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Perpetual purpose trusts (PPT) are an increasingly popular option for companies that want to force themselves to do good. These non-charitable trusts exist for the benefit of a purpose (eg, sustainability, profit sharing or hiring formerly incarcerated workers) – rather than only producing profit.
Owners or shareholders of a company give shares to a trust that has veto rights over any decisions. The aims of the business can then be written into the terms of the trust. Aims might include preventing the future sale of the company or ensuring that profits are given to charity. The trust is managed by stewards (employees and stakeholders), whose role is to help the company uphold its values.
Why?
According to Danish studies, foundation-owned companies have a survival rate that's three times higher than other companies. These businesses promote long-term decision-making and are more profitable in the short, medium and long term. On top of that, customers trust these businesses more and employees tend to work there for longer. This form of steward ownership also allows for more flexibility than becoming a non-profit.
How?
Non-profit organizations like Purpose can help you set up one of these trusts. Although it depends on the size of the business, the cost of such a transition could amount to $30,000.
Who?
• Firebrand. Matt Kreutz, founder of California-based Firebrand bakery, donated 51% of his business' ownership to a PPT. The business now has 11 aims baked into its corporate charter, including an obligation to hire people who were formerly incarcerated. The trust is managed by a committee of five people including Matt, an employee, a manager and two members of the community.
• Ecosia. The search engine that plants trees, which is a certified B Corp and is used by more than 20 million people worldwide, gave a 1% veto share to Purpose. This means that Purpose can prevent the business from becoming a profit maximization vehicle for future owners that aren't aligned with its goals.
A version of this article was published in the Courier Weekly newsletter. For more useful stories, tips, tricks and simply good advice, sign up here.
