Stakeholder Types Public.md

A Fictional Example to Illustrate a Real Problem

As the newly emergent DCE circle is pursuing sociocratic governance for Blockchains, as well as considering Colony as a way to facilitate cooperation, we find it necessary to map who we want to involve in company and product decisions. This will allow us to discover ways to modify the sociocratic model and Colony’s software to enable their participation.

Elaborating on this is difficult without disclosing aspects of our business model not yet public, so I have chosen stand-in, completely fictional examples to illustrate the concepts.

Imagine a company, Fun 4 U, whose mission it is to make the world more fun. This company has in its portfolio: an iPhone gaming app, a clown-for-hire, and a water park. Bear with me. The analogies get kinda weird.

Fun 4 U seeks to implement a multi-stakeholder governance model, but has its toes in a lot of ventures and the stakeholders vary between them.

Allowing consumers of a specific product to have influence over that product makes sense. It makes less sense for a gamer in Mississippi to make governance decisions about the water park in Nevada.

Further, stakeholders vary not just between products, but there are also different categories of stakeholders. These different categories may have differing needs and abilities in terms of governance and profit-sharing.

­­­­­­­­­­­­­­­­First, a mental map of what a product-based sociocratic model might look like:

As you can see, there would be a Blockchains Board of Directors, known in sociocracy as a “Mission Circle.” There would also be an “operations circle,” usually known as the “general circle.” But every product will have its own operations and general circle. This structure will allow each product to have operational autonomy whilst being value-aligned.

Now, to add a layer of complexity to this, I’ll layer in where the stakeholders might fit in:

As you can see, stakeholders exist within the boards of directors, or “mission circles.” This is true of any sociocratic model – outside advisors/stakeholders participate in setting the high-level mission and financial goal/ management. The difference only being that there are multiple mission circles.

The problem we seek to solve, then, is to identify how different stakeholders might participate, since most/none of them will belong to a sociocratic organization (and many of them will not belong to a single organization at all).

So – in a product-based model, who might need to participate:

Stakeholder Types

Partners

Ex: Smiles 2 All Toys, with whom Fun 4 U has a buy a toy get a free in-game skin

For example, a business that Fun 4 U partners with to create a product is undoubtedly a stakeholder, but they automatically receive a portion of the profits from the joint venture and therefore it would not make sense to give them any portion of the profits assigned to Fun 4 U. The partnering company may or may not have reason to participate on or vote in product boards.

Minimally Coordinating, profit-rights eligible, board-represented and voting stakeholders

Ex: customers, investors

On the other hand, a consumer of a product might well deserve some share of our profits. As an example, it would make sense if Fun 4 U shared some of the profits made on the app with app users. It also makes sense that an app user would have say in the services offered by a Fun 4 U. For instance, if the company were deciding whether or not it wanted to replace its subscription model with a data-mining, ad-based revenue model, some app users might prefer the cheap privacy-lite version, while others would prefer to pay with money and not see ads or give their data. If given the option, consumers could probably vote in-app for a board representative they think aligns with their values, or on individual policy questions, but they would be unlikely to be interested in organizing much beyond that.

Minimally Coordinated, board-represented and voting stakeholders (no profit-sharing)

Ex: investors

Investors are similar to customers in many respects, but the case for shareholder profit-sharing is less convincing, since there are many stock-types that do not come with dividend or profit rights; Investor profits are made through trading stock. It’s also arguable whether they should have voting rights, though I will argue that the should have voting rights and board representation, because the financial success of the company is an important consideration, and investors will do well to push forward that interest. Further, under sociocracy’s consent model, they cannot overrule anyone else.

Highly Coordinated, profit-rights eligible, board-represented and voting stakeholders

Ex: employees

But there are still more stakeholder types. Like customers/app users, it might make sense for employees to receive profit sharing rights and voting rights, but still employees are a distinct stakeholder group type from customers because employees work together every day, and so can reasonably organize around their interests and collectively select and elect representatives in a consent-driven sociocratic model, as well as draft and negotiate on specific policies.

Non-human stakeholders

Ex: the environment, animal performers.

Further complicating things, there are also nonhuman stakeholders, like the dogs in the clown show. The dogs could, of course, have an animal rights representative on a board, and Fun 4 U could give some money to animal welfare interests. But it’s a clearly different category than employees or customers, since the dogs cannot elect themselves a representative. Therefore, someone else would need to select the dogs’ representative.

In summary

There are essentially five types of possible stakeholders, listed above. But for the purpose of illustrating people with voting power participating in a circle, there are four (no need to distinguish on basis of profit-sharing): partners, self-electing non-employee stakeholders, board-elected stakeholders, and employees.

How Minimally Coordinated, Board-Represented and Voting Stakeholders Participate in Sociocratic Model

What remains to be discussed is how these individuals will participate, though this is much more easily considered now that they have been mapped. I see essentially three possibilities:

1. The seat on the board for minimally coordinated stakeholders could be simply be a smart contract, allowing those individuals to vote directly on policy proposals. The drawback here is that a contract cannot negotiate and change its mind, and there is no possibility of 100% agreement. 51% (or some other number) would have to be a stand-in for “consent” for this group. And what if 51% approve of an initiative but don’t care that much, but 40% are very opposed?

2. Stakeholders could elect a representative to speak on their behalf, negotiating and coordinating in a consent-driven sociocratic way. The drawback here is that stakeholders are unlikely to nominate their own candidate, and the representative has no clear way to know what their constituents want, since they are not organized.

3. There’s a double-link. There’s a voting contract that allows stakeholders to directly vote on matters, and is facilitated through some app that allows them to give feedback as to why they voted one way or another – but then there is also a human, elected representative. That person can filter the stakeholder feedback and use it to negotiate on the board. They can also exercise some judgement/discretion about the will of the users, based on the feedback and participation rates. The voting contract could then either be binding or non-binding.