Tuesday, August 17, 2010

Redefining Commune -- Communal enterprises

A Communal project is typically an equal partnership in  life/ventures/societies.  A commune is traditionally defined as a living project with equal partnership.  I will further redefine communal to drop equal partnership requirement, and mean a legal framework for sharing of liabilities regardless of any hierarchy or individual profit incentives, but with a substantial internal share of profits.   A cooperative is a communal enterprise.

This is considered a draft post for communal equity

A marriage is a commune in every sense of the word, while a family is not because there is no legal requirement for family members to mutually assist each other.  A bank is almost a commune:  A network of branches, investment banking, and capital trading all pool together to mutually back liabilities.  The extent of its communal nature is entirely dependent on the level of performance-based employment and profitability incentives of each unit.  Higher union wages and performance bonuses all increase the communal purity of a bank, even when it fails communal definition by returning the coomon surplus to shareholders.

Natural Finance separates rewards for financial and labour contributions.  Assigns financial benefits to Investor's financial contributions, and purpose-holding benefits (by default, rights to distribute or direct ultimate profits) to labour.  A founder commune in the traditional equality sense is an obvious option.  Another option is allowing corporate/communal officers to democratically reward officer efforts with post-investor benefits.  Natural Finance facilitates several corporate currency instruments (deferred compensation, W, X and Z prizes are all addressed in manifesto).  Using democratic bonuses and deferred compensation, a communal enterprise can satisfy communal definition without equal participation by labour, and without any consideration for financial contribution.

Natural Finance treats sub-projects much like banks treat branches.  A sub-project is financed in the parent enterprise's name usually with a substantial portion as a secured QCSL tied to the project (which have interest and depreciation repaid each month/period).  Queued behind that secured QCSL are any benefits for the project leader(s).  Sub-projects typically have 10% of contributions go towards the queue.

Sub-projects can be very fine grained.  Any unit sales or production function, or any function that performs a measurable output can be made into a sub-project.  Sub-project managers have at least 3 compensation streams.  cash salary, enterprise deferred compensation, and project bonus (y prize).  The default relationship is an employee one.  As a default, the employee contract is re-negotiated (or discontinued0 after the y prize is paid.  Alternate options include giving sub-project managers "equity" stakes, and treating salary cash payments as (5%) advances on future distributions.

A co-operative can be viewed as a collection of sub-projects.  Co-operatives traditionally involve individual resellable ownership rights to definable portions of an asset, together with a democratic share of ownership and liabilities in the whole.  Achieving the same structure through Natural Finance, involves assigning a resellable perpetual right to the sub-project for its manager, rather than employment of the manager.   The communal tightness of each sub-project is flexible.  A joint-venture is a non-communal alternative, and sub-projects can be structured more like joint ventures than a mutual sharing of liabilities.  Ownership is not as key of a feature as joint vested interests in success.  Equality of members is also not critical to a communal definition, though democratic or equality of member opportunities scores many communal points.

Modern incentivised management techniques naturally benefit from shifting purpose-holding away from investors and towards labour and direct stakeholders.  While traditional financial thinking embraces individual rewards, and  has animosity to communal concepts stemming primarily from distant cold-war politics, communal responsibility and purpose has important motivational possibilities including peer-reinforced indoctrination, and when we drop mandated equality, can include traditional incentives for individual effort.

Communal equity principles

1 comment:

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