Tuesday, January 11, 2022

Can Companies Force Themselves to Do Good?

TrustWith the use of perpetual-purpose trust, companies can “make the values of pro-social companies permanent.” This is best explained through a beautiful example of a company doing good. 

Kate Emery, the founder of a successful digital-consulting firm was considering retirement and was weighing options for her company, The Walker Group. At the time, the Walker Group had nearly fifty employees and was bringing in around ten million dollars. If Emery were to sell the Company, she may have easily made a hundred million—or more. 

However, after a meaningful conversation, Emery decided to take the Walker Group in a new direction as she did not want to sell her company and jeopardize her lifework. Emery then revamped her already successful company by installing a new, yet unusual enterprise model. The Company began sharing a third of its distributed profits with employees and donating a third to nonprofits in Farmington, Connecticut where the Company was established. 

In 2018, Emery paired with the Purpose Foundation after she read about its new kind of corporate ownership structure. The foundation uses what is known as a perpetual-purpose trust which exists to fulfill some purpose, as opposed to providing for a human beneficiary. 

In a perpetual-purpose trust, the trust becomes the legal owner of the business, and the business owner now has “a fiduciary duty to fulfill its purposes, which might include sharing profits with workers, protecting the environment, and hiring the formerly incarcerated.” These trusts can be used to prevent future owners from “discarding pro-social policies in favor of higher profits.” 

With this type of corporate structure, companies can keep their goodwill intact—indefinitely.

See Nick Romeo, Can Companies Force Themselves to Do Good?, The New Yorker, January 10, 2022. 

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

https://lawprofessors.typepad.com/trusts_estates_prof/2022/01/can-companies-force-themselves-to-do-good.html

Estate Planning – Generally, Trusts | Permalink

Comments

Post a comment