Eric Ries on 'Incorruptible': why corporate governance is the most important decision a founder will make

Eric Ries on why governance is the decision founders keep skipping until it's too late

Eric Ries, founder of the Long-Term Stock Exchange and author of The Lean Startup, has a new book called Incorruptible built around one central claim: if a founder gets the governance of their company wrong, no other decision they make will matter in the long run, because they won't be the one making it.

The book arrives as a corrective to a problem Ries says most advisors actively discourage founders from addressing. When founders raise the idea of mission-protective governance structures early, lawyers and bankers typically tell them it's too soon. Then, by the time it matters, the control has already shifted. Ries has watched this play out repeatedly, including once in a room where a CEO turned to their CFO, GC, and bankers and asked whatever happened to that mission-protective provision thing — only to be told it was now too late.

The quarterly reporting argument

Ries filed a petition to the SEC last year advocating for a switch from quarterly to semi-annual reporting, and the economic case behind it is sharper than the usual long-termism argument. Natural experiments in countries that switched between quarterly and semi-annual reporting, where the timing was staggered randomly across companies, show that quarterly reporting is associated with roughly a 5% loss in total equity value. The mechanism isn't the administrative cost of the filings. When companies report quarterly, they start running the company for the report. The quarterly filing becomes the product, and management optimises for generating the right numbers rather than building anything real.

Ries is careful to say he doesn't think simply eliminating quarterly reporting is sufficient. He wants it replaced with more substantive disclosure that gives long-term investors genuine visibility into what is happening inside the companies they own, rather than the current incentive structure that rewards companies for releasing as little information as possible.

“If you don't get the governance of a company right, no other decision you make will matter in the long run, because you won't be the one making it... We have to create companies that are capable of making and keeping promises, that have structural integrity. So they don't give in to inner temptation, they cannot be bullied from the outside.”

Shareholder primacy versus mission primacy

The book's deeper argument is that shareholder primacy, the idea that a company's sole obligation is to maximise returns to shareholders, is historically recent and empirically harmful. Ries notes it only took hold in the 1980s, and points to Costco, Patagonia, Vanguard, Novo Nordisk, and Spain's Mondragon cooperative as companies that violate almost every current governance best practice yet have produced durable, multi-decade commercial success.

His critique of investor-dominated governance is concrete. Private equity buying a beloved hotel and immediately cutting the complimentary nightly cookie and milk. A Wall Street analyst criticising Costco for investing money "that rightfully belongs to shareholders" into the customer experience. Ries uses Costco co-founder Jim Sinegal's own account, which he verified directly with Sinegal, that a 3-cent price increase on a dollar bottle of ketchup, applied across the whole store, would raise Costco's net income by 50% without meaningfully affecting sales. Sinegal's reasoning for not doing it: it's the business equivalent of taking heroin. You do it once, then again, then again, and eventually you're no longer the low-price leader.

What a public benefit corporation actually does

Ries pushes back on the "double bottom line" or "triple bottom line" framing that tends to leave CEOs paralysed between competing stakeholder demands. A public benefit corporation (PBC) doesn't ask management to balance mission against profit. It gives the board and CEO legal cover to resist hostile investors when the financially tempting move would hollow out the company. If a buyer offers a dollar more per share than the company is worth but the deal would destroy what made it valuable, the PBC structure gives leadership the legal standing to say no.

On Anthropic specifically, Ries says he was consulted when the founders left OpenAI and were designing their governance structure. He's explicit that he takes no credit for Anthropic's success, but notes their Long-Term Benefit Trust, a separate outside entity to which Anthropic's board is accountable, is the kind of structure that data shows makes companies roughly five times more likely to reach year 50, with significantly better long-term value creation metrics. Ries adds that at a Vatican panel on AI governance last year, he looked down the row at representatives from OpenAI, Anthropic, Cohere, Palantir, Google, and Meta and realised not one of them uses standard corporate governance. All of them judged it too dangerous to operate without some form of mission guardian.

Employee ownership and AI

A meta-study of 55,000 companies with varying levels of employee ownership finds that the effect is dose-responsive: 10% employee ownership outperforms none, 50% outperforms 10%, and 100% outperforms 50%, not just on employee welfare measures but on revenue growth and commercial outcomes. Ries thinks AI will make this more rather than less relevant. CEOs using AI as a pretext to cut headcount are, in his view, misreading the opportunity. If they genuinely believe in AI's power, the strategically correct move is to enlist employees in a shared effort to gain competitive advantage, not to treat labor savings as a margin line. An old Toyota Production System principle he cites: it is neither ethical nor effective to ask workers to contribute to their own firing.

Mondragon and alternative structures

Mondragon, the Basque worker cooperative network founded by a Catholic priest after the Spanish Civil War, employs 90,000 people and is one of Spain's largest companies, spanning industrial equipment and grocery retail. Internally it is a network of roughly 80 to 90 independent cooperatives that self-govern through a congress of representatives. Ries uses it as a data point rather than a template: collectively, what he calls "alternative structures" (cooperatives, mutual ownership models, long-term benefit trusts) control roughly 5% of world GDP. His point is that most founders have never been given permission to even consider these options, not that every founder should replicate Mondragon.

The practical framework

Ries distills the approach to two paths. The first is ethos: build the company operationally around something it would rather cease to exist than betray, embedded in management structure, business model, and culture. The second is integrity: create structural mechanisms that make the company capable of keeping promises under pressure, including resisting hostile acquisition and internal short-term temptation. PBC status, a board mission pledge, and a long-term benefit trust are the tools he points to. Incorruptible includes what he describes as a detailed implementation guide, term sheet, and legal documents accessible via QR code.

The book itself went through roughly 600 test readers who generated around 10,000 comments. At least five or six of those readers have since contacted Ries to say they identified a new business opportunity they wouldn't have seen before, specifically categories where all incumbents are extractive and a mission-driven entrant could compete on trustworthiness alone.