Choosing a suitable configuration

An organisation should select its configuration by working through its actual needs rather than beginning with a preferred label. The following process provides a practical starting point.

Step 1: Define the purpose

State:

• Why the organisation exists.

• Its intended beneficiaries.

• Its main priorities.

• Any legal or public obligations.

• The activities it will and will not undertake.

A clear purpose makes later trade-offs easier to evaluate.

Step 2: Identify contribution relationships

List the contributions the organisation expects to rely on. For each relationship, ask:

• Is compensation expected?

• Is the contribution ongoing or occasional?

• What risks are being accepted?

• How easily can the contribution be evaluated?

• Does the contributor need governance participation, financial protection or both?

Do not assume that the same person has only one relationship with the organisation.

Step 3: Separate asset ownership from governance

Determine:

• Who legally holds assets.

• Whether assets are restricted.

• Who can authorise a sale.

• Who receives proceeds on dissolution.

• Which decisions can be delegated.

This is particularly important for public, charitable and common assets.

Step 4: Select a primary governance arrangement

Possible arrangements include:

• Worker membership.

• Consumer membership.

• Public oversight with delegated operations.

• Donor participation within a protected mission.

• Multi-stakeholder representation.

Identify any groups requiring additional protection even if they do not form the primary governing body.

Step 5: Choose compensation mechanisms

Specify how the organisation will handle:

• Current pay.

• Deferred obligations.

• Capital returns.

• Shared benefits.

• Contingent surplus distribution.

• Historical contributions.

Avoid creating multiple overlapping mechanisms without explaining how they interact.

Step 6: Define the lifecycle of rights

For each right, document:

• Issuance.

• Eligibility.

• Duration.

• Transfer.

• Expiry.

• Renewal.

• Treatment on departure or death.

• Protection against amendment.

Step 7: Select a proportionate evaluation process

Choose a method that the organisation can realistically maintain. A simple and consistently applied method may be preferable to a complex system that generates unreliable precision.

Step 8: Test difficult scenarios

Before adoption, consider the response if any of the following happens:

• Revenue falls sharply.

• A founder leaves.

• An investor is not repaid.

• Members disagree about a valuation.

• A majority wants to change historical rights.

• A contributor takes extended leave.

• The organisation receives an acquisition offer.

• A distribution would leave insufficient operating reserves.

If the proposed rules do not produce understandable answers, more design work is needed.

Step 9: Document and review

The organisation should produce a concise configuration statement covering its principal choices.

Review dates should be specified, but reviews should not imply that existing rights can be rewritten without protection.

Illustrative configurations

A small professional cooperative might use equal member voting, role-based pay, shared surplus and a short time-period for rewarding people with dividends from future surplus.

A high-risk product organisation might use differentiated compensation, contingent finance, longer historical time-periods for receiving compensation from future surplus and defined founder leadership.

A public service might use public ownership, worker governance participation and performance recognition without private surplus ownership.

These are examples of configurations, not complete recommended legal structures.