adopt a cooperative operating agreement

[chadwhitacre]

It's time. Gittip right now is an LLC that is wholly owned by me. Gittip is de facto owned by the subset of our users that think of themselves as owning Gittip. We need to make this real de jure. I think we should be able to do this by writing bylaws an operating agreement for the current LLC.

[chadwhitacre]

Heard back from Praveen:

We might be able to assist you. We are a free transactional legal clinic staffed by upper-level law students. As such, we take on new clients at the beginning of each semester.

We're scheduling a (closed) call for early January.

[chadwhitacre]

Cartoon about governance:

I finished watching this on the bus this morning. Lots to think about! Is governance life, or does governance enable life? Hmm .... Lots of good practical advice, as well, about conflicting goals, the limits of consensus by unanimity, and the possibility of loose organizational structures, e.g.

I'm following it up with The Mondragon Experiment. Mondragon is often cited as an example of cooperative success, and I've never engaged with them very deeply. Seems appropriate to do so at this time.

[chadwhitacre]

For reference, here's what @Changaco came up with for Liberapay's Bylaws and Rules of procedure.

[JanelleOrsi]

Here's a sequel to that Governance is Life video. Chad, this is similar to what I tried to send via dropbox.

[Changaco]

For reference, here's what @Changaco came up with for Liberapay's Bylaws

A quick note: they're based on French law, and they're for a non-profit organization, not for a cooperative or an LLC.

[chadwhitacre]

Thanks, @Changaco. Noted. :-)

And thanks for the video, @JanelleOrsi. Even more food for thought. The organization you mention in connection with intrinsic motivation and caps on extraction sounds like a kindred spirit to Gratipay! :-) In fact, the "take-what-you-want" compensation that we're trying so hard to get back to was indeed designed to "rejuvenate" intrinsic motivation, and to use the social pressure of fairness within a strongly cohesive group precisely as a cap on extraction.

One thing I'm chewing on is the way in which formal provisions that work well in a situation where everyone is a full-time employee (or a board member roughly equivalent to the others) seem not to fit the FOSS-ish situation we've got here, where not only compensation (output) but also effort (input) is voluntary, resulting in a fat head and a long tail of inputs. How do we prescriptively match outputs to inputs when inputs are voluntary? What does it mean to say "everyone gets equal pay" when the range of effort varies so widely? Instead of a definitive formal approach to legally enforce the outcomes we want, I think we end up needing to rely on designing systems and "cultural technologies" to strongly encourage the behavior we're looking for. This goes for other aspects as well, such as "restorative" efforts.

[chadwhitacre]

As mentioned at https://github.com/gratipay/inside.gratipay.com/issues/242#issuecomment-166604631, I'm now wondering whether full-fledged legal ownership is in fact the best way to encode Gratipay's openness. Legal ownership is rigid and inflexible. Don't we want to maintain our FOSS-style fluidity?

[chadwhitacre]

FOSS projects have "core committers" as well as non-profits with boards, with a good deal and possibly the bulk of the activity happening outside the more formal structure.

[chadwhitacre]

How about this for an outline:

1. A minimalist six-member board formally owns Gratipay. The members of the board are trustees of Gratipay on behalf of the Gratipay community. The board's responsibilities include:
   • Ensuring the continuity of Gratipay as a legal entity.
   • Ensuring the continued forkability of Gratipay.
   • Overseeing the selection of the CEO.
2. One-third of the board is replaced every other year, as follows:
   • The ~users of Gratipay nominate one replacement from among themselves by election.
   • The four continuing board members nominate one replacement.
3. Gratipay has a CEO that acts as benevolent dictator—but not for life. The CEO rotates every two years (out of phase with board selections), and is therefore a "benevolent dictator for now" (BDFN).
4. The CEO is selected at random from among three candidates:
   • The board nominates one candidate.
   • The current CEO may run again, or may nominate one candidate.
   • The ~users of Gratipay nominate one candidate from among themselves by election, or two if the CEO was fired or resigned or didn't nominate a candidate.
5. The board grants the CEO broad control to run the company. Accountability comes from the Gratipay community as a whole (which, of course, includes the board) via our public collaboration channels. Forking is the answer for irreconcilable disagreements.

[chadwhitacre]

And sorry @dmk246 for the accidental assignment! :O

[chadwhitacre]

Okay! Just wrapped a call with Jim Johnson from KDC. Here are the call notes, which include snippets from this ticket along with bullet points on organizational forms to consider. Perhaps the most fun off-the-wall idea: we could become a 501(d) Apostolic Association! :dancer: In general, Jim said that we're "already very advanced" in terms of our analysis of the playing field and our position. We talked about some of the challenges of multi-stakeholder cooperatives (namely, balancing competing interests), along with ways to enfranchise stakeholders without necessarily giving them a board seat. For example, we could combine a 501(c)3 that represents community interests, with a separate cooperative owned by the staff. Some worker co-ops also allow for no-owner workers to handle people who work less than full time. If it comes to it, Jim mentioned the possibility of approaching a state corporation office, floating whatever we come up with, and seeking a "no action letter," meaning they wouldn't expect to take any action against us for doing what we proposed.

In terms of services available, KDC can help groups get "lawyer-ready" and "accountant-ready." They are available to help us workshop our bylaws/operating agreement and also to look over our finances. They work hourly at $75/hr. Jim is up for using Hangouts for future work together where it makes sense.

[chadwhitacre]

Over on https://github.com/gratipay/inside.gratipay.com/issues/432 we're having a conversation about decoupling payments and payroll on Gratipay, which has the implication that we would probably loosen up our requirements on who can be on Gratipay. That has implications for this ticket, because one goal here is to ensure the coherence of Gratipay's brand identity over time. Per Ostrom's Principles, proper commons design begins with clear boundaries. If under #432 we introduce tiers of ~users on Gratipay, how would that affect the design of our structure here? I want to prevent—well, discourage, at least—identity drift. Perhaps that becomes an explicit responsibility of the board? Perhaps the ~users entitled to vote are those participating (owning? giving to? taking from?) "Gratiplatinum" organizations?

[chadwhitacre]

Gratipay, LLC does not have a written operating agreement—and is not required to by PA law, afaict. Here's the law we're organized under, and here's what it has to say about written operating agreements:

The operating agreement of a limited liability company need not be in writing except where this chapter refers to a written provision of the operating agreement.

[chadwhitacre]

So it's fine that we haven't had a written operating agreement. This ticket is about adopting a written operating agreement.

[chadwhitacre]

Are we proceeding with the LLC we've already got? Or are we going to move to Estonia (#438) in the process?

[chadwhitacre]

Working with the existing LLC would be more convenient in the short run, because we already have it and I'm more familiar with PA LLCs. However, an Estonian OÜ would seem on the face of it to be a better long-term fit for the international character of Gratipay.

[chadwhitacre]

Karl Fogel's chapter on "Social and Political Infrastructure" has much to contribute to this ticket.

[chadwhitacre]

Here's another helpful post on forkability. I think forkability is essential to the structure we want to put in place.

[webmaven]

@whit537:

How about this for an outline:

1. A minimalist six-member board formally owns Gratipay.

Hmm. What is your current thinking on Gratipay becoming a worker-owned coop, and making @rohitpaulk a worker/owner with one share? Has that gone by the wayside?

Also:

• The ~users of Gratipay nominate one candidate from among themselves by election, or two if the CEO was fired or resigned or didn't nominate a candidate.

Who has the power to fire the CEO?

Karl Fogel's chapter on "Social and Political Infrastructure" has much to contribute to this ticket.

Absolutely, but you might prefer the latest version: http://producingoss.com/en/social-infrastructure.html

[chadwhitacre]

Who has the power to fire the CEO?

When I wrote that, I was thinking the board did, but now I'm thinking the answer is to fork rather than fire.

[chadwhitacre]

Hmm. What is your current thinking on Gratipay becoming a worker-owned coop, and making @rohitpaulk a worker/owner with one share? Has that gone by the wayside?

Yes. As has surfaced over at https://github.com/gratipay/inside.gratipay.com/issues/242#issuecomment-171401916, the analysis above at https://github.com/gratipay/inside.gratipay.com/issues/72#issuecomment-166605327, that formal legal ownership is not flexible enough for our FOSS-style fluidity, seems borne out by Loomio's example, where some members are not staff, and some staff are not members. Better to keep the legal structure as slim as possible to avoid such absurdities. As I suggest at https://github.com/gratipay/inside.gratipay.com/issues/242#issuecomment-166650524, "the real sharing of control in Gratipay happens daily here on GitHub, not in an annual meeting."

[chadwhitacre]

Note that this doesn't mean that we're "structureless" (https://github.com/gratipay/inside.gratipay.com/issues/72#issuecomment-159794205), but rather that our structure is implemented at a higher level of abstraction than the legal system.

[chadwhitacre]

P.S. I've reviewed:

https://en.wikipedia.org/wiki/Chief_executive_officer https://en.wikipedia.org/wiki/CEO_succession

[techtonik]

It is all an awesome reading. I wish I had more time to read it. Would appreciate some writeup. =)

[chadwhitacre]

Hot on the heels of Holacracy (#404), here's a doc out of Loomio/Enspiral (#420/#421) about "Agreement-Based Organization" (discovered under https://github.com/gratipay/inside.gratipay.com/issues/420#issuecomment-195854347), which also references Sociocracy 3.0. More thinking to digest towards our own operating agreement.

[chadwhitacre]

I'd also like to have PEP 1 on the table.

[chadwhitacre]

Hmm. What is your current thinking on Gratipay becoming a worker-owned coop, and making @rohitpaulk a worker/owner with one share?

My current line of thought is that Gratipay might work best as a consumer cooperative:

A consumers' cooperative is a business owned by its customers. Employees can also generally become members. Members vote on major decisions and elect the board of directors from among their own number.

"Consumer" isn't quite the right word, though (and certainly not "retail"), because our primary customer is the Team. In other words, we would be cooperatively owned by the organizations that use Gratipay to collect and distribute money.

[chadwhitacre]

@nathanairplane Would you be up for an open call to discuss converting Gratipay into a customer-owned cooperative? You are our customer with perhaps the clearest interest in this topic. ;-)

I understand you're traveling at the moment ... looking a little further out, do any of these times work for you?

• Tuesday, June 21 at 9:30 AM Boulder time (MDT)
• Tuesday, June 28 at 9:30
• Friday, July 1 at 9:30

[Also sending in private email since I'm not sure you watch GitHub notifications ...]

[ntnsndr]

Thanks, @whit537. I'd be happy to help if I can, though I'm a reporter more than a business consultant, so I guess I'd be doing this more in my role as a customer. Of these, the only one that works is 6/28 at 9:30 Mountain Time. Shall we plan on that?

[chadwhitacre]

I'd be happy to help

Yessssss! 💃

I'm a reporter more than a business consultant [...]

... though a reporter of questionable objectivity. ;-)

[...] so I guess I'd be doing this more in my role as a customer.

Indeed, and perhaps even a customer-owner by the end of the exercise! :-)

Of these, the only one that works is 6/28 at 9:30 Mountain Time. Shall we plan on that?

Yes! Are you okay with using Google Hangouts on Air again? I'm up for a FLOSS alternative, if you know of one that likewise provides streaming and archiving.

In terms of an agenda, my thinking is that I will draft a proposal for how Gratipay could be converted to a cooperative, and then you and I can dig into that on the call to see if it really holds water as a "platform cooperative." I want to see what emerges when we try to combine your vision for what a platform cooperative should be, and my vision for what an excellent product should be.

[ntnsndr]

Sounds good. Goog would be fine. I usually prefer to use Jitsi @ meet.mayfirst.org, of which I'm a member, but I don't think it allows for archiving unfortunately.

[chadwhitacre]

Okay. I'll send you a join link in private email on 6/28 at 9:30 Mountain Time. Huzzah! 💃

[chadwhitacre]

Bumping a few hours to account for jet lag. :-)

[chadwhitacre]

https://www.youtube.com/watch?v=tT452Sy3MI0

[chadwhitacre]

(Sorry, neglected to post that before starting!)

[ntnsndr]

Thanks for the invigorating conversation! I'm really excited by the potential, and I think Gratipay could become a powerful force for jumpstarting an open co-op, platform co-op ecosystem.

As I said, I think Enspiral could be a really important model in some respects—particularly in their model for co-budgeting and for their stakeholder arrangement of individual "members" and "contributors" plus affiliated "ventures." I've just started a little archive of Enspiral stuff here; their resources on GitHub might be particularly useful for you.

[chadwhitacre]

Invigorating, indeed! I also ended up having an appointment at the top of the hour (I had tried to bump it but failed), so don't feel bad that we had to cut our time short. :)

I appreciate framing the question as one of "ownership design." I'm interested to see what's said in Owning Our Future; what this framing leads me towards is the question, why? What is it that Gratipay's legal structure needs to accomplish?

One of my take-aways from the call is that there are three reasons why we need to work on Gratipay's legal structure: capital, accountability, and continuity. The most pressing is continuity—ensuring that Gratipay is a stable organization that can survive without me—because we do have at least some answers for capital (namely, revenue :) and accountability (forking). As we design Gratipay's ownership, let's keep these in mind.

Regarding Enspiral, they did come up above in this thread (just after Platform Cooperativism, it looks like ;), which led to #421. I appreciate the suggestion to connect with Alanna (cf. https://github.com/gratipay/inside.gratipay.com/issues/421#issuecomment-159751078) and Joshua (I have to admit that discovering Enspiral to have had a single founder feels like I'm now in on a secret :o). Perhaps I should try to get to OS//OS, after all? :)

Thanks for helping stir this pot! :)

[chadwhitacre]

Could there be a company that nobody owns?

There's this vision of an open company. One example of this, for instance, is Gratipay, what they're trying to work toward, which is a crowdfunding thing for open-source projects, and it kind of puts an economic layer on open-source development. You could imagine, for instance: what if there were a payment layer on GitHub? People got paid for their engagement with the projects, but there was still a kind of ambiguity about ownership. You didn't need to hold shares. Maybe the project is still kind of floating in another world. Who knows what the legal environment is? That's been appealing to a lot of people in this space. I think it's interesting, but we also live in a society where ownership is the law. Ultimately, even a company like that, if there's value flowing through it, somebody's got to be holding that at some point. I think it is important to make sure that question is addressed before we give up ownership.

To be honest, I'm kind of a "property is theft" sort of person. I'm not craving more property. I'm more interested in a commons, but I don't want a commons that's just controlled by Google. I want a commons that emerges from a sense of parity and equity among commoners. While these questions of ownership are kind of frustrating, they're also really important.

We see examples of this starting to emerge in the blockchain stuff. I think bitcoin is a really telling example of what happens when people try to pretend that ownership and governance can be evaded through neat algorithms. You end up with a situation where a small number of unaccountable large bitcoin miners—nobody really knows who they are—are controlling the system, and the thing is careening into the ground even while somehow the value keeps going up. That, to me, is not a future that I'm thrilled to jump into right now. On the other hand, that technology could be beautiful for developing really, genuinely democratic practices. But we have to start by thinking about how it works in our relationships, and how it can create genuine accountability, rather than trying to jump ship on accountability and ownership from the beginning. I think that's tended to be a dangerous strategy.

@ntnsndr at https://www.youtube.com/watch?v=9lkLaV85Cuo#t=31m02s

[chadwhitacre]

At https://www.youtube.com/watch?v=tT452Sy3MI0#t=48m16s we sort of dismissed the idea of organizing as a non-profit, but we may have been too quick to do so. I worked with a non-profit once that was in fact "fee-for-service" (their words; funded from revenue, in other words). Perhaps being owned by no-one-and-everyone is the right choice for Gratipay? That's the route Liberapay took, for reference.

[JanelleOrsi]

Just piping up to say this is a great conversation. Chad and Nathan, I just shared with you a draft of an article I'm writing on legal structures for the commons. If anyone else wants to see it, just email me at janelle@theselc.org

Now I'll put in a plug for a nonprofit structure. My thoughts are:

1. You can be a nonprofit corporation without tax exemption, which basically makes you a corporation that no one owns and that can't distribute profits to private parties (though it can of course compensate people for their work). You pay taxes like a regular corporation, but only on net earnings. I imagine you could build up an operating reserve, pay taxes on that, and then budget to operate at cost so that you don't have much net income each year.
2. You could seek a form of tax exemption other than 501(c)(3). For example, you could potentially pass muster as a social welfare organization under 501c4. You can't get tax deductible donations, but you have the advantage of not paying tax.
3. Or you can be a 501c8 fraternal benefit society, which is what Thrivent Financial is - check it out here. This would make Gratipay a mutual, which is pretty darn close in nature to a cooperative, just without dividend payments. 501c8s have some quirky legal requirements (I've written about it here), but it's workable. It might actually be fun, because of the laws requirement to create social ties among members. Yup, you gotta make it "brotherly." The IRS gets to decide whether you are brotherly enough.
4. There's also 501c12 -- which has always seemed to me to be the IRS's strange catch-all for services provided to members at-cost, though the IRS is fussy about what gets this tax exemption. Life insurance mutuals are included, so it seems like other kinds of financial services could work.
5. And unfortunately, even being a nonprofit doesn't prevent the assets of Gratipay from one day in the future becoming swallowed up by the market. Couchsurfing is my cautionary tale, because it was a nonprofit until the founders sold it to themselves for around $600,000. Ugg, every time I think about it, I get irritated at multiple levels. I believe the attorney general fudged up in letting them appraise the company for such a small amount, and the argument that they couldn't stay a nonprofit just because they couldn't get tax exemption has no basis in the law....I could go on about what is wrong with it, but I won't. I'll only say that if Gratipay wants to be owned by nobody, it would be good to empower a few watchdogs to prevent such a transaction from slipping by anyone. You can give other nonprofits the right to intervene to protect the assets, for example.

[ntnsndr]

@JanelleOrsi I don't think I got the draft. I wanna see it! n@nathanschneider.info!

Great stuff. I'll leave it to Janelle to advise on legal structures. One interesting experience of Enspiral is that they felt forced not to go nonprofit b/c NZ charity law doesn't treat open-source projects as charitable. But I don't think we have that problem.

[chadwhitacre]

You can be a nonprofit corporation without tax exemption

I find this option interesting (cf. :), because I think "owned by everyone/no-one" is truest to Gratipay's character ... and I'm not sure we need more organizations trying to get out of paying taxes. ;-)

Couchsurfing is my cautionary tale

Indeed! @bruceadams made this general point when we first looked at adopting a non-profit structure. I resonate with his conclusion:

The primary defense against a change of control for Gittip is in the human leadership of Gittip. Bits of legal language, such as a corporate bylaw or being a nonprofit might help a little, but real defense is in the people.

As I brought up with @ntnsndr and I think also with @JanelleOrsi (though I'm not seeing a transcript on our call above at https://github.com/gratipay/inside.gratipay.com/issues/72#issuecomment-164018346, so I'll need to rewatch to find it), the open-source principle of forkability puts some teeth to @bruceadams' suggestion. If Couchsurfing was an open company with open-source code and a vibrant contributor community, then that would have been a check on the founders selling to themselves for cheap, since others in the community would have been empowered to fork. For the record, Gratipay has already had two forks, so this isn't hypothetical. :)

---

P.S. I skimmed the draft chapter—legally binding cartoon slideshows sound amazing! I'll try to give it a more thorough read on the bus next week ...

P.P.S. I think if you edit your comment and add another line before the first bullet point then the numbering will be fixed and everything will be right with the world. :)

[chadwhitacre]

I don't want a commons that's just controlled by Google

Is Mozilla better than Google? What if Gratipay were a cooperative owned by non-profits?

WikiMedia, Mozilla, Python, Django, jQuery, Node.js, FSF, OSI, SFC, SPI, Linux, Gnome, ...

I believe @JanelleOrsi has implemented non-profit structures where some board seats are reserved for other non-profits: another option.

cf. #637 for an example of how this direction could aid in raising capital

These orgs can also serve as fiscal sponsors for the tiny-just-starting-out projects.

Question is: would they see value in co-owning a payments service?

[chadwhitacre]

It's interesting that non-profit was Enspiral's first instinct: that remains my leaning here as well. We've started to apply for grants (#836 #388 #637), with some hand-waving around our corporate structure. If we win any of the grants, then the path of least resistance will be to convert to a non-profit before actually accepting the funds.

[chadwhitacre]

I'm back on the fence between non-profit and cooperative. I really like the cooperative principles. Especially if these grants don't come through, a cooperative structure with a crowdfunding campaign (#870) to raise capital from initial membership could be the way to go. I'm thinking of this in terms of capital as well as governance, you see (#405).

[chadwhitacre]

I'm also thinking of this in light of the open organization conversation. Like, how strongly defined do we want to be.

[ntnsndr]

This may come as a surprise, but I don't think you need to be married to the co-op legal structure. Many co-ops don't use it. For instance, my hosting/cloud co-op, May First, is a nonprofit. Members still support it with dues. I think you could practice cooperative principles through a nonprofit legal structure, especially in terms of governance. I think that the open-work principles are vital to this project, and you should prioritize them as much as you can. You're forging the way to the new cooperativism.

[chadwhitacre]

@nobodxbodon at https://github.com/gratipay/inside.gratipay.com/issues/836#issuecomment-258776074:

Sorry to bring this up at this moment. Pitifully I missed the discussion of switching to non-profit, which I vaguely recall but can't find the exact issue (could you point me to it?). I heard from a speech about non-profit business that, non-profit usually is harder to run than for-profit business, which I believe you already know well. IMO, a for-profit business can stand out more with the openness and transparency, compared with a non-profit can (openness in non-profit is basically obligation).

Another aspect is, there are way more for-profit businesses than non-profit, and if Gratipay can find a successful business model, it will be more influential, especially if it's potentially reproducible by other for-profit businesses.

Follow-up from @mattbk:

if Gratipay can find a successful business model, it will be more influential, especially if it's potentially reproducible by other for-profit businesses.

👍 I think we want to be influential and show that this stuff can work (along with letting people run experiments*, of course).

I'd argue additionally that, unless there is a pressing reason, there is no need to move toward nonprofit right now.

*I don't know who brought this up (maybe @rohitpaulk? My search-fu is weak this morning), but one potential use for allowing multiple split-up-the-money methods (beside take-what-you-want) and multiple ways of giving (bundles, corporate, others we've brainstormed) is to see what works financially and what doesn't. With enough entities using Gratipay, it could be a good resource for some economic papers.

[chadwhitacre]

Converting to a non-profit reticketed as https://github.com/gratipay/inside.gratipay.com/issues/916.

[chadwhitacre]

I'm partway through Ours to Hack and to Own, which has a lot to say here. I also want to digest the governance/ownership chapter of The Art of Community.