A Mission-driven Publisher’s Succession to Shared Ownership
How Berrett-Koehler Publishers is preserving and extending its mission of “connecting people and ideas to create a world that works for all”
The Berrett-Koehler team, Fall 2020 (Image courtesy of the company)
An Act of Hopeful Defiance
In May of 1991, Steve Piersanti was summoned to New York City to meet with Robert Maxwell--the media titan who had recently purchased Macmillan Publishing--and with the top Macmillan executives. Steve was running a small publishing house called Jossey-Bass in California, which Maxwell had also purchased and made a division of Macmillan.
Several weeks previously Steve had been ordered by Macmillan to reduce Jossey-Bass’ headcount from 68 to 60 employees, as part of a 10% corporate-wide Macmillan workforce reduction. This would have required laying off 8 employees, which made no sense to Steve and his colleagues because Jossey-Bass was growing rapidly, had just finished a record-breaking year in which profit was up 46 percent, and had already been approved to add 8 staff members. Moreover, such layoffs would harm Jossey-Bass’s culture and relationships with employees and other stakeholders. So Steve had refused to carry out the layoffs, which led to his being summoned to corporate headquarters.
“I politely said I just could not do that,” Steve says about his meeting at the midtown Waldorf Astoria Hotel, “They made no argument that it made any sense for our company. They just couldn’t have a little California company defying the corporate order and gave me repeated ultimatums that I had to carry out this workforce reduction or resign, or I’d be fired.”
Steve was fired the following week.
But as he recalls now, “the grapevine worked very quickly.” The day after he was fired, he started receiving calls at his home expressing support for what he stood for and encouraging him to start a new publishing company. Authors offered to send him their manuscripts. And suppliers with whom he had worked offered to provide the infrastructure needed to fund and launch a publishing company.
A New Journey Centered Around Stakeholders
Berrett-Koehler (BK) was born out of Steve’s desire to do business differently. From Day 1, the company held a “deep sense of responsibility to administer the publishing company for the benefit of all of our ‘stakeholder’ groups—authors, customers, employees, suppliers and subcontractors, owners, and the societal and environmental communities in which we live and work.”
In its nearly three decades of operation as a social impact publisher, BK has become a laboratory for making the world better, both internally and externally.
BK articulated its core mission of “connecting people and ideas to create a world that works for all” in the early days. A detailed constitution laid out how employees, authors, service providers, and customers could all be part of a vibrant community. Many author-friendly practices, including its signature “Author Days,” created a partnering relationship between BK staff and authors. Close collaboration between editors, authors, and marketing partners helped drive a regular string of bestsellers.
Structurally, BK incorporated several iterations of successively more aligned ownership and governance designs. The company created an employee stock ownership plan (ESOP) and raised capital directly from authors, readers, service providers, and other community members, so that BK would be owned by its stakeholders and their interests represented. To further advance its mission BK helped foster the founding of two sister organizations— BK Authors Inc (a mentorship and support nonprofit community for authors) in 1998 and the Berrett-Koehler Foundation (a nonprofit public charity that is a significant BK shareholder) in 2013. In 2011, BK was the second book publisher in the world to become a Certified B Corporation. In 2015 the company went further by becoming the first publishing company to be both a Benefit Corporation (which puts the force of law behind BK’s mission and values) and a Certified B Corporation.
Despite already pioneering several radically inclusive ownership and governance structures, the Board knew something was missing to protect BK’s purpose over the long term.
Challenging Trade-offs Between Liquidity & Legacy
In short, the trouble was Steve himself.
Like many mission-driven founders, Steve was the largest single shareholder of his company and BK’s independence and mission-focus were still largely dependent on his leadership. While he was still leading the company, he could effectively empower the many stakeholders of BK by proxy and through servant leadership. But it couldn’t stay that way forever.
In 2019 BK successfully carried out a leadership transition as Steve stepped back from his 27 years as BK CEO role into a new full-time senior editor role. And David Marshall took over as CEO and CFO, while Johanna Vondeling became president and publisher.
But Steve and BK were equally concerned about completing the ownership structure work needed to preserve the company’s mission and values over the long term.
“Based on what I have seen happen to other publishing companies, it’s hard to imagine the most valuable and distinctive aspects of Berrett-Koehler enduring if BK was sold to another company.
I was looking for an ownership structure that would allow us to remain independent, continue operating in the interests of all of our stakeholders, adhere to our fundamental values and purposes, and preserve the many distinctive practices that support our mission.”
BK had put in place many elements for preserving its mission and independence, but a key element was still missing for the portion of BK stock owned by Steve and some other early shareholders.
After considering just about every other option, BK chose to pursue steward-ownership.
Long-term Purpose Protection
With the help of Purpose US, Steve and the BK board designed a steward-ownership model and a recapitalization plan that will serve all of BK’s stakeholders long term and keep ownership of the company aligned with a non-negotiable mission focus.
BK has recently formed the Berrett-Koehler Perpetual Purpose Trust (PPT) that will soon become the largest shareholder of the company, with a fiduciary duty to protect BK’s long term mission and independence--long after Steve has transitioned out.
Steve will convert nearly half his shares at fair market value into a long-term loan with the company, which will then transfer shares into the PPT. Also, Steve will donate most of the other half of his shares to the PPT over time. And it is hoped that many other longtime BK shareholders will do likewise in transferring some or all of their shares to the PPT either through sale or donation of the shares
As part of the transition, new and existing shareholders had the opportunity to invest in two new rounds of long-term, mission-aligned equity in 2020 and 2021. When these PPT and other capital transactions are complete, BK’s ownership will approximately reflect the percentages in the pie chart below..
The PPT’s governing documents direct it to vote against a conversion out of its B Corp status, against a sale of the company (except under extreme circumstances like insolvency), and to prevent changes in the multi-stakeholder board composition that favor any one group inappropriately.
“As succession leaders, David [CEO] and I are delighted with this ownership transition. We’re both deep believers in stewardship—which embraces the idea that ownership should be distributed across the organization’s stakeholders—and we’re committed to Berrett-Koehler’s continued independence under our leadership. This transition helps ensure we as leaders can and will continue to fulfill Steve Piersanti’s founding commitment to administering the organization in a way that benefits all who contribute to its success.”
In this way, the company values of independence and stewardship will be protected at the deepest level of company DNA -- the ownership of the company itself.
The Next Phase of Pioneering for Berrett-Koehler
Steward ownership is just the structural scaffolding for continued evolution of BK as a publishing and media company, vibrant community, and successful business.
The authors and supply chain partners who rely on the company for income to do their life’s work now have a legally binding promise that BK will be there for them in the long term. Existing shareholders will have a new opportunity to invest or cash out, and they will retain ways to stay active in the community, attend shareholder meetings, and give input on the direction of the company.
The current Board and Leadership envision growing BK as a multi-generational impact media organization, with the security of knowing that purpose will never take a back seat to profit.
Berrett-Koehler’s CEO and CFO David Marshall sums it up by saying:
“Berrett-Koehler has long sought to both curate and amplify messages of positive change from pioneering authors to create a world that works for all, and to model how next-generation companies can put these groundbreaking ideas into practice, so we can share our learnings with kindred-spirit firms.
Many of the first generation of mission-based companies are now in the hands of multinationals uncommitted to the core values, because they did not have a sustainable capital structure beyond the founders’ tenures to prevent acquisition or public exchanges beholden to shareholder primacy. We hope our multifaceted steward-ownership approach anchored by our new PPT will serve as a beacon to other B Corp, Benefit Corporation, or triple-bottom-line organizations on how to grow and flourish for generations to come as independent enterprises.”
