What is purpose-ownership?
It is a model of corporate organization that is radically distinct from those regulated in most legal systems, including Portuguese law. It is based on the idea of refocusing the productive organization on its essential purpose - that is, creating products and services that bring added value to society - while protecting the organization from capitalist pressures, such as the tendency to maximize short-term dividends and speculative or predatory acquisition of ownership stakes.
In this model, control remains within the company, entrusted to individuals directly involved in pursuing the purpose or mission (the stewards), and it is not subject to being "bought and sold."
Furthermore, profits generated by business activities are, with few exceptions, not distributed among the members. They are primarily intended to be reinvested in pursuing the objective or mission, strengthening the company in terms of product and service quality, working conditions, and innovation. They can also be redirected (to varying degrees and through various actions) to the community in which the company operates.
Such a legal configuration requires various specific implementation mechanisms. These include the dissociation of voting rights from dividend rights (significantly limiting the possibilities of dividend distribution), strong limitations on the transferability of ownership stakes or members' legal positions (both during lifetime and upon death), and severe restrictions on amendments to the bylaws concerning the essential principles outlined. These measures aim to prevent easy subversion of the model once implemented, which also explains the imposition of limitations on transforming into another type of legal entity and constraints during liquidation (allowing members to receive only the value of their initial contribution).
Who is it for?
Purpose-ownership does not aim to supersede or replace traditional models of corporate organization. Its objective is to meet the specific needs of certain companies and entrepreneurs who do not find adequate answers in those traditional models.
In dynamic and innovative sectors of the economy, interest in the purpose-ownership model has been growing due to its advantages in preserving the business matrix and embodying the desired corporate culture in tangible ways. It also offers the potential for attracting and retaining qualified human resources.
However, in any economic sector, the purpose-ownership model can bring significant benefits regarding the delicate issue of succession in family-owned or closely held businesses. It allows founders to crystallize the business model and avoid the destruction of identity and dispersion of wealth they have created.
While purpose-ownership is currently attracting particular interest, it is not a new phenomenon. Several internationally renowned companies of significant size have implemented the steward or purpose-ownership model for several decades, such as Bosch, Zeiss, Carlsberg, IKEA, Pierre Fabre, and Rolex.
How is it implemented?
The purpose-ownership model can be adopted in two ways:
- From the inception of the company, during its creation.
- Subsequently, by introducing changes to the company's legal structure.
The challenge lies in the absence of specific legal provisions in Portuguese law for companies wishing to implement a purpose-ownership model.
While it is not impossible to create a legal framework capable of implementing certain aspects of purpose-ownership using existing materials, the solution currently remains imperfect and costly.
The study of simpler and viable solutions is one of the main objectives of the POWer project.