profits?
I actually have lots of thoughts on this, and much of it is what the last article in the series ("Principle 3: Ownership by Giving") will be about.
I think the most common business model for public companies, in which legal ownership is held only by a set of financial investors ("shareholders") rather than spread intelligently across all investors (everyone who *gives* to the company), creates an imbalance that presents challenges to the structural integrity of the company. This isn't an impossible challenge to overcome, but it does mean that the shrewd contributist business leader has to work harder than is ideal to make business decisions that don't upset shareholders, as you mention. I think there are a variety of ways to do this — some really good business leaders do it almost entirely through effective storytelling, while others concede on things that are less important to them in order to be contributist on things that are more important to them.
I think the best thing to do, though, is to try to avoid giving a small group of financial investors too much power to begin with. Part of this power is actually just storytelling, too — as you mention, a lot of people *think* they have to maximize shareholder value even when they don't, because the shareholder class has convinced them that they do. Another part of the power is actually easily solved through legalese — there are simple legal decisions that business leaders can make when incorporating their company to avoid giving shareholders too much control. But I think the most complete and effective solution is also the hardest/scariest: choosing an entirely different ownership model, e.g. employee ownership.
I really like the triple bottom line! I don’t want to be too prescriptive, but I think the triple bottom line and contributism are completely complementary. How I think they relate is that I think you could say that the triple bottom line a really good example of a contributist framework.
In other words, the contributist principle of being oriented towards value rather than profit is really broad, and focusing on the triple bottom line is a specific application of that principle. I can imagine that two business leaders could disagree on whether the triple bottom line is the right framework for their business, while still both being contributist. And I think that’s actually a good thing, because the competition of ideas is what leads to innovation and improvement.
Makes sense! I assume then that B Corporation (certification) would fall into the same category. Do you know of other examples of structured approaches to a contributist framework? Or anywhere that lists out companies that follow such a framework?
Can you talk about the idea of companies being legally obligated to maximize shareholder value, as I've seen that idea frequently? My understanding is that it's not actually true[1][2], but it seems a widely held belief in many circles. Even if it's not true, do techniques like Hostile Takeovers make it so that any public company needs to be close enough to profit maximizing that some activist investor/private equity group can't come in and make some quick money by taking control and changing the approach to profit maximizing? Or does Costco's existence prove that as long as you're running the business well, you can keep a contributist approach in the long-run by just making reasonable instead of excessive profits?
[1] https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits
[2] https://www.reddit.com/r/law/comments/3pv8bh/is_it_really_true_that_corporations_are_legally/
I actually have lots of thoughts on this, and much of it is what the last article in the series ("Principle 3: Ownership by Giving") will be about.
I think the most common business model for public companies, in which legal ownership is held only by a set of financial investors ("shareholders") rather than spread intelligently across all investors (everyone who *gives* to the company), creates an imbalance that presents challenges to the structural integrity of the company. This isn't an impossible challenge to overcome, but it does mean that the shrewd contributist business leader has to work harder than is ideal to make business decisions that don't upset shareholders, as you mention. I think there are a variety of ways to do this — some really good business leaders do it almost entirely through effective storytelling, while others concede on things that are less important to them in order to be contributist on things that are more important to them.
I think the best thing to do, though, is to try to avoid giving a small group of financial investors too much power to begin with. Part of this power is actually just storytelling, too — as you mention, a lot of people *think* they have to maximize shareholder value even when they don't, because the shareholder class has convinced them that they do. Another part of the power is actually easily solved through legalese — there are simple legal decisions that business leaders can make when incorporating their company to avoid giving shareholders too much control. But I think the most complete and effective solution is also the hardest/scariest: choosing an entirely different ownership model, e.g. employee ownership.
Would be curious to hear how you think this is similar to and different than the focus on "Triple bottom line"
I really like the triple bottom line! I don’t want to be too prescriptive, but I think the triple bottom line and contributism are completely complementary. How I think they relate is that I think you could say that the triple bottom line a really good example of a contributist framework.
In other words, the contributist principle of being oriented towards value rather than profit is really broad, and focusing on the triple bottom line is a specific application of that principle. I can imagine that two business leaders could disagree on whether the triple bottom line is the right framework for their business, while still both being contributist. And I think that’s actually a good thing, because the competition of ideas is what leads to innovation and improvement.
Makes sense! I assume then that B Corporation (certification) would fall into the same category. Do you know of other examples of structured approaches to a contributist framework? Or anywhere that lists out companies that follow such a framework?