Top 10 FAQ’s on Stewardship Models
What are “Stewardship models”?
Stewardship models describe a diverse set of legal solutions that transform the ownership, governance, and financing of businesses and organizations by fundamentally rewriting the rules of how money and power operate in our institutions.
Shared ownership -Inclusive ownership models that ensure key stakeholders participate in profits and governance.
Intergenerational - Long-term oriented financing structures that protect intergenerational stewardship and independence and ensure assets can’t be resold in the future.
Defined purpose - Corporate purpose and fiduciary duty are based on the needs of the organization and its stakeholders.
How are these models different from conventional ownership?
The code of capital legally defines ownership as the protection of capital and its right to control and extract value from assets. If you own land, you can do with it what you like within the bounds of the law -- sell it, rent it, extract resources from it, etc. Conventionally, this system assumes an equal relationship between economic and decision making power over an asset, i.e., the more money you invest in a company, the more of that company’s voting stock (i.e., decision making power) you control.
Stewardship models rewrite the rules of this system. Rather defining ownership as dominance and extraction for the benefit of capital providers, Stewardship models disrupt the default relationship between money and power. Assets in Stewardship forms do not belong to a single person and cannot be extracted from or sold to the highest bidder. Instead, Stewardship forms enable affected stakeholders to co-govern and co-benefit from a shared asset.
What does it mean to “rewrite the rules”? What’s wrong with the status quo?
By “rewriting the rules”, we are going directly to the legal code of our system to redefine who controls and who benefits from assets. Rather than the default of private asset ownership, Stewardship models create shared ownership among stakeholders, ensuring that decisions are made not just for the short-term benefit of capital-holders, but for the intergenerational benefit of the many. We believe that if we change how and by whom decisions are made, and how benefit is created in our institutions, we can drive dramatically more positive outcomes.
The legal and financial system in the US has been primarily written to protect the rights of capital. “Capital” as such, is a defining feature of modern economies and basically refers to any assets (land, stocks, ideas, companies) that have been legally “locked” into private ownership. The default settings of our legal “code of capital” thus prioritize the creation, growth, and protection of private wealth above all else— often at the expense of people and planetary health.
Why are there “models” of stewardship?
We call ownership and capital structures that achieve these goals “stewardship models” because they represent a set of core “Stewardship” principles for shared ownership, rather than a particular legal form. There is no all-purpose model or instrument for steward-ownership. Each model reflects the unique context, goals, and constraints of a given organization. Common factors that inform the design of stewardship models include:
Amount of funding needed and the risk/return profile of the project for potential funders;
Sources of funding and whether tax-deductible donations are important;
Existing ownership structure, particularly if stakeholders have different priorities for the business; and
Desired governance, including whether affected stakeholders will have direct decision-making power.
Are Stewardship models new? Did you invent them?
No. Stewardship models have been prevalent throughout most mature legal and social systems, from long-established Indigenous land stewardship practices globally to emergent structures for community support and resource sharing. We have found examples of steward-ownership models around the world.
We’ve bundled these forms under a common header to support accessibility and unify movements, but as you can see, we are not the inventors of the principles. You may hear “stewardship”, “stewardship models”, “steward-ownership”, “foundation ownership”, “purpose trusts” and other phrases attempting to describe the same phenomenon. Because the principles of stewardship are in some ways a re-discovery of age-old systems of coordination, the language is still evolving and dynamic.
What’s the most common legal structure for Stewardship models?
There are no all-purpose models or instruments for Stewardship models. We have taken a variety of approaches to develop solutions that fit the needs of a given organization and are feasible given its existing ownership structure. We typically use the Perpetual Purpose Trust structure to transition organizations or assets, but have also used non-profit and hybrid structures.
Who is using stewardship models in the US?
Communities - Looking to prevent displacement and keep value in communities
Non-profit leaders - Looking for flexible alternatives to conventional charitable vehicles
Retiring founders - Seeking intergenerational succession solutions that protect corporate independence and mission, while including employees in upside
Startup founders - Wanting to raise aligned growth capital and build sustainable, long-term oriented organizations.
Municipalities - Looking for alternatives to conventional pathways to grow and keep economic value in communities.
Investors and fund managers - To invest in systems change and intergenerational impact.
What’s the difference between a non-profit and Stewardship models?
The two are not mutually exclusive. Not all non-profit organizations qualify as a Stewardship model, although some, which have protected independence of its assets and purpose, do. The key difference between nonprofit and for-profit Stewardship models is that in nonprofit models it is the state -- rather than direct stakeholders -- that regulates purpose, governance, and stakeholder relationships.
What’s the difference between ESOP/employee-ownership and Stewardship models?
Employee ownership is typically accomplished through options, grants, or tax-advantaged Employee Stock Ownership Plans (ESOPs), and sometimes worker-cooperative corporate forms. While all of these forms of employee ownership have the benefit of including employees (alongside founders, management, and shareholders) in the financial benefit of a company, they do not change the underlying incentive and fiduciary duty to maximize the saleable value of a company. In fact, strict rules governing the fiduciary duties of ESOPs may even force the sale of a company against the interests of current employees.
In contrast, Stewardship models (like the Employee Ownership Trust) allow employees to participate in the long-term success of a company via profit sharing, without relying on an eventual sale of the business.
How are Stewardship models financed?
Stewardship models are designed to protect the independence of an organization and/or assets. This makes many conventional growth equity financing instruments difficult to lever as they often expect: (1) Excessive return that lead to unrealistic growth trajectories, and leave viable businesses (that cannot become “unicorns”) without funding; (2) Preferred shares designed to give investors as much control as possible; and (3) An “exit” via IPO or acquisition involves a change of control that undermines self-governance and co-benefit.
Aligned equity financing options typically involve some form of royalty-based return (e.g. % of revenue, cash flow, or profit) or a “structured exit” where investors agree to be bought out for a multiple on their initial investment. Philanthropy and debt are also compatible with Stewardship models. Often an integrated capital stack that combines philanthropy, debt, and pre-structured equity forms works best for Stewardship models.
Why aren’t these models more prevalent?
In advancing Stewardship models, we are fighting upstream against the gravity of the status quo in the US. Individually, culturally, and legally these models are harder to understand and implement. Here’s why:
Awareness - Many entrepreneurs, community leaders, investors, and even lawyers do not yet know about these alternatives.
Cost & accessibility - Shared ownership, governance, and financing forms can be difficult and expensive to implement in the US legal system, which was not designed for collective benefit.
Capital - Investment capital in the US is primarily available for projects that grow private wealth, not shared ownership. It can be difficult to fund projects that opt-out of the default paradigm.
All of that said, there’s a rapidly growing movement of leaders across the country who are working on transforming ownership for the common good. We’re driving down cost and improving accessibility to meet this rising demand.
How is Purpose making Stewardship models more accessible?
We believe that by making shared ownership models visible, accessible, and replicable, we can dramatically accelerate the transition to a more just economy. Our initiatives drive the implementation of Stewardship and alternative finance models by incubating leaders, reducing legal friction and complexity, and improving access to capital that’s designed to build equity and shift power. We have already reduced the average legal transaction cost from $1m to less than $35k, mobilized more than $50m in impact capital for shared ownership, totaling more than $250m in assets. We’re building a platform to unlock capital at scale and drive high leverage policy interventions over the next decade.