3 Design Elements for a Teal Company

3 TealThree things you need in your company articles or constitution that give you a Teal organisation with solid foundations:

  1. Separate past and future – in most modern organisations they are woven together and are inseparable.
  2. Ensure that all contributions to the company’s success share equitably in the gains created by those contributions – share equitably in any profit generated by that success.
  3. Ensure that every opinion relevant to the company continuing to be successful in the future is included in the annual general meeting with sufficient voting power.

The biggest consequence of keeping past and future separated lies in how you treat the rights to dividends and sharing of a profit in a company and the right to vote and guide the development of the company.

Profit-sharing is part of the past. At the end of the year I share profit (capital gain) out according to the contribution that various people have made to generating that capital gain. At the same time I might have an annual general meeting and in that I want to take decisions that impact the future evolution of the company. That means that the right to vote in that annual general meeting is anchored in the future of the company, not in the past.

So a company that is really designed according to the different needs that the company has – needs anchored in the past and future – ought to separate and treat differently the rights to share in profit and the rights to decide where the direction the company is taking.

By treating these two rights distinct and separably you can structure a company that fairly rewards people for what they have contributed to the generated capital gain from what the company needs to evolve to the future.

We’ve achieved this in Dojo4Life by having four different types of shares. Each type of share is acquired by a specific category of stakeholder. Each class of share carries specific financial rights related to the kind of capital that stakeholder category contributes or has contributed up to that point. Also, a different voting power based on the depth of commitment that category has to the future evolution of the company and the type of perspective and role that category of stakeholder is likely to have about the future of the company.

The first of four classes that we have, there is the investor category and these are standard ordinary shares most companies only have and these shares bring with them voting rights, the right to capital gain and the right to a dividend at the end of every year based on the amount of money the individual has invested in the shares.

At the other end of the spectrum are the Founder Steward shares. In Dojo4Life as we’re structuring it there are only three founder steward shares. These are issued to the founders to enable them steward the early “toddler” years, enabling Dojo4Life reach sufficient maturity. Each founder share carries a total of 20% of the voting rights in the company during the first couple of years dropping down to around 8% of the voting rights once the company is fully established and has exited start-up stage. However the three founder shares carry between them only one third of a percent of the dividend rights and carry no capital gains associated. They also cannot be traded, cannot be inherited and cannot be passed on to any other person at all. Once the company matures, they may be replaced by elected Stewards.

There are two other categories of shares that are identical apart from the qualifying criteria for the shares. One is the labour share. These are for people who are actually working in the company – people who are contributing intellectual capital, human capital and have a working relationship to the company. These shares, again, cannot be traded, cannot be inherited, passed on to anybody else and are only existent whilst the individual satisfies the qualifying criteria for labour shares. Each labour share carries with it rights to dividends from the past and the right to vote in the future. Labour shareholders between them qualify for a share of the dividends – typically between 30 and 40%. They also qualify for a share of the capital gain at the end of each year and the capital gain is calculated according to a reference value at the start of the year and the actual value of the company at the end of the year. A fraction of that capital gain is issued to labour shareholders in the form of investor shares.

Then there are user shares for people who use the product’s at a significant level. Again, there are qualifying criteria for that anybody who meets the qualifying criteria is eligible to receive user shares. Both labour and user shares have only a nominal cost. In that sense the right to receive them depends not on investing a large amount of money, but rather on contributing social capital in the sense of investor share of art, in the sense of user shares or intellectual and human capital in the sense of labour shares.

So if you want to create a teal organisation you need to;

  • separate past from future,
  • give the right power to the right voices to steer you safely into the future and,
  • given right reward for past contribution to everybody who has contributed any of the different elements essential to getting you to where you are today.

You can read the Dojo4Life company constitution here: http://dojo4life.com/fairshares-constitution/

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