I like those statements. While this blog focuses on Company Design the New Rules Project focuses on Community Design with the aim of supporting human scaled politics and economics. There are three guiding principles …

• Decisions are made by those who will feel the impact of those decisions.
• Communities accept responsibility for the welfare of their members and for the next generation.
• Households and communities possess or own sufficient productive capacity to generate real wealth.

Just three? Well done Newrulesians; it’s hard to be that direct. (there are seven co-op principles and six new principles for corporate design (from Corporation 20/20).

The language they feels like common cause with the aims of this blog, here snippets from their web site: 
The old rules undermine local economies, subvert democracy, weaken our sense of community, and ignore the costs of our decisions on the next generation. [...] All human societies are governed by rules, by laws, regulations and ordinances that are a concrete expression of our values. [...]  The New Rules Project identifies rules that honor a sense of place and prize rootedness, continuity and stability as well as innovation and enterprise.

Is there are area of overlap on financing and structuring local business? Maybe.

EDITOR’S NOTE: I originally wrote this for Equal Exchange’s 2008 Annual Report (where it appears on page 12.)

Close to the center of Equal Exchange’s business model there are two gates. One is open, one is closed, and therein lies a great strength and a secret of our success. Most businesses are designed to deliver two financial results: to make profits and to grow in value. They then distribute those gains back to the business’ owners; profits can be returned through dividends and growth in value through increasing share prices, through capital gain.

For over two decades, Equal Exchange has chosen just one means: we welcome profit and decline capital gain. The chart below is the result; it shows our fixed share price and annual dividend (typically five percent), which are reinvested in more shares. It looks pretty good, so let’s dig a little deeper. The Freedom of No Capital Gain. The answer to “How much is a company worth?” can change every few minutes. We’ve all seen the stock market graphs. The answer goes up and down and huge wealth is won or lost on that guesswork and speculation. At Equal Exchange we have closed that gate. Buy a share in our co-op, and its price is fixed. There is no capital gain, no hope of windfall riches, no ticker symbol to obsess over, no precipitous decline. You can’t trade that share in the stock market for a
variable price, you trade it back to Equal Exchange for the price you paid. With no way to get rich, the need to control is also weakened.

In most business models, control allows owners to maximize their return and get the biggest piece of the pie. But if your pie slice is fixed what are you trying to control? That allows us to sell non-voting shares, and keep control with the worker-owners who are both the biggest investors and are closest to the mission. But wait, if all our pie slices are fixed, yet Equal Exchange is growing, who does the rest of the pie belong to? It belongs to the community. That’s what our bylaws say. If the co-op is ever sold, any extra money and capital gain goes to further Fair Trade. That is freedom; freedom from having to, or the temptation to, turn our co-op into cash. It’s freedom to deliver on our mission. The Character of Profits. Profits, that’s different We like profits. We are traders, and sustainable trade involves profit. Profits give us the means to invest in new ideas, to cover occasional failure, and to reward the worker-owners and investors for their labor and money. Profits, unlike share prices, are measured by auditable standards. They reflect what we did. Profits demonstrate to others that Fair Trade can thrive.

So while non-profits avoid both gates, and corporations embrace both, Equal Exchange has chosen a singular path – yes to profit, no to capital gain – and we’ve grown steadily for over 20 years. We hope you’ll continue to travel this path with us. As more people seek economic alternatives, we are expecting company.

A table showing the beauty of one. I guess if we wanted to be complete we could add “speculators” who seek only capital gain and not profit.

As you can likely tell this blog entered limbo just as it began. Someday it may leave this eerie state, or perhaps not.

The beginnings that your see here reflect my concerns on the poverty of company design. Fortunately there is change: Social Enterprise, Social Innovation, Social Entrepreneur are slowly becoming recognized and positive terms. Now, how to accelerate this change?

Till/if/when I get back to writing please enjoy anything you find useful and set aside whatever you don’t.

Cheers,    Alistair Williamson

EDITOR’S NOTE: I originally wrote this for Equal Exchange’s 2006 Annual Report (where it appears on page 12.)

Back in the 70’s almost every bicycle in the U.S. was a form of road bike, often a racing bike with curved down handlebars. For over a century this form of bike had evolved for one primary purpose, to travel down roads, usually fast. And that they did. Similarly today’s corporations are built for one primary purpose – to make shareholders money fast.  And that they do.

Then some wild-eyed folks in California noticed that most of the world didn’t consist of smoothly paved roads or roads at all. They wanted to cycle through forests, up hills, and across streams; to go places that road bikes couldn’t take them. While everyone else thought they knew what a good bike looked like, they set that aside and built a different kind of bike—one with fat tires for better grip, low gears for the long climb, and strong brakes for the hairy descent. The result was a more versatile, rugged, durable bike. You probably own one: it’s called a mountain bike.

Just as most of the land area in the world doesn’t consist of roads, so most of the good in the world isn’t just about money. Conventional corporations are designed to make money, but poorly suited to pursue a larger social mission. This takes an entirely different kind of business. So what are the gears and brakes, the tires and suspension of our new corporation? What makes Equal Exchange more versatile, rugged, and durable? Below are features that constitute the frame of our organization, built with the explicit purpose of pursuing social justice and fairness over profits.

It only took a few years for the advances of the mountain bike to be embraced by the mainstream. Now more than half of all the new bikes sold in the U.S. are mountains bikes. Perhaps in 20 years from now half of the new companies started in the U.S. will be purpose built to pursue the greater good.

sol·i·dar·i·ty  –noun (from dictionary.com)

from Wikipedia: Solidarity is the integration, and degree and type of integration, shown by a society or group with people and their neighbours. It refers to the ties in a society that bind people to one another.

And an Interesting Word Origin and History (again from dictionary.com)

solidarity (1841) came from the French solidarité “mutual responsibility” which came from solidaire (18th century)  “interdependent, complete, entire,” which was from from the Old French (14th century) solide “firm, dense, compact,” which was from Latin solidus “firm, whole, entire” (related to salvus “safe”), which derived from from the ancient Proto-Indo-European language root  sol- (4000 BC?) meaning “whole”.

Cheers, Alistair

One of the flaws in today’s companies is the disconnect between shareholder & management.

Shareholder wishes are caricatured into “more money, faster” or “no risk, please”. With local financing the shareholders have a presence and a voice that makes them real people. Yes, actual people. The business managers responsibilities are then to people not cartoon shareholders. makes it easier to do the right thing.

Here is an article from Yes Magazine on local financing of a bookstore and restaurant. And another on the broad concept of community financing

What’s missing, or perhaps is simply yet to emerge, is a handy support system for such financing.

What might be the desired range? Say $100,000 – $1,000,000.
There could be a simplified version for under $100,000K

the twin pines, a common co-op symbol

There are a number of co-ops in Portland: Food Front, peoples, Bike co-ops and equal exchange. They each abide by seven principles. They were established by the International Cooperative Alliance  as part of the Statement on the Cooperative Identity.

1st Principle: Voluntary and Open Membership

Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

2nd Principle: Democratic Member Control

Cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary cooperatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organized in a democratic manner.

3rd Principle: Member Economic Participation

Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.

4th Principle: Autonomy and Independence

Cooperatives are autonomous, self-help organizations controlled by their members. If they enter to agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.

5th Principle: Education, Training and Information

Cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the public – particularly young people and opinion leaders – about the nature and benefits of co-operation.

6th Principle: Co-operation among Co-operatives

Cooperatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.

7th Principle: Concern for Community

Cooperatives work for the sustainable development of their communities through policies approved by their members.