Opinion | 'A better company starts with yourself', EW

Why there are people who prefer a shower curtain from Blokker over a glass door is a mystery to me. The cute print inevitably sticks to your lower leg, the bottom edge has a color without a name, and after a week the rail falls off the wall while you grab your towel. No, when it comes to curtains, legal philosophy has it. Not a golden masterpiece like in Thierry Baudet's office, but a waterproof, elegant variant. Here's how.

The godfather of modern legal philosophy, John Rawls, believed that you should organize a society as if you were stepping into it from behind a curtain, ignorant of the position you would then fulfill. No idea where your crib is located, how wealthy your parents are, what color you are, and more. From behind this 'veil of ignorance,' Rawls believed you and I would organize society in the most advantageous way for everyone. When you stand in the polling booth – albeit without a curtain in the last elections – you don't vote for your own interests or parish, but for the greater good.

The corporate contract is broken

While political parties often anchor in their principles that they are there for all Dutch people (don't trap in!), the primacy of interests within a company fundamentally lies with one group: its shareholders. Shareholders appoint and dismiss directors, shareholders receive dividends, and shareholders – in their own defense – also carry the risk if things go wrong with the company. The corporate contract, if you will.

But that corporate contract is broken. The risk that shareholders run no longer corresponds to the profits they receive. The society screams – rightly so – that shareholders of (stock exchange) companies become rich while workers, (apparent) self-employed, suppliers, and the environment suffer. Even Prime Minister Rutte gave a swipe at large Dutch companies that did pay dividends or bought back shares but hardly raised wages in 2019 in his speech at the VVD festival – which is what it's called.

Corona showed the power of the shareholder

At the beginning of the corona era, the behavior of some of these companies revealed the true colors on their stance. Many – often prompted by Anglo-Saxon shareholders – unilaterally extended payment terms to not jeopardize their cash position. Booking, which bought back 8 billion euros of its own shares in 2019 and paid out 5 billion in dividends to its shareholders, seemed wise to apply for over 61 million euros in NOW support.

Friends and foes agreed that such behavior is diametrically opposed to the Dutch polder thought that the interests of all stakeholders should be weighed in the business operation. The crisis revealed the biggest flaw of this polder. All corporate governance codes, sustainability indices, and corporate council processes notwithstanding: as long as the shareholder ultimately holds the reins, his interest will prevail. That is not necessarily good or bad, but rather a logical consequence of an inherent flaw in the current implementation of the corporate contract.

The enterprise viewed from behind a curtain

The art, therefore, is to look at the enterprise from behind Rawls's veil as we look at society. If you wouldn't know which role you would fulfill in a company (director, shareholder, supervisor, employee, supplier, etc.), how would you then organize your company?

A possible answer to this is a business model that is gaining ground more quickly. With steward ownership, the control and economic ownership of a company are separated. In other words, shareholders still earn (in accordance with the contractual agreements with the company) from their investment, but can no longer fire the director (or steward) if he does not pay out all profits. This ensures the sustainable character of the company and no longer allows directors to be beholden to malevolent shareholders.

Companies thrive better with the 'steward model'

This model is more than a political hobby. Traditionally, a large number of family businesses are steward owned, and a growing number of Dutch start-ups are designed according to the steward model (see, for example, MoonBack, a crowdfunded alternative to Booking). In Germany, the continuity of giants such as Bosch (of drills) and Zeiss (of lenses) has been ensured for years because these companies earn their millions based on the steward model.

With a company, it's like with a decent watch: it's never really yours because you're just taking care of it for the next owner. Steward ownership anchors that thought in the essence of a company. If Blokker were to embrace that principle, AND come up with glass shower doors instead of curtains, the next generation would be spared a lot of misery.

As published on EW Podium.