A Simple Explanation of FairShares

Its like when protestant missionaries set up grameen banking. They float the initial capital which is great but in return you have to listen to money mangement lectures (seems reasonable) and sermons on the bibles interpretation on trustworthiness and giving to caeser what is caesers. Or going to Hare Krishna temple for free food but being made to listen to a religous lecture first. Not all temples do it and the risk of brainwashing is small but hey... its the founders temple and the funders food and you gotta eat or else you won't have enough energy for paid work. There... thats a simple explanation.

Cannot relate to that at all !

When I see conversations like this I become more convinced of the importance of social auditing and FairShares. Having been involved in countless projects and social enterprises I know the value of Founders and the need to preserve their influence and also to reward them fairly for their contribution. But the issue is also about the values and social objectives that drive the organisation and these, quite rightly will change from the original Founders as others contribute.. It therefore makes sense to build in a soft mechanism, that does not become obsessed with measuring impact- but helps all the parties to review and discuss these core drivers on a regular and open basis. Our SEi Social Audit model I think fits the bill and happy to talk to anyone about it.

Rory, I have a few suggestions for the paper. It seems a bit rushed, give yourself 2 pages (back and front) rather than squeezing it on a single page. Diagrams would be helpful (have you used inkscape?). As I see it, you're explaining something along two dimensions, time and organization? It could be that you could use a multi-column layout, narrative, columns, narrative, columns. Each column could be how other organizational approaches would solve the problem/focus. For example, in a proprietary organization, my 1st round of hires would get equity (1-3%) and the second round very little, to reflect the risk that they experience (justification in proprietary organizations is based around compensation "risk"). I'm not sure if this might help.

Yes - this is a first draft. It will evolve in the context of the book chapter (which has diagrams). The risks born by the workforce are a lot greater than 1 - 3% (as we've discussed previously by email).

Cliff, I'm not sure I understand your contribution either. I think there are two important aspects of cooperatives: (a) at some point the founder must be fully divested in the control of the entity, else it is not user-owned, perhaps FairShares is a bit different, but in this case I'd not call it Founder so much as I'd call it a "Leadership" pool, (b) the people making the proprietary investment must, up front, state the final, total compensation that they will be happy to have in return for their work so that other members are able to evaluate if they wish to involve themselves. In some ways (b) and (a) can be related, once the "loan" has been paid, then veto rights are no longer needed, yea?

Good point but really founders will also be laboring as they maintain their foundational product anyway. The point I was making is that the reason the founders have a stake at all is because of their initial founding labor. Although, yes, founders could just be entreprenerial capitalists (I see a lot of those)... Giving them 2 ways to veto. In a normal IPO the investors buy a share of the IP and the company pays wages for the ongoing labor of the founders. Of course in that situation laborers and consumers are not treated as voting stake holders because labors wages and benefits get paid before investors, should the company fail (with the minimum regulated security to ensure that) and consumers are supposedly protected by legal recourse if they are fast enough. A very feeble excuse for disenfranchising them. In Rhenish (German) capitalism the unions get seats on the board.

I called it a minority veto right because a majority is needed to pass proposals. Wheras to pass a veto a majority of a minority is needed. What would you call it? I am attempting a brief label of a new type of voter that is the most unique feature of fairshares. Majority of a minority class veto is a bit long. Minority class veto is shorter. It is definately stronger than preferential nonvoting shares which is another type of share security (they don't vote but are paid before voters). Explaining fairshares really should include "minority class veto". Class implies its a majority of the class so that is a good way to describe it. Worker consumer hybrid co-ops have been around for generations but are not well known. Adding founder and investor classes and letting them veto is what is really new. It encourages the hybridisation of worker consumer ethical investment and IT companies. Although most countries don't accept them as co-ops. The founders get to act like trustees. The investors get to act like actuaries. Worker and consumer co-ops do their things but all working more closely together

Kim - yes, I can see your argument now.