Roshem: Reaching Beyond Shareholder Primacy

At Roshem, our team dedicates many of our workdays to working directly with startups and enterprising nonprofits to support them in measuring and managing their social and environmental impact. Whether that work involves developing the businesses that Roshem Ventures has invested in, or advising our clients, we handle due diligence, venture scaling, acceleration, restructuring, matters of international corporate law, and communications strategy. We support the practical application of the mission, vision and leadership plans, developed by mission-driven businesses, and the realization of long-term goals.

Personally, I strongly believe that startups that provide products or services which create measurable, positive, social and financial impact beyond financial return have a competitive edge in today’s millennial-driven economy.

However, challenges that can occur for impact-focused ventures seeking to grow and scale internationally can be primarily due to a lack of knowledge about the legal structures, such as the Low-Profit Limited Liability Company (L3C) and the Public Benefit Corporation (PBC) in the United States, and the Community Interest Company (CIC) in the United Kingdom that can support a social venture in clearly defining its purpose and protecting its priorities. Benefit-focused legal structures ensure that a venture’s current or future shareholders are aware that their mission-driven approach (people, purpose, planet and profit) is an element of their venture that cannot be subjugated to the financial interests of their shareholders. 

I’d like to see more countries throughout the world draw from the leadership of the USA, UK and Italy, with its Società Benefit, as the first benefit-focused legal structure for EU-based companies. “The Società Benefit is a new legal tool to create a solid foundation for long term mission alignment and value creation. It protects mission through capital raises and leadership changes, creates more flexibility when evaluating potential sale and liquidity options, and prepares businesses to lead a mission-driven life post-IPO.” (See Reference 4) 

On a global level, the day-to-day priorities of the Roshem team involve supporting the growth and development of startups and ventures seeking to improve their positive impact. If such startups and ventures started out with a legal structure that protects their mission to prioritize positive impact from the very beginning, future communication challenges with new venture partners and investors could be prevented. A tremendous roadblock for the future growth of impact-focused ventures is the lack of local company structures that move away from the long-accepted notion of “shareholder primacy”. This is because new investors might see their benefit prioritization as posing risk to their capital and potential financial returns – which is not conducive to developing the potential within a mission-driven venture. More education and investor engagement needs to happen so that venture partners and social enterprises can drive meaningful dialogue and collaboration.

The September 2019 issue of “The Lane Report” by the Law Offices of Marc J. Lane, a pioneering Attorney who launched the concept of “Advocacy Investing” and who is an active supporter of social enterprise development across the world, posed the question, “Is Shareholder Primacy Dead?”. The newsletter introduced how economist Milton Freidman famously argued in favor of shareholder primacy through a 1970 essay, in which he wrote, “In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires…the key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation…and his primary responsibility is to them.” Ideas such as these are in direct opposition to the mission and purpose of social enterprises, and therefore it is in fact social entrepreneurs themselves who must do their own due diligence to ensure that an investor is right for their venture. This adds an additional layer of responsibility to the development work of social venture leaders. As a result, they must not only prepare their project proposals, pitch decks, pitches, and due diligence documents for potential investors, but they also need to invest additional time and effort into vetting the investors who are interested in their business. 

Unfortunately, what can often happen is that promising impact-focused ventures can be excluded from opportunities due to having rejected an investor who does not understand why “shareholder primacy” simply doesn’t apply to their potential deal. 

According to Marc J. Lane, “The consequences (of shareholder primacy) have been a fixation on short-term financial performance, an outsized focus on share price, and an unconscionably rapid increase in executives’ pay coupled with a drag on their capacity to build businesses for the long term, all to the detriment of a company’s diverse stakeholders….Progressive executives have long known that successfully growing corporations requires taking the concerns of all of their stakeholders into account”.

 At Roshem, our process of evaluating startups as clients or investees includes assessing a venture’s impact on all of its stakeholders. Our team provides consulting services related to impact management, including those that support the process of establishing and operating Stakeholder Boards. All together, we prioritize impact-focused and mission-driven venture. We are primarily dedicated to our own impact investing initiatives and managing the business development and marketing of our investees in-house. By ensuring our own priorities are in order, we’ve been able to send a stronger and more constructive message to our potential clients and new partners through the Roshem Network, an online community that connects our investees, clients, stakeholders, investors, members with one another. 

According to Impact Investor Dmitry Fotiyev, Co-Founder and Managing Partner of Brightmore Capital, an investment management and advisory firm working to empower a new generation of West African entrepreneurs, “we need to continue working to shatter the myth that achieving impact necessitates compromising on financial returns”. The “Making an Impact” article published by Dolfin, a brokerage and asset management firm based in London, UK, which manages $3.2bn USD in assets, on 26 June 2019 shares that, “One misperception is that impact investing generally underperforms non-impact. That is changing as the market matures and many impact investments have gained a track record showing outperformance of non-impact funds over five years or more. According to GIIN statistics, 91 per cent of respondents said their impact investments have met or exceeded their expectations for financial performance; and 97 per cent said they had met or exceeded expectations on impact”. (See Reference 5)

Prioritizing social and environmental impact above financial return may be a challenge at first, especially in relation to communicating your business model.

I believe this is a challenge that, if overcome, can catalyze long-term financial, social and environmental benefits and sustainable, regenerative growth.


1. The Accessible, Accountable Executive: Evolving Expectations for the C-Suite – By Marcia Newbert, VP, Edelman Digital & Dan Webber, GM, Edelman D.C. – Edelman Digital Trends Report 2019

2. The New Face of Wealth and Legacy: How Women are Redefining Wealth, Giving and Legacy Planning – By The Economist Intelligence Unit – 2018

3. Why Social Impact is a C-Suite Issue – By Paul Polizotto – 12 July 2019

4. Società Benefit – English Information

5. Making an Impact – Impact investing is set for rapid expansion, writes Relationship Manager Anny Giavelli – 26 June 2019