Three cheers for the fourth-sector economy

The highest priority of corporations should be the common good – just as it used to be.

Terry Mollner | December 2007 issue
Last year, Google’s directors took a step that did not get much attention but could take our social/political/economic world to the next level of maturity. They decided that the most important thing to do with the firm’s philanthropic dollars was not to set up a charitable foundation (although they did that also), but to establish another for-profit company dedicated to the good of humanity and nature. They put a billion dollars into Google.org, the firm’s philanthropic arm, to be invested in companies that can either make or lose money as long as the common good is advanced. Any profits remain in the company to do more for the common good.

RechargeIT.org is one of the projects supported by Google.org. It produces plug-in electric vehicles that reduce the need for gasoline because they recharge themselves overnight through the domestic electricity grid. All Google company cars are now RechargeIT cars.

The first corporations founded in America were what I call “common good corporations.” To build a bridge, for example, a town meeting established a separate organization called a “corporation.” The minimum amount that could be loaned to it was very small, so each person in town could buy at least one “share.” The bylaws stated that decisions would be made by a majority of shareholders. In this way, the democratic process of the town meeting was sustained in the corporation. The wealthy bought more shares; the poor bought one share. The corporation was managed by a board of “trustees” responsible for managing the bridge-building corporation for “the common good.” When the tolls paid off all the loans, the corporation ceased to exist.

Today, the highest priority of corporations is the financial interests of a few; decisions are made by one vote per share, not shareholder; and these corporations stay in existence as long as they choose. This is a nearly complete reversal of the priority and structure of the original corporation, contributing no benefit to the social structure.

I believe Google.org could supply a visible return on the moral values of the corporate world, and help define what I call a mature fourth sector in society. Currently, the three main sectors are government, for-profit companies, and non-profit organizations. The fourth sector consists of businesses that have social agendas. A mature fourth sector would be one in which the highest priority is the common good without limits on how to express it. Mature fourth-sector firms would impose reasonable limits on equity returns, with all excess profits permanently set aside and managed for the common good.
Financial planners tell their clients the goal should be an 8 to 11 percent return on their investments. Companies could cap their returns at 12 percent. One of the initial priorities could be to put any excess capital into common-good investment funds that buy successful companies and convert them into common-good corporations. These firms could establish joint ventures, eventually making it possible to buy multinational corporations. Once one multinational in a market sector is bought by a common-good fund, it will be in the financial interests of shareholders in the remaining firms to sell quickly to the common-good funds, since the last companies in the market sector to sell would receive less for their shares. In this way, all multinationals could eventually become common-good corporations.

Will this be one of the peaceful paths to a global moral order that builds on individual freedom and a free-market economy? I hope so. Every time I see companies like Google.org come into existence, I am going to step outside my front door and give out a big cheer. I invite you to join me. I look forward to the day when people often hear their neighbors stepping out their front doors and cheering like I am sure those early American townspeople did when they finished their bridges.


Terry Mollner is president of the Trusteeship Institute in Shutesbury, Massachusetts, a founder of the Calvert Social Investment Fund and a member of the board of Ben & Jerry’s.

Solution News Source

Three cheers for the fourth-sector economy

The highest priority of corporations should be the common good – just as it used to be.

Terry Mollner | December 2007 issue
Last year, Google’s directors took a step that did not get much attention but could take our social/political/economic world to the next level of maturity. They decided that the most important thing to do with the firm’s philanthropic dollars was not to set up a charitable foundation (although they did that also), but to establish another for-profit company dedicated to the good of humanity and nature. They put a billion dollars into Google.org, the firm’s philanthropic arm, to be invested in companies that can either make or lose money as long as the common good is advanced. Any profits remain in the company to do more for the common good.

RechargeIT.org is one of the projects supported by Google.org. It produces plug-in electric vehicles that reduce the need for gasoline because they recharge themselves overnight through the domestic electricity grid. All Google company cars are now RechargeIT cars.

The first corporations founded in America were what I call “common good corporations.” To build a bridge, for example, a town meeting established a separate organization called a “corporation.” The minimum amount that could be loaned to it was very small, so each person in town could buy at least one “share.” The bylaws stated that decisions would be made by a majority of shareholders. In this way, the democratic process of the town meeting was sustained in the corporation. The wealthy bought more shares; the poor bought one share. The corporation was managed by a board of “trustees” responsible for managing the bridge-building corporation for “the common good.” When the tolls paid off all the loans, the corporation ceased to exist.

Today, the highest priority of corporations is the financial interests of a few; decisions are made by one vote per share, not shareholder; and these corporations stay in existence as long as they choose. This is a nearly complete reversal of the priority and structure of the original corporation, contributing no benefit to the social structure.

I believe Google.org could supply a visible return on the moral values of the corporate world, and help define what I call a mature fourth sector in society. Currently, the three main sectors are government, for-profit companies, and non-profit organizations. The fourth sector consists of businesses that have social agendas. A mature fourth sector would be one in which the highest priority is the common good without limits on how to express it. Mature fourth-sector firms would impose reasonable limits on equity returns, with all excess profits permanently set aside and managed for the common good.
Financial planners tell their clients the goal should be an 8 to 11 percent return on their investments. Companies could cap their returns at 12 percent. One of the initial priorities could be to put any excess capital into common-good investment funds that buy successful companies and convert them into common-good corporations. These firms could establish joint ventures, eventually making it possible to buy multinational corporations. Once one multinational in a market sector is bought by a common-good fund, it will be in the financial interests of shareholders in the remaining firms to sell quickly to the common-good funds, since the last companies in the market sector to sell would receive less for their shares. In this way, all multinationals could eventually become common-good corporations.

Will this be one of the peaceful paths to a global moral order that builds on individual freedom and a free-market economy? I hope so. Every time I see companies like Google.org come into existence, I am going to step outside my front door and give out a big cheer. I invite you to join me. I look forward to the day when people often hear their neighbors stepping out their front doors and cheering like I am sure those early American townspeople did when they finished their bridges.


Terry Mollner is president of the Trusteeship Institute in Shutesbury, Massachusetts, a founder of the Calvert Social Investment Fund and a member of the board of Ben & Jerry’s.

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