5 ms·

It sounds like a gGmbH, but the Imprint (https://www.ecosia.org/imprint https://www.ecosia.org/imprint) still says Ecosia GmbH (-> For-Profit).

stakhanov 2y ago
I looked up the bylaws just now (mostly because I'm procrastinating). It looks like they have a gGmbH that owns 99% of the shares (by number of shares), but founders retain 99% of the voting rights. Founders' shares are barred from receiving dividends, and the gGmbH has veto rights in relation to any certain changes that would fundmentally alter this ownership structure.
- nbadg 2y ago
  Something I don't really understand, maybe you have thoughts: is there a benefit to gGmbH over the company being a wholly-owned subsidiary of a Stiftung?
  - stakhanov 2y ago
    They have a brief paragraph here [1] that indicates they considered these and decided against it: "The team considered several alternative ownership solutions to address these questions, including converting the business to a German non-profit and establishing a foundation. Both of these solutions had constraints, though, and neither offered the mixture of entrepreneurial flexibility and structure security they sought." Stiftung (Foundation) generally work well if you have a bunch of money and you basically have a fixed "algorithm" that you want to execute around the money like: "Invest it all into an index fund, and in any year in which the fund returns a profit, pay out the profits to the family members of person X in the same ratios that would apply if those people came into X's inheritance". You then appoint a bunch of lawyers to serve as the board of the foundation. Because the "algorithm" is so precisely defined, the set of circumstances where the lawyers do their job wrong will be well-defined, and will constitute a breach in their fiduciary duty. There's basically no room for making entrepreneurial decisions along the way. It's a bit like taking a pile of money, putting it on a ship, putting the ship on autopilot, and giving up any and all direct control of the ship. Depending on what precisely that "algorithm" actually is, this might get you tax advantages. Or it might create non-financial positive outcomes you might be trying to achieve like making sure that your progeny will continue to enjoy the wealth you created for many generations to come while limiting the probability that any one generation can screw it all up for the later generations. Social entrepreneurship is different from that: A social entrepreneur wants the goodwill and favourable tax treatment that comes from giving up their claim to ownership of the money generated by the business (this is what the gGmbH status does; it's a bit like 501(c)3 in the U.S.) -- But they want to retain control over the business. They want to make entrepreneurial decisions as they go, changing strategies along the way in whatever way they please, without restricting themselves too much to the execution of any predefined programme. [1] https://purpose-economy.org/en/companies/ecosia/ https://purpose-economy.org/en/companies/ecosia/
    - nbadg 2y ago
      For context, I live in Germany and am familiar with the landscape here. Also, I would not equate a 501(c)3 to a gGmbH; gGmbH is more like a B Corp (at least in some of the states that allow it; corporate law differs from state to state in the US). A gemeinnützige Stiftung (Foundation for public purpose) is much closer to a 501c3 than a gGmbH, and a Familienstiftung (Family foundation) is closer to a family trust. (At least for tax purposes, which is the territory I'm most familiar with in this comparison). But that's not what I'm asking about. Unlike in the US, Stiftungs in Germany (both family and public-purpose) can own an unrestricted percentage of shares -- including all of them -- in normal companies (Kapitalgesellschaften). And I'm specifically interested *not* in restructuring a GmbH as a Stiftung, which is what Ecosia decided against, but rather, I'm wondering if there are any resources available discussing pros and cons of forming a Stiftung as a holding entity, fully owning a GmbH subsidiary (such a construct is not legally possible in the US). From my perspective, this holding structure would provide much better legal insulation (in both directions) from the founders, preserve the operational flexibility of the (operational) GmbH, while allowing distributions from the GmbH (which would, by definition of being a 100% stakeholder, flow exclusively into the Stiftung) to be distributed by the (purely administrative) Stiftung, according to the founding documents. But I've never seen such an arrangement discussed in depth, which is why I'm asking about it.
      - stakhanov 2y ago
        Okay, well it sounds like you're deeper in the rabbit hole than I am, then. (I also live in Germany and have a passing interest for the law, though I'm no lawyer). Regarding your last paragraph, where you say that a foundation provides better insulation from founder control, it sounds to me like you answered your own question: Retention of control vs. insulation from control is precisely the distinction here. Foundations are typically for people who don't have the option of retaining control, even if they wanted to, because they are typically close to death and in the process of structuring an inheritance. Handing over control to person X is something they see as a threat, because they assume that X will screw it up, so they'd rather make it so that no one can have control. With social entrepreneurship like Ecosia, founders are typically still young and somewhat idealistic. They want to retain the control, because them being in control is not something they see as a threat. Rather that's what they see as the best possible mechanism for their company/cause retaining its idealistic values. (Also, they are looking for something meaningful to do with their lives). A cynic might notice that you're kind of looking at regular narcissism vs. communal narcissism here. If you wanted to structure your social entrepreneurship type business as a foundation which owns 100% of the shares in "your" for-profit corporation, that doesn't work as a "have your cake and eat it too" solution, because either that means that the trustees of the foundation are actually your boss and you're just a replaceable employee with replaceable employee wages or, if you try to pull any shenanigans to make it so that this is not the case, the trust loses its tax-free / "community interest" status. Trying to game this system is something that rich people are routinely trying to do. I'm not saying that some don't get away with it, but the authorities generally have a lot of tools at their disposal to fight this sort of thing.

stakhanov 2y ago

I looked up the bylaws just now (mostly because I'm procrastinating). It looks like they have a gGmbH that owns 99% of the shares (by number of shares), but founders retain 99% of the voting rights. Founders' shares are barred from receiving dividends, and the gGmbH has veto rights in relation to any certain changes that would fundmentally alter this ownership structure.

nbadg 2y ago
Something I don't really understand, maybe you have thoughts: is there a benefit to gGmbH over the company being a wholly-owned subsidiary of a Stiftung?
- stakhanov 2y ago
  They have a brief paragraph here [1] that indicates they considered these and decided against it: "The team considered several alternative ownership solutions to address these questions, including converting the business to a German non-profit and establishing a foundation. Both of these solutions had constraints, though, and neither offered the mixture of entrepreneurial flexibility and structure security they sought." Stiftung (Foundation) generally work well if you have a bunch of money and you basically have a fixed "algorithm" that you want to execute around the money like: "Invest it all into an index fund, and in any year in which the fund returns a profit, pay out the profits to the family members of person X in the same ratios that would apply if those people came into X's inheritance". You then appoint a bunch of lawyers to serve as the board of the foundation. Because the "algorithm" is so precisely defined, the set of circumstances where the lawyers do their job wrong will be well-defined, and will constitute a breach in their fiduciary duty. There's basically no room for making entrepreneurial decisions along the way. It's a bit like taking a pile of money, putting it on a ship, putting the ship on autopilot, and giving up any and all direct control of the ship. Depending on what precisely that "algorithm" actually is, this might get you tax advantages. Or it might create non-financial positive outcomes you might be trying to achieve like making sure that your progeny will continue to enjoy the wealth you created for many generations to come while limiting the probability that any one generation can screw it all up for the later generations. Social entrepreneurship is different from that: A social entrepreneur wants the goodwill and favourable tax treatment that comes from giving up their claim to ownership of the money generated by the business (this is what the gGmbH status does; it's a bit like 501(c)3 in the U.S.) -- But they want to retain control over the business. They want to make entrepreneurial decisions as they go, changing strategies along the way in whatever way they please, without restricting themselves too much to the execution of any predefined programme. [1] https://purpose-economy.org/en/companies/ecosia/ https://purpose-economy.org/en/companies/ecosia/
  - nbadg 2y ago
    For context, I live in Germany and am familiar with the landscape here. Also, I would not equate a 501(c)3 to a gGmbH; gGmbH is more like a B Corp (at least in some of the states that allow it; corporate law differs from state to state in the US). A gemeinnützige Stiftung (Foundation for public purpose) is much closer to a 501c3 than a gGmbH, and a Familienstiftung (Family foundation) is closer to a family trust. (At least for tax purposes, which is the territory I'm most familiar with in this comparison). But that's not what I'm asking about. Unlike in the US, Stiftungs in Germany (both family and public-purpose) can own an unrestricted percentage of shares -- including all of them -- in normal companies (Kapitalgesellschaften). And I'm specifically interested *not* in restructuring a GmbH as a Stiftung, which is what Ecosia decided against, but rather, I'm wondering if there are any resources available discussing pros and cons of forming a Stiftung as a holding entity, fully owning a GmbH subsidiary (such a construct is not legally possible in the US). From my perspective, this holding structure would provide much better legal insulation (in both directions) from the founders, preserve the operational flexibility of the (operational) GmbH, while allowing distributions from the GmbH (which would, by definition of being a 100% stakeholder, flow exclusively into the Stiftung) to be distributed by the (purely administrative) Stiftung, according to the founding documents. But I've never seen such an arrangement discussed in depth, which is why I'm asking about it.
    - stakhanov 2y ago
      Okay, well it sounds like you're deeper in the rabbit hole than I am, then. (I also live in Germany and have a passing interest for the law, though I'm no lawyer). Regarding your last paragraph, where you say that a foundation provides better insulation from founder control, it sounds to me like you answered your own question: Retention of control vs. insulation from control is precisely the distinction here. Foundations are typically for people who don't have the option of retaining control, even if they wanted to, because they are typically close to death and in the process of structuring an inheritance. Handing over control to person X is something they see as a threat, because they assume that X will screw it up, so they'd rather make it so that no one can have control. With social entrepreneurship like Ecosia, founders are typically still young and somewhat idealistic. They want to retain the control, because them being in control is not something they see as a threat. Rather that's what they see as the best possible mechanism for their company/cause retaining its idealistic values. (Also, they are looking for something meaningful to do with their lives). A cynic might notice that you're kind of looking at regular narcissism vs. communal narcissism here. If you wanted to structure your social entrepreneurship type business as a foundation which owns 100% of the shares in "your" for-profit corporation, that doesn't work as a "have your cake and eat it too" solution, because either that means that the trustees of the foundation are actually your boss and you're just a replaceable employee with replaceable employee wages or, if you try to pull any shenanigans to make it so that this is not the case, the trust loses its tax-free / "community interest" status. Trying to game this system is something that rich people are routinely trying to do. I'm not saying that some don't get away with it, but the authorities generally have a lot of tools at their disposal to fight this sort of thing.