How ownership structures shape moral narratives and personal identity

A new study argues that the architecture of corporate ownership does far more than allocate capital and control rights: it actively teaches people how to behave, shaping whether virtues like trust, solidarity and prudence can take root inside firms or quietly erode under the pressure of shareholder-value logic. The research, published in the International Review of Economics by Geoffrey Friesen of the University of Nebraska–Lincoln, Robert Couch of Earlham College and Caleb Bernacchio of Loyola University New Orleans, proposes a “virtue-based theory of ownership and governance” that reframes companies as formative moral environments rather than neutral contracting vehicles.

At the heart of the paper is the concept of “moral ecology,” borrowed from moral philosophy and defined as the dynamic interplay of narratives, structures and practices through which practical reasoning is shaped and persons are formed. The authors contend that ownership forms and governance structures encode and authorize a firm’s ends. When those ends remain open to internal discovery and deliberation, the ecology can sustain cooperation and cultivate what the authors call market virtues. When ends are externally fixed in financial terms, a process they label “learned economism” sets in, narrowing the vocabulary of justification until non-financial goods become unintelligible or merely instrumental.

The theoretical scaffolding draws on two strands of research that have developed largely in parallel. The first is performativity research, which shows that economic theories can become self-fulfilling prophecies. Agency theory, the dominant framework in corporate governance since Jensen and Meckling’s landmark 1976 paper, assumes managers are opportunistic and designs governance around monitoring, high-powered incentives and stock-price-based rewards. Citing classic findings such as Tenbrunsel and Messick’s demonstration that weak sanctioning systems can shift decision-making from an ethical frame to a business frame, the authors argue that such arrangements do not merely accommodate self-interest; they teach it. The second strand is the theory of market virtue and team reasoning developed by economists Luigino Bruni and Robert Sugden, which holds that market participants can stably pursue mutual benefit rather than extracting maximum advantage in zero-sum fashion.

What has been missing, the authors argue, is an account of the structural conditions under which such cooperative dispositions can actually be cultivated. Their answer centers on “narrative capital,” a term they extend from Bruni’s work to describe the shared stock of meanings, ideals and justificatory stories that orients organizational action over time. When narratives are embedded in congruent ownership and governance structures, narrative capital accumulates, stabilizing expectations and making cooperation credible. They also introduce the phrase “structure as catechesis” to describe how recurring meetings, reporting cycles, surplus-sharing rules and governance procedures function like liturgical practices, habituating firm actors over time to interpret restraint, patience and reciprocity as normal modes of action.

The empirical core of the paper is a comparative narrative analysis of Vanguard and Cabela’s, supplemented by comparisons involving mutual versus stock insurers and Patagonia. The mutual-insurance cases provide the conceptual foundation. In mutual insurers, policyholders are the owners, fusing beneficiary and owner roles in a way that keeps deliberation about surplus and purpose internal to the community. This structure explains the persistence of participating policies, in which policyholders share in discretionary surplus distributions. Agency theory struggles to account for these products: because the agency-cost savings from surplus-sharing are contingent and hard to quantify, while the reduction in the shareholder residual is immediate and observable, stock insurers tend to retain surplus rather than distribute it. For mutuals, by contrast, surplus-sharing is a constitutive feature of the form itself.

The historical sweep of the argument is striking. From the Hand in Hand Fire and Life Insurance Society in London, founded in 1696, through Benjamin Franklin’s Philadelphia Contributionship of 1752 and the thousands of American farm mutuals organized under the Homestead Act, mutual insurers have embedded narratives of shared risk and prudential stewardship in their organizational forms. Franklin’s Contributionship even required chimney inspections, institutionalizing prudence by linking each policyholder’s preventive conduct to the protection of the entire risk pool. From an equilibrium standpoint, participating policies allow low-risk members to pool undiversifiable shocks through discretionary surplus-sharing without violating incentive compatibility, a mechanism that transforms shared statistical vulnerability into institutionalized solidarity.

Vanguard extends the logic into asset management. John Bogle founded the firm in 1975 on the conviction that investment companies should serve their clients in “the most efficient, honest, and economical way possible.” Crucially, he structured Vanguard so that it was owned by its member funds, which in turn were owned by the investors in those funds, aligning residual beneficiaries with clients. Bogle’s so-called folly, the first index fund, made no claim to beat the market and challenged the fee-generating narrative of managerial skill on which the mutual fund industry rested. The authors argue that such a product was structurally unviable under shareholder ownership: shareholder-owned advisory firms could not credibly launch and sustain a low-fee index fund because their governance form and dominant narratives made it incoherent. At Vanguard, efficiency gains passed to clients through lower fees, reversing what Fred Schwed famously called the “yacht problem” of Wall Street, in which the yachts in the harbor belong to brokers rather than customers. In MacIntyrean terms, Vanguard pursued goods internal to the practice of investing, such as honest representation of the limits of managerial skill and stewardship of investors’ assets, and its ownership structure protected those goods from subordination to external goods like fee income and asset gathering.

Cabela’s tells the reverse story in three acts. Founded in 1961 by brothers Jim and Dick Cabela after a classified ad for hand-tied trout flies went viral in its own modest way, the firm built a distinctive moral ecology in which customers and employees were treated as ends in themselves. Growth was funded through retained earnings, employees held ownership stakes, and downturns were weathered by prioritizing customer relationships and community stability. But the June 2004 initial public offering introduced a new narrative. The authors track the linguistic shift through shareholder letters: in 2004, customers were the firm’s “very reason for their existence”; by 2005, the stated purpose was to “maximize shareholder value,” with employees and customers demoted to subordinate clauses in the firm’s grammar. They interpret this as a hinge moment, echoing Alasdair MacIntyre’s account of the corruption of practice by institutions, where internal goods such as community, trust and loyalty are reinterpreted as tools for external goods.

The third act arrived in November 2015, when Elliott Capital Management, led by Paul Singer, publicly pressed Cabela’s to consider a sale. Activist pressure narrowed the range of reasons that could count as authoritative in strategic deliberation, translating commitments to employees, customers and the Sidney, Nebraska community into constraints on shareholder-value maximization. Elliott exited swiftly after Cabela’s stock surged on merger news with Bass Pro Shops in late 2016, and the subsequent closure of the Sidney headquarters meant the costs of what the authors call narrative and ontological collapse were borne by long-standing stakeholders. Empirical literature reinforces the pattern: research by Lin and colleagues shows public firms often underinvest in social capital when shareholder value dominates, and Guiso and coauthors find that public ownership alters the cost-benefit calculus of integrity and culture.

Patagonia provides the constructive counterexample. In 2022, the Chouinard family transferred all voting stock to the Patagonia Purpose Trust, created to safeguard the company’s mission and values, and all nonvoting stock to the Holdfast Collective, a nonprofit that receives profits not reinvested in the business to address environmental problems. The authors stress that Patagonia does not escape financial discipline; it remains a for-profit benefit corporation that must stay economically viable. Rather, its ownership structure protects a broad, nonfinancial purpose while leaving managers to deliberate about how that purpose should guide particular decisions, institutionalizing stewardship in the way Cabela’s IPO institutionalized economism.

The paper’s implications cut across corporate governance debates, purpose-driven management and the growing literature on organizational narrative, including Robert Shiller’s work on narrative economics. The authors are careful to acknowledge limitations: their analysis rests on a small number of textual excerpts and firms rather than a comprehensive survey, treating each case as what philosopher Michael Pakaluk calls an n=1 narrative experiment, in the methodological spirit of Elinor Ostrom’s comparative study of common-pool resource governance. They also caution that mutual ownership alone is insufficient; as mutuals grow, member participation can thin and managers can drift toward economism. The relevant contrast, they argue, is not between small and large firms but between thick and thin forms of participation. The central contribution remains: narratives embedded in ownership and governance structures stabilize expectations, render cooperation intelligible and make certain forms of agency credible over time. Once shareholder value is codified as the telos, they conclude, it changes the very being of the firm, and the question of who owns a company becomes, in a precise sense, a question about who its people become.