Lawyers in Oregon have begun to use the stewardship trust form for business ownership. Described in a prior article in the Winter 2020 Business Law Newsletter, the Oregon legislature authorized a new form of trust, called a stewardship trust, that is a form of purpose trust—a trust with no beneficiaries. The structure involves placing ownership of a company in a stewardship trust and focuses on using profits to carry out the business’s purpose, rather than the other way around. In a business structured to benefit owners, the purpose of the business – providing a good or service to the community – becomes a means to generate profit for the owners. In a steward-owned business, the profits serve the purpose. The goal is to maintain a profitable business, but the emphasis is on purpose rather than financial benefits that go to individual shareholders. Profits may be reinvested in the business to further its mission and may go to preferred shareholders holding non-voting stock, to employees in the form of raises or performance bonuses, to suppliers or purchasers in the form of better prices, or to the community in the form of charitable grants. When a business is placed in a stewardship trust, the trustee is directed by a stewardship committee, which includes representatives from all of the stakeholder groups. 

Lawyers report that the stewardship trust form can be used for a family business, to maintain the business in the community with benefits for the community and not for distant shareholders. Rather than selling the business to distant shareholders, the next generation can continue to receive financial benefits as preferred non-voting shareholders while managers run the business. The stewardship trust form can also be used by a mission-driven business, to ensure that the mission is protected over time, as the original owners retire or move to other activities. An article by Professor Susan Gary, “The Oregon Stewardship Trust: A New Type of Purpose Trust that Enables Steward-Ownership of a Business,” provides more information about stewardship trusts and the Oregon statute authorizing them. Professor Gary’s article is available at https://ssrn.com/abstract=3426845.  

Interest in steward ownership is growing around the world. Professor Gary has been working with a group of lawyers and entrepreneurs in New Zealand to produce a white paper, “Purpose-driven structures for Impact Entrepreneurs in Aotearoa New Zealand: Considering Kaitiakitanga and Steward Ownership,” which will be available soon.  

By Susan Gary, Professor Emerita