Legally Teal – Part 1

By Graham Boyd for Enlivening Edge Magazine

Enslaving people—owning a human being—is now illegal almost everywhere. Your freedom is good for you in many ways, including better earning power.

The next step is ending ownership of entities with the legal status of persons—namely, companies. The company that owns itself is free to grow in its own unique way to fulfill its own unique potential. It is likely to be more profitable over the long term, with a lower risk of failure.

Such a Legally-Teal company requires three freedoms for itself and its people:

Freedom from ownership

Freedom for self-governance

Freedom for self-development

I have started up and/or led five companies over the past decade, since leaving Procter and Gamble. Each was deeply anchored in purpose, each striving to grow towards Teal. And in each case we realised that the privileged power of financial investors was the Achilles Heel which could cripple the company. In each company we took a prototype legal structure one step forwards. Below I describe where we are in the latest company, EvoluteSix (formerly Dojo4Life.)

Freedom from Ownership

A free person has the right and the power to decide on their own evolutionary purpose. One characteristic of later and more complex   developmental stages is both exercising this right, and having the developmental capability to do it well.

Organisations which have matured to a Teal stage of development have the capacity to achieve their evolutionary purpose.

A Legally Teal company also has the legal ability to follow its evolutionary purpose—even if that is against the narrow interests of a stakeholder group. So it must be free from being owned—no privileged category of shareholders.

For two companies that I have run (EvoluteSix and LTSGlobal) we developed legal structures that protect this freedom. You can download the EvoluteSix (formerly Dojo4Life) articles from our website.

In a typical limited company, you buy shares (= buy votes). The shareholders (investors of financial capital) own the company’s value, and have complete control over the future of the company (via votes in a General Meeting.) The myth is, giving complete voting control to the investors of financial capital is the best way to control risks and profit. Isn’t this the same as the slavery myth?

A Legally Teal company recognises multiple capitals, and works to grow them in an equitable balance. Financial, Human, Environmental, etc.

The main Teal pillars supporting recognition and growth of multiple capitals in our legal structure (Articles of Incorporation) are:

  1. Purpose
  2. Citizenship
  3. Fair Share

Purpose

A clear statement of purpose (which can evolve) binds the directors to serve that purpose instead of the default purpose of maximising total shareholder value. Our purpose in EvoluteSix is “Enable businesses and their people to flourish by getting the benefits of developmental coaching, organisation design and practice to all.” That legally binds the directors to maximise this purpose—which can of course include very healthy financial profits.

Citizenship

Every stakeholder category in a free company represents a facet of the call and purpose. So every stakeholder must have both a voice and a right to vote at a general meeting, just as the free citizens have in a democracy. Each stakeholder is speaking as a parent, or steward, giving voice to how the company might need to evolve to continue to flourish—not speaking as an owner. But of course benefitting from profit-sharing, reward for risk, and contribution.

In EvoluteSix, we have four stakeholder categories (Steward, Labour, User, Investor). The votes in each category are added up, and then weighted to achieve an equitable power. (You might, in your company, add categories for the community, environment, suppliers, etc. A UK company, Riversimple, has done this. The legal structure was created by Patrick Andrews.)

This right to vote merely broadens the existing right of ordinary shareholders to all stakeholders. Just as in a typical company of today, day-to-day executive decisions continue to be done by the staff.

The biggest difference from ordinary “shares” is that these rights are qualified for, not bought. We define voting rights (i.e., citizenship) criteria for each category. Investors qualify mainly by putting money in. Staff qualify by putting in intellectual capital, time (a percentage of their lifespan), and their social capital. Customers qualify by using our products, perhaps with intellectual capital, perhaps with social capital.

Ideally shares that are qualified for by non-financial contributions ought to have zero financial face value. In EvoluteSix, the non-financial shares have a token value of one pence. Individuals can have shares in multiple categories (as founder I have shares in all four stakeholder categories) but their vote only counts in the highest category. I can only vote as a Steward.

Only investor shares can be sold to others; labour, user, and steward shares are annulled if the qualifying criteria are no longer fulfilled. If you stop working for us, you also forfeit your labour shares.

In EvoluteSix, we have an evolution of the voting weight. Initially the Steward weight is very high, until the stewards judge the company has matured to a stage where the call and purpose of the company are clearly represented by all stakeholders.

Fair Share of value-creation

Each stakeholder gets a fair share of the value created through their engagement in the company.

Technically, this means we separate past and future. For example, the right to vote about the future of the company is separated from the right to have a fair share in the value created from your past contribution. Normal shares hardwire voting rights (future) and a share of past value-creation together.

In EvoluteSix, capital gain is defined each year using a valuation formula. Half of this capital gain is allocated to the existing investor shares. The other half is allocated to the holders of labour and user shares. This converts to financial value their investment of intellectual, social, time, and other capitals. But we only convert after we know what the financial gain is, not before. Normal companies do this at the start, leading to issues.

Freedom for Self-Governance

There are many ways of doing this, including Sociocracy, S3, Holacracy etc. This is well-described elsewhere.

In Part 2 of Legally Teal we will cover the final freedom, Freedom for Self-Development.

Photo©John Cassidy The Headshot Guy® www.theheadshotguy.co.uk 07768 401009
Photo©John Cassidy The Headshot Guy®
www.theheadshotguy.co.uk
07768 401009

Graham Boyd is a CEO, leading business and product innovation. To do this he has been transforming organisations towards Teal for over 2 decades, in Procter and Gamble, and more recently as turn-around CEO and entrepreneur.

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