The unusual way Denmark reins in reckless corporate greed

It’s a common refrain: corporate executives in the U.S. are too short-sighted and myopic in their time horizon, controlled by the immediate vagaries of the stock market rather than seeking to create long-term value. But it’s not shocking why the status quo encourages quick profit-making; for one, payoffs from long-term investments aren’t necessarily reflected in quarterly earnings reports. That’s a major barrier to companies spending money on risky but worthwhile bets like research & development and projects like renewable energy upgrades that require patience.

In the robust market economy of Denmark, an intriguing workaround exists that frees up companies to take a more far-sighted view. There, private nonprofit foundations and charities control many of the country’s biggest companies. As reported by the Huffington Post:

Many of the country’s corporate titans are controlled by nonprofit foundations and charities, which either own majority stakes or dominate shareholder voting through more powerful classes of shares. Their backing makes it much easier for management to stave off pressure from other shareholders to pursue quick financial gains — at the expense, perhaps, of employees’ well-being, the environment or even the company’s own long-term competitiveness.

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“Guys like myself are shielded from the sheer short-term focus of the stock market,” Nielsen said. “Yet we have 75 percent of our ownership in free-float, so we’re actually exposed to the stock market.”

America, of course, isn’t Denmark. There are substantial differences between the two countries, which raise questions about the feasibility of making the nonprofit ownership model an option in the U.S. as well. That said, foundation ownership of companies actually used to be a common feature in America until federal tax laws were changed in 1969 to restrict it. Given the challenges we face today in more effectively regulating the corporate sector, it’s an idea worth revisiting.