Living Enterprises

Agenda: Advance the transition to an economic system populated by locally owned, human-scale living enterprises.

A living enterprise is rooted in a community of place, works in harmony with natural systems, supports vibrant community life, provides meaningful living-wage jobs, treats profit as a means rather than an end, and cooperates with like-minded businesses to create community wealth for all stakeholders. Because those who own rule, a democratic society is necessarily an ownership society

A living enterprise functions as a community of people making a living, not a pool of money seeking to reproduce itself. It is built on human relationships and maintains itself at a human-scale — preferably less than a hundred employees and rarely more than 500 — because to grow larger would be to lose its human quality. It is owned by engaged stakeholders — workers, community members, customers and suppliers — who have a personal involvement in its operation and a living interest in both the healthy function of the enterprise and of the community in which it is located.

There are numerous enterprise forms that link the interests of the enterprise to the interests of the people, communities, and natural systems of the places where it does business.  We call them living enterprises because they have living owners and relate to the living communities in which they operate in ways similar to the relationship of a healthy living cell to the healthy living body it both serves and would not exist without. At their best, living enterprises work in harmony with natural systems, support vibrant community life, provide meaningful living-wage jobs, treat profit as a means rather than an end, and cooperate with like-minded businesses to create community wealth for all stakeholders.

Ownership

Ownership is key to connecting an enterprise to the community in which it does business. The greater the extent to which ownership of the enterprise is rooted in the community, meaning it is held by workers, customers, and community members who bear the consequences of its action, the greater the natural incentive to manage the enterprise in ways that contribute to the living human, social, and environmental wealth of the community. By contrast, absentee owners are unlikely to have knowledge of, let alone interest in, any outcome other than their own short-term financial gain.

When enterprise ownership is both rooted and shared among a variety of community stakeholders, there is a natural incentive for the enterprise to serve the community with integrity and to  recognize its responsibility to operate in a way that balances the interests of all its stakeholders. Shared, rooted ownership brings many social benefits beyond lessening the need for governmental oversight.

Participation in the ownership of community wealth gives individuals greater control of their economic destinies, enhancing their ability to plan for the future, pursue an education, purchase a home, or start their own business. The increased security, social status, and connectedness that normally come from ownership participation in turn contribute to good general physical and mental health. A true ownership society is a healthy society.

Local owners invest themselves as well as their money in the enterprise and expect that in addition to a modest financial return they will also receive a living return in the form of a healthy and prosperous community and a vibrant natural environment. Financial viability — including a fair return on financial investment — is essential to any for-profit enterprise, but a fair return is not the same as maximum return. Furthermore, the living enterprise seeks a fair and balanced return to all its stakeholders — including safe, meaningful, family wage jobs for its employees, good service and useful, safe, quality products for its customers, and a healthy social and natural environment for the community in which it is located.

The guiding question for those who lead a living enterprise is not “What action will create the biggest boost in our stock price this quarter?” but rather “How can we best contribute to creating community wealth in a way consistent with financial viability and a fair return on financial investment?”

Appropriate supporting policies favor locally owned human-scale enterprises, support cooperative worker, consumer, or community ownership, and hold enterprises and their primary decision makers accountable for maintaining at least the same ethical standards expected of any responsible adult.

Forms of Enterprise

Living enterprises may take on a variety of organizational forms. They may, for example, be organized as consumer cooperatives, worker-owned corporations, community corporations, partnerships, family businesses, or simple sole proprietorships—all of which involve rooted, engaged ownership. Contrary to the claims of market fundamentalists, there is no reason that all enterprises should be profit maximizing. There are many needs—health insurance, electricity, water, and banking among them—that may best be met by community owned, non-profit, or cooperative enterprises.

Where the nature of the work requires greater aggregations of skills and capital, individual living enterprises may come together to form larger alliances comprised of locally rooted living enterprises. Examples include the Mondragon Cooperatives in Spain, the Organic Valley dairy coop in the United States, local manufacturing networks located throughout the world, and purchasing and branding cooperatives owned by member stories, as for example Ace and Tru-Value Hardware.

The only excluded enterprise forms are those that give a controlling interest to absentee owners, legally define organizational purpose primarily in terms of financial returns to shareholders, and/or confer on owners and officers special rights and immunities not available to other persons. Lacking natural community connections, these old economy corporations tend to act like cancer cells, seeking their own unlimited growth in a quest for ever increasing monopoly power. They serve absentee owners and managers whose only stake is financial and who use the corporation as a legal shield to insulate themselves from responsibility for the social and environmental consequences of their actions.

As the body develops mechanisms to protect itself from cancer cells and parasites, so too living communities properly maintain regulatory defenses against predatory forms of enterprise that lack community roots, come only to extract community wealth, and have no moral qualms about engaging in unfair competitive practices to destroy the living enterprises on which the community’s long-term health and well-being depend.

The Cost of Wall Street’s Failure

In contemporary societies, the institutions of business powerfully shape our individual and collective identity, values, and relationships, economic choices, and priorities. How we define the purpose, values, and reward structures of the prevailing forms of enterprise has far-reaching implications and merits careful consideration.

For some thirty years, Wall Street interests rewrote the rules of commerce to facilitate the concentration of virtually unlimited economic power in global corporations that operated beyond the reach of public accountability for the sole purpose of maximizing financial returns to their owners and top managers.

The corporate forms favored by Wall Street were extremely successful in doing what they were designed to do, expand consumption to generate profits for Wall Street. Their “success,” however, comes at a terrible cost to society in the form of extreme inequality, stagnant wages, deteriorating public services and infrastructure, skyrocketing health care costs, wasteful consumption, collapsing environmental systems, resource wars, and the toxic poisoning of air, water, and soils.

The Business of Business is to Serve

Every human has a responsibility to behave in a way consistent with the well-being of others and the community at large. A human institution that represents an aggregation of economic power far beyond that of the average person can scarcely be absolved of comparable responsibility for how that power is used.

Financial return is a reward for service rendered to the community in response to market demand. Therefore, the owners of an enterprise are entitled to a financial return on their investment only to the extent that the enterprise performs a useful service. The extraction of financial gain unrelated to the production of real value is a form of theft and is properly prohibited by society.

 

 

 

Public Policy

Our future economic health depends on advancing public policies that favor living enterprises and insulate them from unfair competition from corporate predators. Such policies would include rigorous antitrust enforcement to break up concentrations of corporate power and give employees or the communities in which the employees live first option to purchase the divested units.

Public policy might require a corporation that decides to sell or close a local plant to give its workers or other community minded interests in the affected community an option to buy the assets on preferential terms. During bankruptcy proceedings, employees and communities should have the option of paying off creditors at discounted rates and taking possession of the corporation’s remaining assets. Rules governing company pension funds might allow their use by employees to purchase voting control of the firm’s assets.

Government oversight should assure that worker and community buyouts are structured to give workers and communities real control—in contrast to many employee stock ownership plans (ESOPs) that vest control in management.

The Business of Business Is To Serve