ELEVEN
MISSION-CONTROLLED GOVERNANCE
Humans at the Helm

One of the highlights of my visit to the John Lewis Partnership was touring its Peter Jones department store, a glass-walled shopping emporium on Sloane Square in the Chelsea neighborhood of London. I’ll confess that I’m a fan of magnificent department stores: the Marshall Field’s in Chicago, where my grandmother took me as a child, and whose elegant green boxes appeared under our Christmas tree every year; the old Dayton’s in Minneapolis, where to stride through its aisles was to feel the riches of the world at your fingertips (yes, I know, consumerist excess and all that: more on that point in a moment). Walking into Peter Jones in London, one has that same feeling of abundance. The oval central atrium stretches eight stories to the sky, letting natural light fall on the richly colored bolts of fabric in the carpets and window coverings department, there in the center of the store.

It is through that light-filled space that I am passing, a little entourage of executives in tow (more accurately, I am in tow behind them), when we bump into a distinguished gentleman, a midlevel manager on the floor. “Oh, here’s a member of the Partnership Council,” one of the executives says. I’d read about the bicameral governance design of JLP, which has a traditional board of directors as well as a second employee house, the Partnership Council, directly elected by employees. Here is my unscripted chance to get a sense of how it works. That central employee council is the body on which this gentleman serves. He gives his name as Harry Goonewardene.

“How did you get on the council?” I ask him. “Did you campaign?”

“Very much so,” he says. “I stood at the door and grabbed people, told them, hi, this is who I am.” He carries himself as a city council member might, calmly, with an air of dignity that is striking—arresting, almost. He is impeccably dressed in a dark suit and has the dark olive skin of someone from the Middle East—from Sri Lanka, I am later told. He lacks that harried, pinched sense that one often sees among floor managers at other low-price retailers. (This is a company whose slogan is, “Never knowingly undersold,” a company that competes based on price as well as quality—not a high-end, Hermès-type luxury retailer.) A meeting of the Partnership Council will be held soon, he tells me.

“What will you be discussing?” I ask.

“An adjustment to the pension scheme is coming up,” he says. Every employee at JLP is eligible for the pension plan after five years. Each year, the company contributes to employee accounts a sum not far below their annual pay; employees aren’t required to contribute anything. People are concerned that this probationary period means they are losing five years’ worth of pension contributions and wonder if an adjustment should be made. “A committee has been looking at this, and we’ll take it back to constituents and present a plan,” he says. By “constituents” he means the employees he represents. (I find out later that the company did in fact approve a shift, shortening the eligibility period from five to three years.) Another issue is on the table, he says. “Charitable giving—what is its future direction?” At the next meeting, Harry tells me, “we’ll actually make the decision.”

By giving employee-owners a genuine voice in high-level decision-making—a voice in company governance—the John Lewis Partnership helps bring its purpose to life. It changes the rules of the game. Later in the day, Ken Temple and I walk to a nearby English pub, the Constitution, and sit and talk about it over a beer.

This trim, dapper gentleman in his 60s would strike most people as an unlikely revolutionary, but there is a fire in his heart that is unmistakable. That was evident to me from the moment we first connected. I’d given a talk in London, years earlier, after my first book came out, and afterward Ken read it and got in touch. “Your book hit me between the eyes,” he said. It had articulated the intellectual underpinnings for Spedan’s approach. Immediately recognizing in one another a kinship, Ken and I began a dialogue that stretched over many years, through calls, e-mails, a trip by Ken to Boston, and ultimately my London visit.

THE MANY FACETS OF GOVERNANCE

“I view our business as part of a movement,” he says to me. “We’re more than just a retail organization.” He’d been with the John Lewis Partnership for more than 25 years prior to his recent retirement. For a good part of that time he served as Partners’ Counselor, responsible for “all of our democratic mechanisms and the behaviors that flow from being employee owned,” as he put it. While most businesses have a single structure of command—with a board of directors at the top, overseeing a CEO, who oversees managers—JLP has essentially two parallel structures: that traditional commercial structure, plus a second democratic one.

Ken’s job was to keep the spirit of partnership alive in the company. The essential frame of the democratic structure he oversaw was a nested series of employee-elected forums—at the department, branch, division, and company levels. These are places for employee input, information sharing, and decision making. In the linens department, employee representatives might work out things like setting goals or devising better scheduling. Each operational unit—shops, warehouses, factories—has a branch council, giving input to unit management. At the company level, the Partnership Council has oversight of pensions, charitable contributions, and the Committee for Financial Assistance—which Harry and John spoke about—as well as a voice in other policies. Chairman Charlie Mayfield appears formally before the council twice a year, where he sometimes faces tough questioning. The council has the formal power to sack him, should he fail in his duties. Imagine that: employees with the power to fire their boss.

The Partnership Council works primarily as advisor to the board of directors, which holds much of the final power. The employee council selects five out of 14 members of that board. The aim of this design, as Spedan wrote, is to have sharing of power “as far as seemed practicable … with sufficient care not to go suicidally too far.”

“That formal structure needs to be there, absolutely,” Ken tells me. “But the way the structure and ideals are played out in daily behavior actually makes the difference.” To keep democratic values alive on a daily basis, the company has a team of 30 or so “registrars,” headed by the Partners’ Counselor.

“We have weird and wonderful titles,” he says with a laugh. “The closest US equivalent would be director of ethics.”

“Your role seems to be to safeguard the soul of the partnership,” I say.

“Yes,” he agrees. “The registrar staff tries to keep the partnership dimension real and in focus.”

One of the tools that the company has developed to advance its mission in recent years is a partnership survey. “We have pages of financial targets, but we’re getting better at setting targets around satisfaction and happiness,” Ken says. To gauge progress on those goals, the survey asks employees to rate their experience along such dimensions as “I am treated fairly by my line manager” and “I understand how the forums will enable me to discuss and resolve the issues that matter to me.” The aim is to make working at the company a satisfying experience.

Taken as a whole, the ownership design of the John Lewis Partnership—the mission of employee happiness, the constitution, the cascading bodies of employee representation, the bicameral legislature, the registrars—adds up to one of the most remarkable designs I’ve ever encountered. That it has worked across the span of many decades, on such a large scale, is testament to its effectiveness.

Is it a bit elaborate? Perhaps. Granted, this is a company with more than 76,000 employees, comparable to the population of a rather substantial town. Yet it offers far more avenues for input than a town democracy does. It’s close to the model of city/state/federal democracy: a lot to pack into one company.

Is it too self-consciously modeled on democracy? Perhaps. Spedan lived in an era when Queen Victoria sat on the throne—when monarchy was the dominant governing institution around the world. In that aristocratic age, as he reached for alternatives to the unfairness he saw at work in his dad’s shops, he instinctively reached for the tools of democracy. But the fit seems to me not a perfect one. There is not a one-to-one correspondence between the kinds of social architectures suited for nations and for companies.

While cities and states provide the frame for all of life—childrearing, churchgoing, vacationing, living day to day—companies are goal-oriented entities of a largely economic sort. Importing the tools of democracy into business, whole cloth, may not be the most effective approach to dealing with the daily rigors of running a company. What Spedan devised does work. But it also might be a model that in all its detail will not be widely replicated.

Its deeper design patterns, on the other hand, seem to me to be of wide relevance. Living Purpose is the first of these—a purpose of serving a broad base of human needs, not simply the interests of the financial elite. The second is Rooted Membership—in this case, drawn to encompass employees as owners. The third design pattern is Mission-Controlled Governance, which in the case of JLP is embodied in the constitution, the employee-elected councils, and the registrar structure. It is the combination of these patterns that allows the John Lewis Partnership to set up feedback loops that succeed in changing the rules of the game.

SOLVING THE LEGACY PROBLEM

In the same way that membership boundaries can be drawn in various ways, Mission-Controlled Governance can also take a variety of forms. Spedan Lewis articulated its fundamental aim well: the goal is to make a focus on values “permanent, not dependent upon the inclinations of some particular individual.”¹

More than a century ago, Spedan solved the legacy problem. He kept the value of fairness alive inside a large company, long after he as founder was gone. Yet his particular design isn’t the only way to solve it.

In the United States, another example of Mission-Controlled Governance is the family-controlled New York Times Company, a cultural institution with a mission of journalistic excellence. Although the majority of shares in the Times Company trade on public stock markets and can be purchased any day, by anyone, the Ochs-Sulzberger family holds super-voting shares, enabling them to control the board of directors. This single design pattern protects the Times Company from predatory takeover. The design’s power can be seen, for example, in the fact that Rupert Murdoch has not been able to buy the Times, although his desire to do so is widely known, and Murdoch rarely fails to capture what he seeks. But the Times is not for sale. At any price. In the wake of the scandal at Murdoch’s News of the World—where reporters were caught hacking into the voicemail of a murdered child and bribing police for information—one shudders to imagine what Murdoch would do, were he to acquire the New York Times. Our world might be a very different place.

Super-voting shares do not, in themselves, constitute Mission-Controlled Governance. Also essential is Living Purpose. In the wrong hands, super-voting shares can be a tool of mischief. Witness, for example, the fact that Murdoch himself uses super-voting shares to maintain control of his own firm. When there is Living Purpose, combined with a way to keep governing control in the hands of those concerned with mission, Mission-Controlled Governance is created.

Governance design—like JLP’s democratic structure or the New York Times’ family-controlled board—is a way to keep a generative mission alive in a world often indifferent to the notion of social mission in business. These designs might be likened to the way a room is kept warm when the outside environment is cold. Keeping the temperature from sliding toward the ambient norm takes more than walls—more than elegant purposes put down on paper or social boundaries drawn correctly. It takes the ongoing process of making sure the furnace is running and the thermostat is adjusted: the process of governance.

There are weak and strong forms of Mission-Controlled Governance. The weak version might, for example, mean having a single public interest director on a board. The strong version involves vesting literal, legal control of an enterprise in mission-oriented hands. The hands might be those of a family, a foundation, a trust, a nonprofit, employees, or the community.

Mission-Controlled Governance works not only at corporations. Community land trusts, for example, are traditionally governed by a three-part structure, with one-third of board seats reserved for those who live in the community land trust homes, a third for those who live in adjacent homes, and a third for public interest representatives, which might include a mayor’s staff member or representatives of nonprofits.

Mission Control exists in a variety of forms, all over the world. In Latin America, one example is the VIVA Trust, which holds ownership of Grupo Nueva, a consortium headquartered in Santiago, Chile, with operations in the forestry and construction materials industries. Revenues of the company are $1 billion, and annual profits of up to $30 million flow into the charitable trust, where they’re used for the mission of promoting a sustainable Latin America. VIVA stands for “vision and values.” In creating the VIVA Trust in 2003, founder Stephan Schmidheiny—a Swiss billionaire who previously founded the Business Council for Sustainable Development—said his aspiration was to promote values of human dignity. The design he created, intended as a model to inspire others, is characterized by trust control.²

Another approach to Mission Control is foundation control—a model seen in the US company Newman’s Own, as well as in many companies across northern Europe, like the Dutch firm Ikea, Bertelsmann of Germany, and Novo Nordisk of Denmark. In many of these foundation-controlled companies, one executive said privately, “There’s less going on than meets the eye.” Foundation control constitutes generative design only when it is accompanied by authentic Living Purpose.

If these models of large companies are in many ways inspiring, I find that they leave me with an unanswered question: what about ecological impact? More specifically, what about growth? Are these models any better than traditional companies on that point? The John Lewis Partnership, I find, is in fact vigorously focused on growth. It opened close to two dozen new shops in a recent year and has plans to open many more. Here is that issue of consumerist excess: isn’t the John Lewis Partnership—by its very nature as a shopping emporium—committed to helping everyone consume as much as possible? The answer seems unavoidable: yes.

I’ll add that in the years I’ve been watching JLP, it has stepped up its environmental commitments considerably. While its sales in a recent year increased 11 percent, its total emissions grew only 5 percent. That’s progress. And the company has set a target of achieving a 15 percent absolute reduction in carbon dioxide emissions from operations by 2020. It also gets 97 percent of its electricity from green sources, and it is minimizing refrigeration and cooling emissions, exploring alternative fuels for transport, and managing water consumption. It has diverted 81 percent of operational waste from landfills. These are big steps in the right direction, if not yet the truly generative economy we need.³

I ask Ken about this at the Constitution. How can a department store chain shift into a low-consumption, no-growth economy? He doesn’t have an answer. Maybe none of us do.

“I can’t envisage the future world my children will live in, any more than my parents could envision talking on a cell phone,” he says. Fair enough. He adds that in moving into a wholly different world, companies will need to be nimble, ready to adapt. Employee ownership would help in that, he says. I think he’s right. But are there other ways in which generative governance designs might help in transitioning to a sustainable economy?

SYMBIOSIS

To explore the answer, there is another company I want to see among mission-controlled corporations. It’s Novo Nordisk, the foundation-owned Danish pharmaceutical with $11 billion in revenue. When I find myself traveling to nearby Stockholm on a business trip, I decide to add a detour to Copenhagen. There I rent a Corsa Diesel and take Highway 21/23 west through the greening fields of rural Denmark—guided by my trusty Global Positioning System. (For some reason, I find Copenhagen to be short on three things: decaf coffee, soymilk, and maps of Denmark.) My destination is the small coastal town of Kalundborg. With only a few episodes of “recalculating,” I find my unflappable robot companion delivering me to the door of the Kalundborg Center for Industrial Symbiosis.

Visitors from across the globe come here to study the town’s model of industrial ecology, one of the most famous in the world. Industrial ecology sees industrial systems as living systems, interdependent with the natural world. In plain language, industrial symbiosis means that waste products from one company are used by another. A complex mix of these arrangements has been in place in Kalundborg for more than three decades. One of the premier players is Novo Nordisk. That it is a mission-controlled corporation seems to me not an accident.

Center director John Kruger, a blue-eyed Dane, tells me he is leading a seminar later that afternoon and invites me to follow him to the conference center. As we drive along the coast—past whitewashed cottages with terra-cotta roofs—I see large green tubes running unobtrusively through the town, a foot or so aboveground, carrying steam from the local power plant. This is the “district heating” arrangement that means thousands of local homes have no need for furnaces—one element of the industrial symbiosis at work.

As John and I sit at a picnic table to talk, the aroma of another element of the scheme is in the air. Pig farms. “There are more pigs than people in Denmark,” he tells me. The hundreds of thousands of tons of slurry left from Novo Nordisk’s production of insulin and enzymes are not thrown out; they’re treated and spread on fields as fertilizer and given to pigs for food. John tells me that the gypsum plant I passed in town—with its tall white windowless silos—is another player in the arrangement, making wallboard and other products from the fly ash waste produced by the power plant. It’s all so simple and sensible, like everything should be (and so little is, in the extractive economy).

In my drive back, I pass the Novo Nordisk production facility, where 40 percent of the world’s insulin is made. At a dirt road nearby, I pull over and get out at the point where three large green pipes emerge from the ground. I put my hand to each one in turn and find the central one warm to the touch—likely carrying steam from the power plant for Novo Nordisk’s use. In this visit, I want to experience the company as the natural world does, so I decide to forgo the managerial entourage. I walk along the dirt path that runs for 200 yards alongside the pipes, escorted only by a black cat, which demonstrates for me how the pipes can be used as a walkway to ford the creek and clamber through a thicket of hedges into the plant. It’s clean and quiet there—a small village filled with massive round metal buildings where yeast is no doubt doing its work making insulin.

This is a company tangibly conscious of its humanitarian and ecological footprint, and its foundation ownership supports both of those aims. It uses the Mission Control tool of super-voting shares, held by the Novo Nordisk Foundation, to give that nonprofit control of this publicly traded company. Its mission is to defeat diabetes, and it has a stated philosophy of balancing financial, social, and environmental considerations. Its reputation among corporate social responsibility experts tells me that aim is real. In a recent period when the company saw 13 percent sales growth, for example, it reduced CO² emissions by an impressive 35 percent.⁴

The symbiotic arrangements at Kalundborg came together gradually, over many years—arising from the stable human relations that are possible only when ownership is also stable. When companies merge or change hands—or live beneath the relentless eye of hedge funds and day traders intent only on the moment—the pressure on management often drives out all considerations beyond immediate financial performance. Novo Nordisk’s Mission-Controlled Governance allows it the luxury of managing for the long term, for a Living Purpose. Mission Control allows capital to trade freely, in public markets, even as it ensures that that mission is not for sale.

When my visit to Denmark is at an end and my business in Sweden complete, I spend a final afternoon on a boat tour of the harbors around Stockholm—a city built on an archipelago of some 30,000 islands. Settling comfortably in the boat, I push the button for the canned tour in English. As we pass a row of magnificent seaside residences, the voice intones, “With the rising seas from global warming, all of Stockholm’s waterfront buildings may have to be abandoned.” How different the European sensibility is from the American one: so much more frank and open about the fact that the economy of the future will be unimaginably different from the economy of today.

The new era we’re entering is one where the realities of the natural world are likely to displace the fantasies of infinite financial growth, around which our existing economy is self-organized. What models of ownership will be suited for that emerging world is a question likely to loom large, one day, in the public consciousness. The models I visit—mission controlled and employee owned—aren’t the complete answer. But they hold hints, glimpses, and elements of what we’ll need. And there’s yet another key element that I need to understand—in many ways the most important: capital. How can finance begin to come back to earth? What can the role of finance be in a generative economy?