(Illustration by iStock/Yutthana Gaetgeaw)
When Etsy launched in 2005, its founders set out to build a different kind of online marketplace. They wanted to give artisans a place to sell handmade goods directly to buyers: an alternative to eBay, which Etsy founder Rob Kalin saw as a “faceless corporation” that crowded out small makers. “The industrial revolution and consolidation of corporations are making it hard for independent artisans to distribute their goods,” Kalin said at the time. “We want to change this.” The company paid employees fair wages and a share of the company’s profits, built a community workshop in its Brooklyn headquarters where local crafters could learn and create, and cultivated a seller community that grew to more than 1.4 million active sellers by 2014. In the process, Etsy demonstrated that e-commerce could be done differently.
As the company grew, it became a certified B Corp, a designation recognizing its commitment to balancing profit with social purpose. In 2015, Etsy went public. But going public handed power over the company’s direction to shareholders. When Etsy’s stock dropped sharply in its first year of trading, activist investors started to push the company to grow its profitability and new leadership was brought in, focused on conventional growth metrics. In 2017, Etsy dropped its B Corp certification. The marketplace built to serve independent makers began optimizing for search algorithms, advertising revenue, and seller fees, and allowed the sale of mass-produced goods that undercut the artisans the platform was created to support.
What changed at Etsy was not its core business. What changed was the set of forces shaping what decisions the company could make: who owned it and what those owners expected. After its IPO, the company did not have the room to prioritize its founding mission over short-term financial performance. Etsy is just one example of many, where good intentions are eroded, and where the original intent fades away as the company prioritizes financial metrics above all else. In short, Etsy is an example of a company that stopped being able to make values-led decisions.
Freedom of Choice and Values-Led Decisions
A values-led decision is a strategic business choice primarily guided by values above purely financial considerations. Values can include environmental stewardship, economic inclusion, worker dignity, community responsibility, and religious faith. When the cosmetics chain Lush temporarily closed its UK stores in solidarity with people in Gaza, that was a values-led decision. When Malden Mills continued paying employees after a devastating factory fire, or when Chick-fil-A closes on Sundays, forgoing revenue so workers can rest and worship, those are values-led decisions. But what determines whether a company can make decisions like these?
The answer is a combination of factors—ownership, governance, capital, stakeholder relationships, financial position, market conditions, political environment—that shape what values-led decisions are available to a company at any given moment. The totality of these interconnected factors is what we call freedom of choice. An analysis of more than 600 cases of values-led business decisions across industries, ownership types, and stages of growth found that these factors, taken together, define the range of decisions an individual leader can make. They also point to clear ways both businesses and civil society can expand leaders’ freedom of choice.
Companies with high freedom of choice can take actions that would be difficult or impossible for others. Mars, the privately held food and confectionery company, developed an “Economics of Mutuality” model: a profit-and-loss framework that measures outcomes for farmers, workers, and the environment alongside financial results. Mars can do it because its family ownership, now in its fifth generation, insulates the company from the quarterly earnings pressure that constrains many of its peers. Thomson Reuters, though publicly traded, benefits from the Thomson family’s majority stake through the Woodbridge Company and a special “Founders Share” that protects Reuters’ editorial independence. Operating from this position, Thomson Reuters undertook a third-party human rights assessment and created a Human Rights Crimes Resource Center—showing leadership where most competitors have not taken comparable steps.
High freedom of choice, though, defines what a company can do—not what it will do. Vanguard was set up as a mutual, making it independent from outside investors. It used that independence to build a low-cost, customer-first model that has reshaped the investment industry. But the same company retreated from climate commitments, leaving the Net Zero Asset Managers initiative in 2022 for example.
Companies with lower freedom of choice can still make values-led decisions, but the opportunities are narrower. Dick’s Sporting Goods was publicly traded, in a politically sensitive product category, with a customer base that included gun-rights advocates, yet it stopped selling assault-style rifles after the Parkland shooting, absorbing a $150 million revenue hit. What made it possible was a specific alignment of factors: cohesion between the CEO and his board, and the company’s financial strength at that moment. Costco, also publicly traded, has consistently defended above-market wages and its commitment to diversity, equity, and inclusion (DEI). In both cases, financial performance and stakeholder alignment created enough room to act despite the constraints of public ownership.
One important clarification: Freedom of choice does not always mean freedom to do anything. Some companies increase their future freedom of choice by deliberately limiting their options in the present. Patagonia transferred ownership to the Patagonia Purpose Trust and the Holdfast Collective, legally binding future decision-makers to use the business profits to fight the environmental crisis. Epic Systems refused outside investment for over four decades and placed voting shares in a purpose trust, ensuring the company can never be sold. In both cases, narrowing the range of possible decisions overall widened the range of values-led decisions available.
Taking Action to Expand Freedom of Choice
Freedom of choice is a diagnostic lens: an invitation to look deeper at the factors that constrain or enable values-led decisions. Understanding which factors are in play, and which can be influenced, is what makes freedom of choice useful not just as a description of conditions, but as a guide for action.
While some factors such as macroeconomic conditions or political environment are largely outside of an individual’s business’ ability to influence, most factors can be shaped either immediately, or over the long term.
Factors within a leader’s direct control include management and financial systems, corporate culture, and the composition of the leadership team. For example, are bonuses based only on financial performance, or do they consider other types of employee contributions? These levers tend to be readily visible and actionable.
More impactful, and too often overlooked, are the factors a company controls but only at significant inflection points such as founding or change of control. A company’s corporate form and ownership structure will determine who is in the driver's seat over the course of the company’s life, and what rules constrain them. Bob Moore chose to sell Bob’s Red Mill to its employees to ensure the company continues to prioritize their needs long after he left. When Ginkgo Bioworks went public, it granted employees super-voting shares—a decision when it went public that kept the company’s governance in the hands of its employees.
Also within a company’s control, but harder in practice to shift, is the choice of sector the business operates in. The structural characteristics of a sector shape competitive dynamics, operating requirements, and growth potential. These include barriers to entry, margins, and the maturity or decline of an industry. In addition, many industries face regulatory and reputational scrutiny while essential goods and services like medicines and utilities face expectations of broad access at affordable prices. CivicaRx, a nonprofit pharmaceutical manufacturer, was founded to address a market failure in generic drugs—its nonprofit ownership structure enables it to offer insulin at a fraction of typical market prices, a model well suited for the industry within which it operates.
Beyond factors that can be directly influenced, there are “shared influence” factors: the orientation of investors, boards, customers, employees, and relationships with civil society and government. Leaders cannot dictate these factors alone, but they can shape them—and savvy leaders will see external stakeholders as allies in this work. The Frontier Coalition, launched by Stripe, Alphabet, Shopify, and others, expanded freedom of choice through collective action: By pooling demand for carbon removal technology, they changed the economics of a constraint no single company could have shifted alone.
Of course, the decisions leaders make can also reduce freedom of choice. Any decision to raise external capital, or go public, can provide resources a company needs, but also comes with sustained pressure for financial results, often at the expense of values. At Unilever, CEO Paul Polman spent a decade embedding sustainability into governance—linking executive pay to impact performance, creating sustainability oversight at the board level, and attracting long-horizon investors. But the company’s public ownership left it exposed. In 2017, a hostile takeover attempt revealed how vulnerable Unilever remained to short-term pressure. Polman was later ousted, and much of his agenda was reversed.
By considering a wide range of factors, partnering with stakeholders, and thinking long-term to take advantage of key inflection points, business leaders can expand their company’s freedom of choice and in turn make values-led decisions stick over time.
What This Means for Civil Society
For civil society leaders, funders, and intermediaries, freedom of choice should inform how you engage with business leaders. Instead of treating all companies as similar actors whose primary variable is willingness, this lens can help identify what is possible for a given company right now—and what would need to change to make more ambitious action available. For example, during the anti-apartheid movement, employee and consumer pressure moved Polaroid to withdraw from South Africa in 1977. Companies like General Motors, with far larger operations in the country, had less freedom of choice—and took years longer to act.
Policymakers and advocates can also push to clarify what fiduciary duty entails. The prevailing norm treats shareholder value maximization as a legal obligation—but corporate directors in fact have broad discretion to consider long-term corporate interests, not just short-term shareholder returns. Challenging this misperception through policy, business education, and industry norms would expand freedom of choice for the many leaders who have more room to act than they think.
In addition, it should be a priority to scale up alternative ownership models. When Spirit Airlines collapsed earlier this year, over 125,000 people pledged $88 million in just a few days to buy it as a community-owned cooperative. The public appetite is there. But most business leaders are still unfamiliar with models like worker cooperatives, steward ownership, or employee ownership trusts—let alone how to implement them. Scaling starts with awareness, through business education, practitioner networks, and public storytelling about what these models make possible. But awareness alone isn’t enough without the legal and financial infrastructure to act on it. There are promising examples underway: The bipartisan American Ownership and Resilience Act would create federal loan guarantees to finance employee ownership transitions in the United States; Germany’s coalition government committed to creating a dedicated legal form for steward-owned companies; Colorado recently signed the A-Corp into law as a new corporate form for artist-owned businesses. These kinds of enabling structures make it easier for leaders to choose alternative ownership when the moment is right.
For business leaders, the opportunity is to recognize freedom of choice as something that can be actively shaped, especially at key inflection points. Our research identified 26 specific mechanisms that companies use to operationalize their values and expand their freedom of choice over time. These include legal and governance tools like benefit corporation registration, purpose trusts, and dual-class shares; internal practices like integrated accounting and board alignment; and external strategies like coalition-building and supply chain standards.
The lesson from the more than 600 companies making values-led decisions we identified is that those decisions are neither rare nor marginal. But whether those choices are available—and how wide the range of possible action is—depends on context: a company’s freedom of choice. Understanding that context, and working to shape it, is how values-led decisions move from isolated acts of conviction to a normal part of how a business operates over the long-term.
Read more stories by Julie Menter.