Successfully reshaping the ownership relationship by reducing ‘moral debt’ and justly distributing residual claims: The cases from Scott Bader Commonwealth and the John Lewis Partnership

This paper examines the issues relating to the most appropriate form of corporation ownership including organizational and cultural systems that will maximize the firm's value to society whilst maintaining a more sustainable market value. The paper argues that the maximization of firm value to society may be more readily achieved through a closed corporation type formation with better rights protection for all internal stakeholders, such as an employee-owned corporation or a limited liability partnership similar to Scott Bader Commonwealth and John Lewis Partnership, rather than a publicly-owned open corporation with large ‘moral debt’ claims, conflicts of interest, and agency costs. The four main perceived theoretical arguments against a closed corporation are: The horizon problem; the common-property problem; the non-transferability problem; and the control problem. Our analysis demonstrates how the Scott Bader Commonwealth and the John Lewis Partnership with support from the capital markets evolved successful solutions to the above theoretical issues. In other words, closed corporations such as Scott Bader Commonwealth and John Lewis Partnership with their better organizational and cultural systems can be considered to be more just at distributing residual and ‘moral debt’ claims than open corporations and thus are better at maximizing their value to society.