The Power of Stakeholder Capitalism (and how you can support it)

The start of a new year is always a time of reflection and re-dedication. For me and ep group, 2022 is the year when we really start to multiply our impact in the areas that we care about.

When we consider what those areas are, we all think first about the obvious ones like climate change, the energy transition and the wider, urgent environmental problems such as the threat to biodiversity, all of which are pressing, critical problems.  The other area that is deeply important to us is the way that companies are run and managed, and the linkage between companies and the provision of capital. The dominant model of capitalism, with its emphasis on shareholder primacy, is undoubtedly one of the causes of the environmental problems we face. It is also a cause of problems, both at the social level such as extreme wealth inequality, and the level of individuals such as lack of purpose and sense of worth.

As with the solutions to environmental problems, the solutions to the problems of shareholder primacy capitalism are out there, they are just not widely distributed.  They are, however, growing fast. The rise of the B Corp movement, which we admire and support, is evidence of that.

And it is not just B Corps and other ‘alternatives’.  Blackrock’s Chief Executive Larry Fink recently wrote to CEOs of investee companies and amongst many other things said:

‘Putting your company’s purpose at the foundation of your relationships with your stakeholders is critical to long-term success’

‘we focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients’

‘our conviction at BlackRock is that companies perform better when they are deliberate about their role in society and act in the interests of their employees, customers, communities, and their shareholders’

Just over a year ago we decided to act on our beliefs around these issues and implement a form of ownership called steward-ownership, one that is not widely known but is more common than is generally appreciated. Steward-ownership is defined as follows:

The concept of “steward-ownership” harnesses the power of entrepreneurial for-profit enterprise while preserving a company’s essential purpose to create products and services that deliver societal value and protecting it from extractive capital.

Steward-ownership represents a viable alternative to shareholder-primacy ownership. In addressing fundamental structural deficiencies of our system, it retools the goals and incentives that guide decision making in companies in the corporate DNA. By doing so it has the power to transform the economy. Steward-owned companies are committed to two principles:

(1) Self-governance — Control remains inside the company with the people directly connected to stewarding its operation and mission. With the control of the company held in a trust, it can no longer be bought or sold

(2) Profits serve purpose — Wealth generated by these businesses cannot be privatized. Instead, profits serve the mission of the company, and are either reinvested in the company, stakeholders, or donated. Investors and founders are fairly compensated with capped returns/ dividends

What does this mean for ep group?

Firstly we are restructuring our various companies into a formal group and secondly we are re-writing the articles of the companies to reflect the principles of steward-ownership.  In parallel with those internal changes we are engaging with SMEs with services that support net zero and the regenerative economy, the kinds of companies that are the ‘picks and shovels’ of the transition, and who like the idea of coming together and building a larger steward-owned business rather than selling to extractive capital. Our intention is to bring these companies into the ep group through acquisition in a way that brings equitable rewards and balances a high degree of autonomy with support in key areas.  By aggregating these SMEs we can bring to SMEs the financial, impact reporting and marketing systems of a bigger company, as well as access to lower cost capital.  Furthermore there can be real synergies between the companies within the group.

In order to execute this strategy we are raising capital for the first time. The investors we want are impact driven investors who are committed to enabling the transition to a net zero and regenerative economy but also recognise that the structure of companies and their relationship to capital has to change.  If that description fits you and you are interested in joining us in this journey by investing please let me know and we will share more details.

Steward-ownership; ep group impact report