Publication Tomorrow’s Business Forms: Making the right choices of ownership, structure and governance to deliver success for business and society

by Luke Robinson _______1st November 2013

Executive Summary

Business and government challenged to rethink choice of ownership structure and governance

Choice of an appropriate business form can enhance business success, and may well help a business achieve more trust. Yet this combination of legal status, ownership, governance and accountability rarely receives the attention it deserves from boards or owners of companies.

“We challenge owners and board members to reconsider the use that they are making not only of their legal status but of all the options within it” say a group of business leaders in a new report from Tomorrow’s Company.”

The report ‘Tomorrow’s Business Forms – making the right choices of ownership, structure and governance to deliver success for business and society’ shows how some listed and private companies have changed business form, and describes a growing array of choice of business forms. This presents an opportunity for the owners and boards of businesses. Examples of this welcome growth in diversity of business form include social enterprise, employee ownership, public sector mutuals, LLPs, listed company hybrids, innovation in private equity and Community Interest Companies. In its agenda for change the report challenges business owners and boards to ask:

At the launch of the report at Deloitte on the 25 November 2013, Mark Preston, Group CEO, Grosvenor, said:

“The best recent example of a failure to match form to purpose must be the Southern Cross care homes collapse. The vulnerability of its residents and the rather obvious purpose of caring for them ought to demand … a business form and ownership suitable to conservative financing”.

He contrasts this with the success of Circle, a health care partnership now running Hinchingbrooke Hospital within the NHS. “This was the first attempt to privately manage a hospital and their success in both patient care and cost reductions is likely to be connected to the fact that Circle is half owned by clinicians and employees”.

The same awareness of business form is needed by government as policymaker, owner and purchaser. Government has encouraged increased diversity through, for example, its response to the Nuttall Review on employee ownership. It is encouraged to move from such piecemeal encouragement to systematic promotion of diversity. The report suggests government carry out a review of innovation of business form across the world, and its implications for business in the UK.

The report has been prepared by a group of influential business leaders representing a wide cross-section of business forms. It aims to:

This project was initiated by business think-tank Tomorrow’s Company, working with a diverse group of business leaders, under the chairmanship of Mark Preston, Group CEO, Grosvenor.

“In today’s increasingly competitive business climate, there is more pressure than ever for companies to be able to adapt and evolve.  Businesses need to take advantage of the commercial opportunities open to them – and that means making best use of the resources at their disposal, whether they are intellectual or other capital assets, a skilled workforce, or acquired business experience and knowledge.

This is a fantastic initiative in encouraging companies to take an objective look at the way they are set up, and the way they work, and to consider whether there is a better way of doing things.  There is a great deal of evidence that alternative business models, such as mutuals, and the wellbeing of staff, can have a transformative effect on the competitiveness of organisations.”

– Norman Lamb, North Norfolk MP

“The form and structure of a business is increasingly influential in the way the business connects with and understands consumers, markets and longer term trends. No longer need we be confined to the conventional plc structures that have dominated for so long. This report explains the new business forms that are emerging, and why; and how they can help tomorrow’s company face the challenges of a fast-changing world. It makes fascinating reading; and compels action.”

– Dame Fiona Reynolds, Master, Emmanuel College, Cambridge

“The Government is removing obstacles preventing the wider adoption of employee ownership. This commitment can be extended to all business forms to encourage greater diversity.”

– Graeme Nuttall, partner, Field Fisher Waterhouse LLP and author of the Nuttall Review