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Steward Ownership Initiative Set To Create Multi-Million Dollar Boost For NZ Charities

In what is believed to be a first for the country, a New Zealand social enterprise is buying out its own shareholders in order to transition to steward ownership - creating a new pathway for other firms to greatly amplify their positive impact, while still rewarding their investors.

Steward ownership is an emerging term internationally that changes the intent of business ownership from a tradable commodity into a responsibility to carry forward an enterprise that exists for a purpose.

Unlike traditional shareholder-owned businesses, steward-owned companies place ownership with a trust whose interests are focused on improving outcomes for communities or the environment. Steward ownership allows the full economic potential of a business to be used to enhance the positive impact of the business. The model will allow shareholders to see a return on their investment while also ensuring the long-term commitment of the company to supporting societal or environmental objectives.

Wellington-based fintech firm Thankyou Payroll, which last year processed over $1.4 billion in wages for 7,000+ businesses and charities, has successfully converted its ownership structure to a new model, under which it will be owned by a charitable foundation.

In a multi-million dollar asset transfer, the company’s shareholders voted to progressively sell their shares to the Thankyou Charitable Trust over the next few years.

The new ownership structure will enable the trust to increase its funding of charitable initiatives from an average of $50,000 to over $1,500,000 annually within seven years.

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David Morrison, CEO of Thankyou Payroll, says the model is designed to provide a legacy-based exit strategy for other founders and investors.

He says there is significant potential for other Kiwi businesses to adopt a similar structure, a move that could see hundreds of millions of dollars returned to New Zealand charities annually.

“One of the greatest challenges for many Kiwi business owners reaching retirement age or seeking to exit is that the sale of their firms to a competitor or third party creates a risk of it being transformed into something they don't recognise or that is inconsistent with their values.

“We know that this outcome may not have sat well with many entrepreneurs who have launched and nurtured these firms from their start-up phase into a successful, purpose driven wealth generating asset.

“Steward ownership offers an alternative, allowing a self-sustaining business to become a legacy that can go on to create an intergenerational revenue stream for a variety of causes - well beyond the life of its founder.

"Imagine if 100 businesses of our size transitioned to steward ownership? That could potentially see hundreds of millions of dollars being invested in communities across New Zealand over the medium to long term.

“The investors and founders who have exited these businesses could then go on to create the next generation of purpose-driven social enterprises.

“With the creation of a revenue stream of this scale, the potential exists for a collective of Kiwi entrepreneurs to elicit positive and systemic change at a community and societal level,” he says.

Morrison says more needs to be done to create the support infrastructure necessary to help other companies transition to this form of business entity.

He says the cost of moving their firm to steward ownership was a ‘six figure’ sum with significant levels of support from legal and specialist consultants.

“With the growing adoption of this model internationally, there is an opportunity for New Zealand to establish more defined pathways for businesses wanting to support charity in this way.

“In Denmark for example, these entities employ up to 5% of all private sector workers and the market cap of all foundation-owned businesses accounts for about 70% of the total capitalisation of the Copenhagen Stock Exchange.[1]

“In pioneering this process within New Zealand’s legal framework, we have developed a considerable number of learnings and we would welcome the exciting opportunity to share these with other firms wanting to embark on this path,” he says.

Lani Evans, board member of Generous Ventures, says their foundation has followed a community-led funding approach, including local charities and groups in decisions around how and where donations are distributed - as well as helping to identify and prioritise need across other recipient organisations in their community.

She says under this model they have been able to support 300 causes throughout the country including mental health, kaupapa Maori organisations, diversity, arts and sporting groups - however they are considering new funding models which would allow them to provide even greater value to those in need.

“Thankyou Payroll's exit to the community represents a huge opportunity for funding things that really matter to New Zealanders. Our focus is on developing a new strategy and exploring new ways of working that can help us generate impact,” she says.

Morrison says the company, which launched in 2009, has worked to embed impact at every level of the organisation from sustainability programmes which provide staff with free public transport through to providing over 750 charities with free payroll services.

“Over the past 14 years, Thankyou Payroll has provided hundreds of thousands of dollars in much needed support to a wide range of organisations around the country.

“This transition to steward ownership enhances impact even further, something we are all very excited to see achieved,” he says.

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