It is time for a steward-ownership legal form in the Netherlands for corporations that want to be "for purpose" rather than "for profit".
Enterprises can play a major role in the transition to a sustainable and fair economy. The Netherlands is bursting with ambitious entrepreneurs who are consciously doing business 'for purpose' rather than 'for profit'. For many entrepreneurs, wanting to make a difference in the world is a more important motivation than making a lot of money and getting rich, according to the Global Entrepreneurship Monitor year after year. Both society and these entrepreneurs deserve a steward-ownership legal form that facilitates and secures these ambitions for the long term.
In practice, commercial legal forms (B.V.'s, N.V.'s and cooperatives) offer too little room to put social goals above shareholder interests. This is because the structure of these legal forms creates incentives to focus on profit maximization as the highest priority. This is because shareholders are allowed to vote on important issues, while their main interest is profit. Entrepreneurs need a new legal form with a legal structure that removes these incentives, creating space for directors and employees to put the mission of the company first.
A legal form for steward-owned enterprises should satisfy two principles:
- Stewards protect the mission: Control at the shareholder level is exercised by individuals committed to the company's mission. This right cannot be sold or inherited.
- Profit serves the mission: The corporation has locked assets. Profit belongs to the company and can be used to serve the mission and contribute to society. In any case, profit cannot be distributed to persons with voting rights in the company.
In the Netherlands, there are more than 100 companies that are already set up according to these principles. These steward-owned enterprises are thriving and sustainable leaders in their sectors. However, because there is not yet a dedicated legal form, the implementation of steward-ownership is complicated and therefore time-consuming and expensive.
A steward-ownership legal form is interesting not only for start-ups and family businesses with succession issues, but also for SMEs and even multinationals, as Patagonia showed last year. A legal form locks down the mission and demonstrates to employees, customers, suppliers, investors and other stakeholders that the company is truly "for purpose" - forever.
A steward-ownership legal form has long been under consideration in Germany, and this new potential legal form has even been included in the coalition agreement. German Chancellor Olaf Scholz said of the German initiative for a steward-owned legal form that he finds "the thoughts behind the idea of steward-ownership not only trustworthy, but also congenial.” Now that the first thoughts on this are beginning to form at the European level, the Netherlands can take the lead in this together with Germany.
Yes, I want a legal form for steward-owned companies!
FAQ:
Doesn't the proposed BVm meet the needs of businesses that want to be "for purpose"?
The BVm aims to offer social enterprises recognition. However, the legal form we have in mind has a different purpose: a new legal structure in which voting control and financial rights are divided. This prevents the mission from being changed, or the profits from going to shareholders. This need, which exists not only among social enterprises but also among family businesses and SMEs, is not met by the BVm bill.
What should the new legal form look like?
We are currently working on a draft steward-ownership legal form. In drafting this concept, we can draw inspiration from the German concept for a ‘GmbH mit gebundenem Vermögen’. In its conception, shares have only voting rights and no profit rights. So there is a so-called 'asset lock'. In addition, there is the rule that control in the company cannot be sold or inherited. Thus, the emphasis in this legal form is not on setting requirements for the purpose of the company (as in the BVm), but on the rights of shareholders. The aim is to remove incentives for profit maximization.
Isn't it already possible in the Netherlands to create a steward-ownership structure with (a combination of) existing legal forms?
This is indeed possible. For example, it is conceivable to use a foundation as the legal form for the company. However, foundations are not optimally suited for commercial enterprises, in part because of the lack of supervision. Often a combination of a B.V. and one or more foundations is used, where the foundations hold the shares in the B.V. However, this structure with multiple legal forms is complicated (and therefore time-consuming and costly) to create. With a "ready-made" legal form, we significantly increase ease of usage for entrepreneurs. Finally, we believe it is important, together with Germany, to take a leading position on this topic. In this way, we may also be preparing for discussion of a steward-owned legal form in the European context.
Who is behind this initiative?
The co-authors of this petition are:
- Gijsbert Koren and Jorick Wijnen (We Are Stewards)
- Melanie Rieback (Nonprofit Ventures)
- Nena van der Horst (N-EXTLAW project, University of Amsterdam)
- Sophie Kuijpers
- Rutger Marres