Restoring Trust Through Trusts: Hobby Lobby CEO is a Steward not an Owner by Jerry Bowyer
Hobby Lobby founder David Green's new book is both memoir and message. The message is that God owns everything, including David Green’s multi-billion dollar business. He applied that principle first in the form of personal generosity, eschewing the CEO lifestyle for one of high and growing philanthropy. But later for him it went deeper and the Greens were moved to give the company itself away, transferring it to a trust. The trust is mission-oriented, and ensures that the family can no longer touch the assets. If they want to make a living from Hobby Lobby, they have to apply for a job and work there. That's why the book is called Giving it All Away, at least that's the first half of the title. The second half is ...And Getting it All Back Again. How do you get it back when you've given it away? You get it back by getting peace of mind. When you acknowledge that Someone else is in charge, and that you are responsible only for faithfulness, not for outcomes, life gets simpler.
This is one of those paradoxes of the Bible: first shall be last; lose your life to gain your life; the greatest of all shall be the servant of all; give and it shall be given to you. Theologian Gordon Clark called paradoxes 'charley horses between the ears'. Paradoxes trigger cramps in our mind in order to reveal the ways in which our thinking was already too cramped. They force us to change the way we naturally think.
Giving it away is a source of joy because human nature is such that when we own things, they also tend to own us. Wealth can get a hold on us. I've seen this among wealthy acquaintances, especially once they've 'cashed out' of the business. Often after that big liquidity event their one and only job is to guard 'the pile'. But that begs the question: if you spend all your time and energy guarding the pile, is the pile your property, or are you just the pile's full-time security guard? Just who is working for whom in that relationship?
David Green told me that the time in his life which was most difficult was not when the federal courts had threatened to shut him down because of his refusal to pay for abortifacient drugs, and he was fighting for liberty of conscience while being excoriated in the press. No, the toughest challenge for him was when he had listened to advisors who told him to set up his business affairs in a way which would cause Hobby Lobby to be passed on to multiple generations of his descendants. That's when he was really worried. What will this money do to them? How can he be assured that future generations will not turn away from the original mission and culture of the company and become a hundred 'hooks' into the company, taking from it rather than giving to it? What if future generations abandon the culture of service to employees and customers?
It's an understandable concern. You don't have to look too hard to find situations where dropping a gigantic pile of money on heirs crushed their spirit, their initiative, and their values.
So the Greens decided to go in a different direction. They turned away from the advice they had gotten from the high prestige accounting/consulting/legal experts and asked Gen 2 (the immediate offspring of David and Barbara) to give back their 15% equity stake in the company and place it in a trust. They did so, without hesitation. The trust owns the company now. The trustee's job is to make sure that Hobby Lobby remains true to the mission and values on which it was founded - in perpetuity. No jobless 4th or 5th Gen heirs siphoning cash out of the company instead of working for a living.
For the Greens, once this option was presented, it was an easy decision. Theologically God owns it all, and the Greens are only stewards of God's company. The most natural thing in the world for them was to choose a legal and capital structure which matched the theological structure to which they were already committed.
I might be a little biased, as I happen to work for a company which has also chosen that structure. But I don’t think it's mostly bias on my part: it's more a matter of exegesis. The New Testament (as well as the Law and the Prophets) have a great deal to say about the role of a steward/trustee. Several of Jesus' parables are about trustee relationships in business. It's a surprisingly (at least to people who think the Bible is otherworldly) central topic in the Bible.
Am I, or is David Green, saying that every Christian business owner should go with the Trust legal model? No. You have to think, pray, love (but maybe not eat) your way through this decision.
I sat down across a Skype line with David Green who is the founder, but no longer the owner, of Hobby Lobby to talk about this and many other things. You can listen to the entire interview here and read a partial transcript below. Both are edited for clarity.
Jerry Bowyer: I was not aware, until I read this book, of your corporate structure -- the ownership is a trust company. That is not a solution a lot of businesses turn to. Can you just talk a little bit about how you got there? What does that mean? I know that our mutual acquaintance Bill High helped you set this up. Bill also helped set up this interview. The book talks about how you came to that conclusion. Can you talk a little bit about that, and then lay out what that means to have your corporation owned by a trust, as opposed to shares owned directly by, say, you or your family members?
David Green: Well, when we were involved and saying, what do I do with this company that's worth billions of dollars? We called in some of the people -- you might even know their names -- that would help us with all of the ownership issues of this company, our estate. And what they were suggesting is that we hand it down to our children, and they would hand it down to their children, and they would hand it down to their children.
Bill was not involved at this time, and it was one of the most difficult times of my life, because I had all of these questions that were "what ifs". What if there's a divorce? What if someone doesn't want to work and they own five percent of this company, they're multibillionaires, or mult-millionaires? And so it was a most difficult time in my life, or one of the most difficult times of my life the decision about what to do with this company. And so finally we found the answer in God's word; it said He owns it and we don't.
And so I had already given my children about fifteen percent of this company, and I asked them if they would sign off on it to where that we all, as a family, in a document said there's no way any of our family, my children, my grandchildren, my great grandchildren can ever touch the assets of this company, because God says He owns it.
So the answer to my problem was real, real simple. God. I don't know own it I'm the stewardship. And so now we have a stewardship trust that we're stewards of this company, but we're not owners. And I, nor any of my family, could ever touch one penny of the assets of this company. We can only -- we can only be stewards of it.
If at any generation; gen one, gen two, gen three, any of them sells the company, ninety percent of it goes into a foundation that would serve the Lord and do ministry things, and ten percent would be for education, for the family, for health, for widows, things of that nature. But no one has the ability for a company that's worth billions of dollars to ever touch the company, because it's all real simple: God says He owns it, so now we're the stewards. We're set up in a trust where one hundred percent of the voting stock is in one percent of it, and the trust is my wife, myself and my three children. But to get on the trust -- we can have as many as seven -- these individuals have to follow this -- they have to say when they accepted Jesus Christ as their personal savior; they have to say these are the basic tenets of a Christian.
So we feel like that through the generations, generation after generation, that we will be stewards of people that love God and want to use this business for His benefit.
Bowyer: So as I understand that story, if I understood it properly, you had family members who owned fifteen percent of a multibillion dollar market cap company and they willingly relinquished that ownership share?
Green: You know, they did, because we do a lot of things wrong here, but we did one thing right in the beginning, and that's -- we said this business belongs to God, and all you get is what you earn.
But then we had people saying you better start giving this away. So we said that on one side, but on another side we were doing legal stuff that said something else. So legally my children could have said no; I own this; it's worth hundreds of millions of dollars, my part. And they could have said no to that. But since they started right when we first started this, that it belongs to God, then we made a mistake by doing the fifteen percent thing. But it wasn't a mistake because my kids knew that --
Bowyer: It gave them an opportunity to be generous voluntarily, right?
Green: Yes. And now here's what we have; it's a whole different model -- I can't find anything wrong with being a steward...with what we've done. I can't find one thing wrong. I can't find one thing right with being an owner.
Everything we have done is one hundred percent. I'm glad we're where we are. I don't worry about if there's a divorce in the family, if there's someone that doesn't work. I see there's companies where there's like 200 hooks into the company. Well, that means there's 200 people saying if I own part of this company, you owe me something, right?
We owe no one anything. Hobby Lobby owes no one anything. It's a whole different mindset. Our family owes the business, which is a ministry; we don't owe the family anything. And so that becomes very, very important. It's a different paradigm.
Bowyer: It is.
Green: Completely different. Ownership versus stewardship is totally different. Those two things are just the opposite.
And you have all these "what if" questions in gen two. Gen two is my kids; gen three, my grandkids. Great grandkids, I got eleven gen fours. I had a thousand different "what if" questions. What if this and what if that?
But I got good kids, and great grandkids. But I have great grandkids that aren't born yet. I don't know about them yet.
Bowyer: Well, we've seen the great fortunes of America destroy the third and fourth generations in many cases. I mean look at fourth generation of, say, the Rockefellers, or whatever. Something about that model of the great man of the first generation builds his dynasty and builds his fortune, and then second generation remembers some of it, third generation forgets most of it, fourth generation almost reverses the world view in many cases. It seems like oftentimes these gigantic bequests are spiritually and culturally toxic. You can poison your descendants in some ways by giving them too much.
Green: I think your chances of hurting your children and your grandchildren and your great grandchildren is much greater of hurting them than helping them. So why do it? It's that simple.
And it's also that simple because God says we don't own it anyway. So why not say you own it God; we're going to be the stewards of it.
Bowyer: Right. Why not have a legal structure that matches the theological structure, right?
Bowyer: But so few people do that. And I find often, with these successful Christian entrepreneurs, you know, early on, they make a fortune following Biblical principles, and then at some point they go to the Big Four accounting firm, or the high status, high prestige accounting and/or consulting firm which doesn't share their world view. But God got you there; God got you to being a billionaire, so why not keep going with Him, rather than at some point saying, okay, well, you know, we can't really use Biblical principles anymore? Now it's serious; now we've got a billion; now we have to use the big names in consulting.
Green: Well, that's where we meet. We used the big names in helping us with all of our assets, and we were being guided the same way that someone that wasn't a Christian. And that was where we lost a lot of sleep for a period of time. That was before Bill. And so we finally decided it's real, real simple: we don't own it; let's just write it off where we can't touch it. So that's what I'm so excited about God's word is -- it just helps guide us. And no place is it going to hurt us.
So it was exciting just to come up with the idea that let's just, all of us -- we got opportunity from my family, and we want to hand down a heritage, but I want to hand down a heritage of loving the Lord and working for Him, and telling everybody we can about this good news of --
Bowyer: Right, idleness can be bad for you.
Well, you look at the Bible -- at some point I'd like to do a deep dive on this. The idea of a steward or a trustee, you know, in 2 Corinthians, first of all, it's required of a steward that he be found faithful. The steward model is throughout Jesus' parables, it's throughout the Prophets, it's throughout the Pauline epistles. There's a lot there, and almost nobody uses a business structure that formalizes the steward or trustee model. So there's a lot there as well.