Ownership

We talk a lot about ownership in America: George W. Bush promoted an “ownership society;” people trying to change institutional systems are urged to help those involved to “own” the changes.

The disconnect comes when we consider corporate ownership–which, increasingly, doesn’t exist in any meaningful way.

Think about the origins of the business corporation. A Henry Ford, an Eli Lilly, a J. Randolph Hearst would begin an enterprise that continued to reflect upon its founder whether or not that founder retained majority ownership (which most did). Other shareholders profited or not, participated in the election of the board or not, attended annual meetings or not, but it was understood that they weren’t owners in the way we understand that word.

A business school colleague once described today’s shareholders and bondholders as two different kinds of lenders. The guy who purchases corporate bonds wants priority and a secure rate of return. They guy who buys shares is gambling, in a sense: he’s willing to risk a greater downside in hopes of a bigger return. Neither of them is really interested in the company or its business, except to the extent necessary to make an investment decision.

Meanwhile, the company is managed by hired guns who rarely have any sort of emotional connection to the corporation, and whose own “ownership” is limited to stock options and other incentives–incentives that tend to reward quarterly rather than long-term performance.

Real ownership is so different.

Last week, the Indianapolis Public Library hosted a small reception for the Lacy family, one of the increasingly rare exceptions to the picture I’ve just painted. The impetus for the reception was the family’s donation of a book–a history of the company–to the Indiana collection. The book traced the company from its origins manufacturing corrugated cardboard boxes to its current incarnation as LDI–Lacy Diversified Industries. During the brief talks, someone made the point that multi-generational family ownership like LDIs currently represents perhaps 3% of American businesses.

If you are thinking, “so what?” think about the contributions made to this community by family-owned companies like LDI or MacAllister Machinery. These are enterprises still run by their founders, or the children and/or grandchildren of their founders. Such businesses are connected to this community in multiple ways that the more impersonal, shareholder-owned companies and their managers are not. They are also far more likely to make business decisions based upon the long-term interests of the enterprise, rather than on the next quarterly or annual report. As a result, they are more likely to be corporate good citizens.

Mitt Romney to the contrary, corporations are not “people, my friend.” But a dwindling number are owned by identifiable people. And that kind of ownership is infinitely preferable to the lottery-ticket shareholder mentality that has largely replaced it.