Marjorie Kelly on the Emerging Ownership Revolution
From a talk given at the BALLE network Uploaded on 2012-06-02
(Transcript, cleaned up and added headings, given starting with Marjorie Kelly's appearance on stage. Timings are relative to the whole video as on YouTube.)
I want to thank everyone else for rolling out of bed so early this morning and being here I had hoped that that I get to speak from this pulpit up here you know with the eagle – I think they were a little afraid what might come out of my mouth!
I grew up catholic and all – we won't go there – but I am going to start with a prophecy. The last time I was at BALLE was in Charleston, South Carolina and that was when David first unveiled the BALLE vision. I wanna start with that today: it's a prophecy of where we're heading.
Within a generation we envision a global system of human scale interconnected local living economies: that function in harmony with local ecosystems; meet the basic needs of all people; support just and democratic societies; and foster joyful community life. What do you think about that? (Applause) I need a drink of water after that one!
So, within a generation – so we need to get to work! One of the most important things that we need to take up as we work for this vision is the issue of scale – of getting to scale. I had a conversation not long ago with Andrew Kassoy who is with B Lab. He's one of the founders of the notion of the B corporation – the beneficial corporation, and I asked Andrew, I said, "how many of your 500-plus B corporations are currently led by their founders?"
And he paused, and he looked at me, and he said, "Well, all of them!" And I thought, you know, that really in a nutshell says where we are: the local living economy is mostly about companies owned by individuals and by families.
But there's a growing feeling – David's been saying this to me and I had the sense too – that we need to become more sophisticated about more complex forms of organization that can allow businesses to grow; to take on significant capital and keep social mission alive after the founder is gone.
Outside of BALLE is however earlier speaker said I mean we're seeing a lot of dissatisfaction with business as usual and growing interest an alternatives, and so I think the time is right to take our vision out to a much broader audience and I'm hoping that my book can help with that a little bit as david said it's called (08:00) "Owning Our Future: The Emerging Ownership Revolution". Now my publisher, Berrett-Koehler, had copies specially shipped here today. It's not going to be in bookstores for a couple of weeks, but we wanted to launch here at BALLE, we wanted to be the first place to have these books. So I'll be doing a book signing at lunch, so you can come and find me there, if you're interested.
A learning journey
Now, in writing this book I traveled around the world – I did a "learning journey" as Peter Senge says. I wanted to go visit the best alternative ownership designs I could find, from the foundation-owned corporations that I discovered are common in Northern Europe, like Novo Nordisk, considered one of the most socially responsible companies in the world. It produces 40 percent the world's insulin.
I discovered community-owned wind farms in Denmark. Local investors got together and created wind farms with no corporate middleman, and these are widely seen as having jump-started the wind industry in Denmark, which now produces 20 percent of that country's electricity – it's more than any other nation.
In Europe I discovered 21 percent of all deposits in banks are held in co-operative thanks there owned and democratically governed by their own depositors. Employee ownership has been promoted up by a number of countries including Spain, Poland, France and Sweden. Co-operatives – this is the year of the cooperative as our earlier speaker said, and they're found in virtually every country of the globe. In Kenya, to give one example, cooperatives represent 45 percent of GDP. In New Zealand it's 22 percent of GDP. Worldwide, co-operatives employ more people that all multinationals combined. (Applause) (10:10)
We don't hear about that every night on the news: the rise and fall of co-operatives. But you know I'm here to tell you that we here at BALLE are not alone.
The Generative Economy
There is a growing ownership revolution rising around the world. We haven't recognized it – we haven't seen it as a single phenomenon – because it hasn't yet had a single name. I would suggest we call it the "generative economy".
A generative economy is one that embodies the BALLE vision. It's an economy whose fundamental architectures tend to create beneficial, rather than harmful, outcomes. It's a living economy that has a built-in tendency to be socially fair, and ecologically sustainable. The notion of a generative economy I hope can add a critical element to the BALLE vision, and that is the element of ownership design.
A lot of people I think beyond this room don't recognize: ownership is the foundation of every economy. It's the power of ownership and how it's wielded that determines: whether we can own our own homes; or how much anxiety we suffer over our debts; whether we can be secure in retirement; whether we're empowered or belittled by our work.
And the crises we face today – ecologically and financially – they're all tangled up with the ownership designs that dominate the globe, which of course is the publicly traded company, with ownership shares, absentee shares, trading, and public markets.
But we here, we know there's more than one way to own things. What I want to suggest to you today is that these emerging alternatives represent a single coherent school of ownership design. It's a family of generative ownership designs and together they form the foundation for a generative economy.
Now 'generative' I think is a nice word – it simply means the carrying on of life. It comes from the same root word "ge", the same as Gaia, and generative design is about the institutional framework for carrying on life. It's built around fundamentally living purpose. But purpose isn't enough: what makes it a design is at least one other structural element that holds that purpose in place over time. Now in the journeys that I've done for my book I've found five basic structural elements of generative ownership design.
First is purpose: that's most important - living purpose.
The second is rooted membership. We have ownership held in living human hands.
Third is mission-controlled governance, where the mission and the control of the enterprise is in the hands of people who care about mission.
Fourth is stakeholder finance – it's not the "casino finance" that we know so well – it's where capital becomes a long-term friend.
And fifth and finally, there are ethical networks, that offer collective support for social and ecological norms – it's different than commodity networks, which focus only on price.
Not every ownership model has every one of these elements, but the more elements you have the better the design.
The John Lewis Partnership
I want to share a story about one of the most exciting companies I found in my travels, that seems to me truly generative at scale, and that's the John Lewis Partnership. I visited them in London. Now this is the largest department store chain in the UK. They have 35 department stores, close to 300 grocery stores, and when I entered the flagship store in London – not too far from the Queen's palace – I went in through the employee entrance, and there's this legend in stone over the door, it says "Here is partnership at the scale of modern industry", and that was really the goal the founder, Spedan Lewis, and I think he definitely succeeded.
This company employs 76,000 people – I can hardly count that high. It has revenues of 13 billion dollars: it's larger than Monsanto; it's 100 percent owned by its employees and its purpose is serving employee happiness. That's a very clear articulation of a living purpose. It also has mission-controlled governance. Employees directly elect a Partnership Council which oversees certain decisions and that council in turn appoints about a third of the board of directors so there's this bicameral governance design.
When I was walking through one of the department stores I ran into a mid-level manager who serves on the Partnership Council and I asked him "so what will you be talking about at your upcoming meeting?" I wanted to see if this was anything real going on in this council. He said, "Well we're going to be talking about improving the employee pension plan." They wanted to shorten the eligibility from five years to three years – and I found out later that that they did. And he said, "We will soon be taking a plan out to our constituents." And by constituents he meant employees.
There are a series of elected councils at John Lewis Partnership: the linen department has a council; the men's underwear department has a council; and it goes up to the Partnership Council. So this is rooted membership and the people who are the firm are the employees, and it's real ownership: the company shares between 40 and 60 percent of profits every year with employees. Last year that was about nine weeks pay.
I met a woman named Emma who had just started there and working at a grocery store – she was stocking shelves – she said that last year she got a bonus of over 3,000 dollars and she was able to take a vacation for the first time in four years.
And this company also practices stakeholder finance. They are now doing something called the John Lewis Partnership Bond. You can't buy it through a broker: it's only available to customers and employees; it pays four and a half percent and there's an extra 2 percent in store vouchers. So it's definitely capital being a friend and not a master, in this company.
The John Lewis Partnership is larger than what most of us would say is human scale. I don't think I'd go so far as to say all companies ought to be this large. This is one that does seem to work, because its ownership design keeps it rooted in, and accountable to, its community of employees.
I've found many other models rooted in community: I'll talk about just a few.
There's community-owned forests in Mexico. And this is where indigenous peoples govern these forests. And because they make a living off the forest – making furniture, doing sustainable harvesting – they have an incentive to care for the forest, and they have found that community ownership dramatically reduces illegal logging and reduces deforestation which is one of the largest causes of global warming.
Now here's the amazing part though. These community forests represent 60% to 80% of all forests in Mexico. They represent a quarter the forests in the developing world, and yet this model is virtually unknown.
In Maine I studied the ownership rules of the lobster industry. It's a wonderful, really thriving industry up there. Now they have ownership rules that help govern lobstering. They say only owner-operated boats can operate in the inshore waters where lobster breed. The big corporate boats, the big trawlers, can only operate in deeper waters offshore. They also have democratic fishermen councils. There are seven of these. Fishermen directly elect councils and help decide on the rules.
Now here's the amazing fact here: at a time when most to the world's fisheries are depleted, the lobster industry in Maine is thriving. There are record catches and so the lobster are thriving and the people are thriving together, and it's because of this local community ownership that's rooted in community.
We see in these models what it means to design an economy as a living system. (19:58) Living systems: they function by the same rules, whether they're biological systems or social systems, and a lot of these rules have been articulated by systems thinking – a school of thought that Peter Senge is one of the leaders in. And one of the core insights of systems thinking is that behavior comes from structure. Every system has a structure that shapes how it behaves, in the same way that a slinky has a structure that shapes how it bounces down the stair.
When you take a socially responsible company, and you sell it to multinational you have changed its structure, and you are going to see different behavior as a result. In many cases you see social mission squeezed out.
When we think the structure of a company, we tend to think of Articles of Incorporation and by-laws, but the structure of a living system is something different. Living structure is purpose expressed through design.
The real purpose and life of a company
The real purpose of a company, of an enterprise – it may not even be written down anywhere – you tend to see it through the operation of the company. Enron, for example, had a beautiful code of ethics, it is very well-regarded in the ethics industry. And it had virtually nothing to do with the behavior of that company. It's not about what you write down. Keeping a company's real purpose alive over time – it isn't something that you design once and then you're done.
There are at least three moments in the company's life when design for social mission really is critical. The first is the founding. The second is when you have capital infusion, and the third is when the founder departs or sells.
In my work with Cutting Edge Capital I've been working with Jenny Cassan there who's the president of the firm. She and I've been helping a medium-size firm do a large stakeholder financial offering, and it's going to be the first time that the founder loses majority ownership of this company. And so we're suggesting that that he should consider using something that I call "mission shares". These are super-voting shares that allow a person or group to retain control of the board without having majority of all the (?) stock.
In Novo Nordisk which is a publicly traded company, they have mission shares that are held by a foundation. With the New York Times and the Washington Post, mission shares are held by a family. There are a number of ways that can be done. What mission shares can do is they can allow liquidity for investors, while ensuring that the soul of the firm is not for sale.
This is one example of designs that can help us go to scale.
Scaling up Generative Ownership
So there's a final lesson that I think we can see in all these models and that is that generative ownership is not only for small scale. When democracy was new, and it existed in only a few countries of the world, they used to say, well you know democracy, that's only going to work in small countries.
But today, democracy is the dominant form for government across the globe. And I'll say I think the day may come when we see that generative design becomes the dominant form for economies across the globe.
We can go to scale in different ways. We can have some large firms that remain generative in their design, and we can have networks of linked local economies like at the networks in BALLE, the networks of cooperatives, or like the community forests of Mexico.
You know, when you put it all together it begins to sound like that BALLE vision: of a global system; human scale; interconnected; local economies; that function in harmony with the ecosystem, and meet the basic needs of all people. So here's the truth: that I think we need to begin telling the world. And that is that the generative economy in many ways is already at scale. We are not the fringe any more: we are the leading edge of the future.