Sustainable Organization Design Principles

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According to a 2010 Organizational Dynamics survey, over 75% of executives worldwide say they believe that sustainability is “important to the financial success of their companies,” but only 30-40% of those executives are taking steps to embed sustainability into their core business practices.


Given consumer, workforce, and investor trends, this gap between rhetoric and action may prove more a strategic failure than an ethical one.  A recent National Marketing Institute survey found that approximately 68 million U.S. consumers state a preference for making purchasing decisions based upon their sense of social and environmental responsibility: where price and quality are equal, 86% of consumers would switch from their current brand to one that is socially responsible.  Meanwhile, more than two-thirds of employees (69%) consider the social and environmental track record of a company in deciding where to work, and socially responsible investing has grown to represent nearly 10% of U.S. assets under management, or roughly $2.3 trillion.

At the root of the surveyed executives’ failure to implement practices that capture these trends may be a commensurate failure in their understanding of sustainable organization design principles that allow firms to match the growing demand for “triple bottom line” businesses.   This paper lays a framework for designing such an organization that will take advantage of strategic sustainability or corporate social responsibility opportunities, while implementing sustainable and socially responsible practices throughout its own infrastructure and supply chain.

I begin with a discussion of the need for integrating vision, mission, and values into a firm’s organizational DNA; I discuss the intersection of values and greenwashing, and analyze the difference between one-off initiatives and strategic integration of values and mission into the business model.  I next discuss the essential relationship between environmental influences and organization strategy and recommend scanning practices.  I then review Griffiths and Petrick’s early work on corporate architectures for sustainability and update aspects of their framework.  Finally, I summarize the intersection of evolving corporate governance legal issues with the organization design principles most aligned with a sustainability-focused business strategy.  I conclude by synthesizing brief recommendations from each section.

Mission, Vision, and Values: The Danger of Rhetoric, The Power of Integration

A recent Accenture study found that a majority of CEOs who embraced the United Nation’s Global Compact principles had adopted policies on and programs for sustainability, but of that same majority, “comparatively few had made the necessary operational changes in their supply chains and distribution systems or established sustainability goals and controls for their lines-of-business.”  This illustrates the organization design axiom that, while it is necessary for companies to develop their vision, mission, and values statements, simply having them isn’t sufficient.

Companies do best by incorporating the full range of stakeholders into the development and implementation of the company’s core values and mission in pursuit of the vision.  “Vanguard companies go beyond the lists of values posted on walls and Web sites by using their codified set of values and principles as a strategic guidance system.’’   While this may be true for all companies, for firms embracing a sustainability focus, the need for values implementation is far more acute, especially when it comes to branding.

Values for Branding: Greenwashing and Consumer Pressure

Recent years have seen popular uproar at companies not abiding by common notions of business responsibility, and the uproar is even more clamorous when corporations engage in “greenwashing,” or openly stating values that they then fail to embody and embrace to the extent the public sees fit.  Nike in the late ‘90s provides a well-known example:

“At the 1997 meeting of Business for Social Responsibility, a Nike representative showed a video of happy workers in a Vietnamese factory. Unfortunately for Nike, two days later – while the conference was still going on – a story appeared on the front page of The New York Times about conditions in Vietnamese Nike plants where workers were being exposed to carcinogens at 177 times safe levels, and were being paid just $10 for a 65-hour work week, far longer than the local law allowed.”

This sort of hypocrisy can be extremely damaging to a company’s brand image, and consequently, to company value.  A survey by Interbrand and Citibank found that 70% of the value of the top 100 companies was attributed to goodwill in 1998, compared with 40% in 1988.  Activist journalist Naomi Klein has noted that, in many ways, branding is the “Achilles heel” of many major corporations: “the more that companies place their value to brand meaning and brand image, the more vulnerable they are to attacks on that image.”

The infamous Nike mistake was repeated in recent years by British Petroleum (BP).  In an attempt to capitalize on growing clean-tech consumer sympathies, beginning in 2000 BP ran a public-facing “Beyond Petroluem” campaign, wherein, through its website, public print media, and commercial airwaves, BP promoted itself with emotive advertisements about green energy.  But as of 2008, several years into the campaign, BP was still investing 93% of its resources in oil and gas despite over $1 billion expended on the branding campaign.  In 2006, a chief architect of the “Beyond Petroleum” ads pronounced his disillusionment: “I guess, looking at it now, ‘Beyond Petroleum’ is just advertising. It’s become mere marketing — perhaps it always was — instead of a genuine attempt to engage the public in the debate or a corporate rallying cry to change the paradigm.”  By the time the 2010 Deepwater Horizon accident decimated the Gulf coastline and killed nearly a dozen workers, it appeared to most that BP was simply repackaging dirty practices with green dressing.

Values for Practices: The Need for Strategic Integration

While the BP and Nike incidents serve as examples of the danger of using values commitments without the practices to back them up, the 2010 Super Bowl’s Coke-Pepsi rivalry and the post-Hurricane Katrina efforts of Wal-Mart serve as a comparative study on the benefits of strategic values integration.

As part of its 2010 Super Bowl ad campaign, Coke pledged $1 to Boys and Girls Clubs for each person who previewed its 2010 Super Bowl ads on its Facebook page.  In response, Pepsi launched its “Refresh” campaign, through which, instead of spending $20 million in Super Bowl ads, it would benevolently donate those funds to people who had “refreshing ideas to change the world.”  Although both campaigns clearly pursued worthy causes, neither possessed the key element of effective sustainability practices: strategic integration.

One-off campaigns are fleeting and unsustainable, and of little brand and competitive value, because they do not contribute to long-term strategy.  While it is difficult to call them a “waste,” they may be analogized to starting a backcountry hike with a foray into the surrounding woods without first checking a map or compass.  One-off initiatives preclude the firm from creating scalable practices aligned with core competencies and competitive advantage.

Compare the Coke and Pepsi efforts with those of Wal-Mart after Hurricane Katrina.  In response to Hurricane Katrina, Wal-Mart utilized its extensive human resources and expertise in logistics to make a massive contribution to Katrina’s victims.  By leveraging a core competency and key resource, it was able to deliver goods to those in urgent need, and make a huge impact.  Then, it used the success experience to springboard its launch into a far more expansive and significant green campaign that “engages customers, suppliers, and staff in a war on waste, obesity, and global warming.”  It has taken steps to clean up its supply chain and started carrying healthier, greener products.  Thereby, Wal-Mart carried out the key element of functionally integrating its mission, values, and vision: it strategically aligned its activities, and integrated its sustainable practices into its core competencies.

By “baking” vision, mission, and values into their “corporate DNA,” companies can not only contribute to the social and environmental bottom lines of the business, but develop strategic advantages that enhance their financial bottom lines as well.

IBM: A Paradigm for Strategic Values Integration

The story of the IBM turnaround is well-known.  In the late 80’s and early 90’s, IBM’s financial fortunes went south and its values along with it.  Louis Gerstner led the turnaround effort by transforming the company from hardware manufacturer to a services business, closing down the PC software lines and acquiring the consulting arm of PwC.

In 2002, Sam Palmisano began focusing on rebuilding IBM’s culture and values.  He began by engaging stakeholders in an online conversation: tens of thousands of IBM-ers participated in brainstorming, debate, and planning on the direction of the company.  The online conversation was so successful that two years later, the company held a “values jam” involving a full 72 hours of dialogue.  The result was the establishment of three stakeholder-definedcore values: “dedication to every client’s success; innovation that matters, for the company and the world; and trust and personal responsibility in all relationships.”

Based on these values, IBM set out to combineits commercial, social, and environmental capabilities.  When a team of IBM-ers doing community service in Bosnia after the Balkan conflict found that relief workers from the International Rescue Committee, CARE, Doctors Without Borders, and other NGOs “couldn’t communicate across one another’s computing systems without open sourcing tools,” it capitalized on the opportunity to develop business solutions for inter-connectivity in the commercial realm.  IBM focused on integrating its community and commercial efforts into a “socio-commercial strategy.”  IBM learned from its stakeholders and embraced responsibility as a source of innovation.

IBM began to meld its innovative technologies like grid computing, social networking, and virtual worlds, and apply them toward creating a ‘‘smarter planet.’’ IBMs clients for a smarter planet evolved from single businesses and government agencies to entire ecosystems of organizations and interests that could be connected to ‘‘work smarter.’’  Martin Jetter, Chairman of IBM Germany, described that the new business value proposition was “based on IBM’s three core value commitments;” it was uniquely IBM.

Its strategy had developed through its first internal values jam, and since then, IBM has hosted online jams with customers, suppliers, myriad stakeholders, and the public at large, and it has focused them on diverse social and environmental problems calling for innovation.  As such, IBM used stakeholder values development to guide its strategic evolution from a “Defender” hardware producer with mechanistic task design and bureaucratic organization design, to a “Prospector” services provider with extensive scanning, elements of virtual and network organization architectures, and an emphasis on flexibility and willingness to learn from the environment and invent around it.

Environmental Scanning and Stakeholder Engagement

Key to IBM’s turnaround strategy was its ability to scan stakeholder environments for not only values development, but forward-thinking technologies and market opportunities.  Rosabeth Kanter, Author of SuperCorp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good, remarks that model enterprises utilize their values statements as a basis for internal and external scanning: they ‘‘create and reinforce principles through active recitation and search for interpretation. The statements are not hung passively on the wall; they are internalized through inquiry.’’  These companies engage all levels of employees in identifying values, and then use engagement of stakeholders to orient and align corporate strategy in accordance with environmental pressures related to their core competencies.

Unilever is perhaps the best historical example of a large company engaging in market scanning to implement strategic values-focused business practices that enhance the financial bottom line.  As a company with historical commitments to society tracing to its founder in the 1800s, Unilever has consistently reinvented its heritage to align company initiatives with present societal needs and enterprise competencies.  When a leader reported that there were “too many unaligned programs and messages,’’ the company decided to create a new brand identity that integrated the modern home-and-personal-care and food-and-beverage businesses underneath a single corporate umbrella.  It developed a strategically oriented mission ‘‘to add vitality to life by meeting everyday needs for nutrition, hygiene, and personal care brands that help people feel good, look good, and get more out of life,” and appointed Tex Gunning, CEO of the Asian foods business, to organize stakeholders worldwide in a collective fact-finding and action-plan-formulation effort.  “Unilever scanned its world and reconsidered its role in society.”

Unilever’s environmental scanning identified sustainability themes material to Unilever core competencies.  For example, because of Unilever’s food and beverage business, the theme of excessive environmentally-induced consumption was found to be essential.  An analysis of New York Times articles found that in 1990, 84% of stories stressed that obesity was caused by individualeating-and-exercise habits, whereas by 2003, 46% cited environmentalcauses such as pressure from advertising toward unhealthy products, and poor availability of healthy options. The threefold increase was attributed to processed-food purveyors, fast-food franchises, and soft-drink makers.  Rather than repackaging the same foods with a healthy branding campaign, Unilever targeted the environmental relationship between consumption and obesity as a values-oriented area of social responsibility that Unilever could convert into a strategic advantage.

Unilever then targeted its lion’s share of future growth in developing and emerging markets as the ideal launching pad for its “Vitality” approach to enhance nutritional health and hygiene.   Its tactics included the sale of iodized salt in India and parts of Africa, addressing a key dietary deficiency common among the poor; and a campaign for hand washing in India, where its Lifebuoy soap aimed to reduce diarrheal disease.  It submitted 25,000 recipes to nutritional analysis, and reformulated them to make them healthier, and entered into a partnership with UNICEF, through which it launched a ‘‘kid’s nutrition’’ campaign that included research into the impact of saturated fats on children’s physical and mental performance, conferences on improving youth eating patterns and preferences, and development of healthy breakfast foods aimed at fortifying the diet of poor children. In first world markets, the company introduced new tea products with antioxidant benefits and dramatically reduced sugar content, and a new smoothie beverage made from concentrated vegetables and fruit juices.

Unilever also increased its focus on environmental sustainability.  Over two-thirds of its raw materials came from agriculture, meaning that, at a four percent growth rate, the company would use 20% more pesticides on farms, 20% more packaging and associated waste and litter, 20% more water needed to grow crops, and 20% more water used by consumers to cook, wash, or clean with company products, over a period of five years.  So it devised new local supply chains to make products more affordable, and developed distribution channels that turned underprivileged women into village-level entrepreneurs.  This, in turn, allowed them to take advantage of the evolving trend toward healthy and sustainable consumption, with organic foods and clothing growing at 20% annually, fair trade at over 70% annually, and ethical consumerism growth through interest in cause-related products and in brands’ social responsibility.

Organizational Architectures for Sustainability

All of these opportunities to capture values-oriented market trends are internalized through organization design, and capturing evolving trends in a values-oriented context can prove especially difficult for established firms.  For example, an IBM executive remarked, ‘‘we had the technology, but not the right skill mix and capacity to relate to so many different groups.’’  Capturing core values in an organization design proposition required a “willingness to invent as things went along;” there were “no models of a multilateral organization to apply to this case, nor a clear roadmap of how the relationships work or should evolve.”  This is to say that bureaucratic organization structure and mechanistic task design, while perhaps fruitful for certain aspects of leader firms’ activities, may inhibit firms’ abilities to discover and then capture values-aligned opportunities.

Andrew Griffiths and Joseph A. Petrick’s early work on organizational design for sustainable enterprises identifies three ways in which traditional large corporation hierarchical architectures impede sustainability competitiveness.  First, established task routines promote the status quo and result in “dynamic conservatism.”  New practices and theories of the firm’s value to society are perceived as threats when firms rely heavily on routines and command-and-control style management systems.  Second, the authors find that command-and-control, hierarchical architectures deny access to stakeholder input.  The traditional organizational design focuses only on a very limited set of stakeholders: the board of directors and stockholders.  Perceivably based on our discussion above, the lack of stakeholder integration inhibits effective values formulation, reduces scanning, and precludes opportunities for innovation.  Finally, Griffiths and Petrick say that no department in the traditional corporate architecture has “specialized environmentally relevant knowledge to recognize, act on, and transfer to other parts of the organization.”  However, our earlier discussion of values integration and scanning techniques teaches us that it is not one department that must possess specialized knowledge, but rather a collaborative group from across the organization that must assimilate and develop action plans based on the knowledge to capitalize on opportunities.

In tune with that observation, the Griffiths and Petrick study shows that power should be devolved to individuals and local communities to create citizen-inspired agenda for local sustainability; and that firms should play an active role in creating communities where production and use align with community needs.  Unilever’s local supply chain and distribution efforts discussed above are ready examples of a leading firm’s implementation of these practices.  The Griffiths and Petrick study also shows that smaller structures were more responsive to concerns.  The above examples of multinational corporations’ successes in sustainability initiatives indicate that while overall small structures may not be necessary, responsiveness indeed is.

The study identifies three alternative organizational architectures which may be able to mitigate size effects, and provide alternative routes to responsiveness.  The first alternative architecture is “network” organizational design.  The second is “virtual” organizational design.  The third is “communities of practice.”

Network organizations are defined by dispersed service nodes, and small, flexible, responsive, and innovative units even when overall organization size grows.  Network organizations are able to respond to changing market conditions with the speedy development of products and services.  However, they are reliant upon free-flowing information, adequate communication fora, and employees that are appropriately skilled and motivated.

Virtual organizations leave a minimal environmental footprint, can give the impressions and benefits of size, and can operate globally with a small number of employees.  Land’s End mail-order catalogue and are ready examples.  The information technology of virtual organizations allows extensive outsourcing, but this creates an imperative for the virtual organizations to remain responsible for the impacts of their suppliers and distributors.

The authors define “communities of practice” as amorphous, nonhierarchal structures that form around areas of interest and expertise.  Status in the communities is based on expertise and contribution to the development of leading ideas, rather than position or authority.  The communities are effective because they are able to take on new members, acquire new information, and remain focused on common interest and the desire for learning.

Virtual organization design principles are best exemplified by the “jams” led by HP.  Network organization design is exemplified by the localized supply chain and distribution initiatives implemented by Unilever: despite size, Unilever was able to develop feedback from stakeholder communities, internalize that feedback into its emerging markets strategy, and then implement pocketed local suppliers and distribution channels that served local needs.  IBM’s organic outreach efforts at CARE and other ngos are also stellar examples of using networks to discover market opportunities.  Finally, Herman Miller’s implementation of cradle-to-cradle design principles through their DfE process  is emblematic of the Communities of Practice organization design: Herman Miller leveraged organic committees of engineers and chemical analysts to determine the ideal chemical makeup of product components, and then leveraged the findings of those communities to develop its overall environmental strategy.

Alternative Legal Architectures for Values-Oriented Businesses

The Fiduciary Problem

Despite growing interest in alternative organization design and integration of stakeholder interest with organization interest, the traditional law of corporate governance poses barriers to doing so.  The notion that the exclusive purpose of a business corporation is to create financial gain for its shareholders was forcefully articulated by the Michigan Supreme Court almost 100 years ago in the landmark case of Dodge v. Ford.  In that case, Henry Ford (“Ford”), founder of Ford Motors, was majority shareholder and Chairman of the corporation’s board of directors.  Ford Motors had been earning substantial profits, but Ford decided not to issue a dividend to shareholders; instead, he proposed to use the money to hire additional employees to fight unemployment, and increase benefits for employees.  His testimony in the case stated that he saw no point in increasing profits if he could not use them to care for his employees.  The Michigan Supreme Court found that the decision breached his fiduciary duty of good faith to the corporation, stating:

“A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the non-distribution of profits among stockholders in order to devote them to other purposes.”

Dodge v. Fordillustrates the legal difficulty sustainability-focused firms may face if they do too much to incorporate stakeholder interests in their business model.  According to most interpretations of the opinion, business models mustfocus on sustainability onlyinsofar as doing so enhances firm profits and shareholder value.  For example, creating benefits for Unilever’s stakeholders in developing and emerging markets may be seen as an illegitimate purpose for Unilever’s resources if creation of those benefits detracts from Unilever shareholder value.

Recent Legislative Responses

To respond to this concern, state legislatures have been passing legislation that allow firms to adopt an alternative legal form called the “Benefit Corporation.”   Unlike traditional corporations, Benefit Corporations must by law create “a material positive impact on society; consider how decisions affect employees, community and the environment; and publicly report their social and environmental performance using established third-party standards.”  A Benefit Corporation must create a “general public benefit” (included in the corporation’s statement of purpose), which benefit must be measured by an independent third-party standard.  A “general public benefit” means a material, positive impact on society and the environment, as measured by a third-party standard, through activities that promote a combination of specific public benefits.  Specific public benefits as set forth in the statute are:

  • Providing individuals or communities with beneficial products or services
  • Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business
  • Preserving the environment
  • Improving human health
  • Promoting the arts, sciences, or advancement of knowledge
  • Increasing the flow of capital to entities with a public benefit purpose

A Benefit Corporation director does not have a separate duty to the beneficiaries of the public benefit purposes of the Benefit Corporation.  However, the director must consider the effects of any action or decision not to act on:

  • The stockholders of the benefit corporation
  • The employees and workforce of the benefit corporation and the subsidiaries and suppliers of the benefit corporation
  • The interests of customers as beneficiaries of the general or specific public benefit purposes of the benefit corporation (as opposed to general beneficiaries of the public benefit purposes, who the director is not obliged to consider)
  • Community and societal considerations, including those of any community in which offices or facilities of the benefit corporation or the subsidiaries or suppliers of the benefit corporation are located, and
  • The local and global environment.”

It is foreseeable that adoption of the Benefit Corporation legal form would promote – or at least allow – adoption of alternative organizational architectures that enhance stakeholder value, and allow more complete integration of stakeholder interests in firm “DNA.”


Leader firms in sustainability must be competent at engaging stakeholders to develop core values; scanning the surrounding environment for values-oriented opportunities; and integrating values-oriented opportunities into strategic decision-making processes.  Firms seeking to adopt best practices of design should consider network and virtual design principles for stakeholder engagement, and communities of practice design principles to integrate knowledge into core practices.  Firms should  also consider alternative legal entities to facilitate stakeholder engagement and blended value creation for both stakeholders and shareholders.



Mirvis, Googins, Kinnicutt; Vision, Mission, Values: Guideposts to Sustainability. Organizational Dynamics (2010) 39, 316.

“Sustainable organization design” is used in certain contexts to refer simply to organization designs which preserve financial sustainability. In this paper, the term is used to refer to organization design principles for what are commonly called “triple bottom line businesses.”

Triple Bottom Line, The Economist, Ideas,, accessed November 19, 2011. “The phrase “the triple bottom line” was first coined in 1994 by John Elkington, the founder of a British consultancy called SustainAbility. His argument was that companies should be pursuing three different (and quite separate) bottom lines. One is the traditional measure of corporate profit—the “bottom line” of the profit and loss account. The second is the bottom line of a company’s “people account”—a measure in some shape or form of how socially responsible an organisation has been throughout its operations. The third is the bottom line of the company’s “planet” account—a measure of how environmentally responsible it has been. The triple bottom line (TBL) thus consists of three Ps: profit, people and planet.”

Mirvis, Googins, Kinnicutt; Vision, Mission, Values: Guideposts to Sustainability. Organizational Dynamics (2010) 39, 316-324.

A vision, in our definition here, is simply a picture of what success for the business will be at a particular time in the future. It is Collins and Porras’ BHAG – the big, hairy, audacious goal that an enterprise sets out to achieve. It is the “what.” A mission, by contrast, defines the purpose for the company – the “why.” And the values statement serves as its “strategic guidance system” – the “how.” Together, they can capture opportunity for innovation and bolster a company’s strategic advantage. But to do so, they must be integrated into the company’s DNA.

Rosabeth Moss Kanter; SuperCorp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good (2009).

Sharon Beder, Nike’s Greenwashing Sweatshop Labor, April 2002, /nikesweatshop.cfm, Accessed November 19, 2001.

Sharon Beder, Environmentalists Help Manage Corporate Reputation: Changing Perceptions not Behaviour, Ecopolitics: Thought and Action, 1(4), Spring 2002, 60-72.

Naomi Klein in CBC Entertainment, “Hot Type: Activist Naomi Klein on her new book No Logo’, (CBC,, 2000

BP: Beyond Petroleum or Broken Promise? The Brand Positioning Workshop,

Sharon Beder, ‘BP: Beyond Petroleum?’ in Battling Big Business: Countering greenwash, infiltration and other forms of corporate bullying, edited by Eveline Lubbers, Green Books, Devon, UK, 2002, pp. 26-32. (“Rsearch and preparation cost $7 million; bp planned to spend $200 million between 2000 and 2002 rebranding its facilities and changing signs and stationery and another $400 million on advertising its gasoline and pushing the new logo.”)

John Kenney, Beyond Propoganda,

Pepsi Refresh Campaign,, Accessed Nov 19, 2011.

Mirvis, Googins, Kinnicutt; Vision, Mission, Values: Guideposts to Sustainability. Organizational Dynamics (2010) 39, 316-324.

See, e.g., Raymond E. Miles and Charles C. Snow, Organizational Strategy, Structure, and Process (New York: McGraw-Hill, 1978)

Rosabeth Moss Kanter; SuperCorp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good (2009).

In the late 1800s, William Hesketh Lever created a company village offering housing to workers at reasonable rents and introduced the then-unheard-of eight hour workday, sickness benefits, holiday pay, and pensions for both male and female employees.

By Tojo Thatchenkery, Advances in Positive Design 3, “Positive Design and Appreciative Construction: From Sustainable Development to Sustainable Value” P48

Paul Shrivastava and Stuart Hart, Creating Sustainable Corporations, Business Strategy and the environment, Vol. 4 154-165 (1995).

Andrew Griffiths and Joseph A. Petrick, Corporate architectures for sustainability, International Journal of Operations & Production Management, Vol. 21 No. 12 (2001) 1573-1585.

B Lab/B Corporation, Maryland First State in Union to Pass Benefit Corporation Legislation,, Accessed Nov. 19, 2011.

Jackson & Campbell, P.C. – The Maryland Benefit Corporation Act, accessed at, Accessed Nov 19, 2011.

Maryland was the first state to pass the Benefit Corporation legislation. It was passed into law in 2010. MD. CODE ANN., CORPS. & ASS’NS § 5-6C-01 (West 2011). The legislation is now also passed in Vermont, Virginia, New Jersey, and California. It will likely also be passed in New York before the end of the year. Notably absent from the movement thus far is Delaware, which is home to over 90% of publicly traded corporations.