Aligning on governance
Implement an alternative way of owning and governing companies that creates maximum value for all stakeholders
The Breathe approach enables companies to successfully fulfil their purpose while serving the needs of all stakeholders.
Most companies today are owned and controlled by shareholders. Stakeholders such as employees and the environment are protected by law, and although companies often create significant value, negative externalities and their impact on the planet and society are not sufficiently considered.
Companies can take accountability for these negative externalities by giving a ‘voice’ to all relevant stakeholders in their company’s governance.
Companies should assume integral responsibility for their impact on the planet and society. This impact becomes explicit by defining a clear purpose that clarifies a company's contribution towards its stakeholders. A new governance blueprint is needed to support and anchor purpose in a company. The purpose of governance is the governance of purpose, by Colin Mayer.
To place purpose at the heart of a company, it must explore who gets a seat at the table. In our governance model, economic rights are separated from voting rights. Both the shareholders as well as all relevant stakeholders receive voting rights. By representing stakeholders in the governing entity of the company, it can take accountability and act in the interests of the broader society.
There are many examples of legal forms that are not purely shareholder-owned or profit-driven. One form that has proven to work in many jurisdictions is a foundation. On the board of a foundation, multiple stakeholders, besides the financial investors, are represented. Furthermore, decisions are made not based on simple majority voting rights but also to achieve optimal solutions that create ‘broad value’ for all stakeholders.
A commonly used method for decision-making by these foundations is "integrated decision-making". This decision-making process consists of 5 highly structured steps by which decisions are only rejected if they are detrimental to the company's purpose.
Many examples of foundation-controlled companies are found, of which a large proportion are also listed on a stock exchange. There is increasing proof that stakeholder-governed companies create at least as much financial value as shareholder-controlled companies but at lower risk and with a higher contribution to society and the planet.
Breathe co-founded Home.Earth, a real estate development company that is raising over €200 million of capital with institutional investors based on these governance principles. This demonstrates that investors are increasingly comfortable with new governance models in which they don't have the ultimate control, provided that (1) their financial interests are adequately taken into consideration and (2) the company clearly articulates which other stakeholders are relevant for the company and how their "voice" is taken into account.
To read more about the other four components of the Breathe Approach – Purpose, Structure, Capital and Culture – have a look over here.