Virtualising governance for established organisations
Posted by Charles Armstrong | Filed under Articles
Initiatives like One Click Orgs and Harvard University’s Virtual Corporations Project are paving the way for a new breed of virtual organisations whose legal underpinnings are wired up to electronic workflows. Such organisations open up intriguing new possibilities for collaboration, participation and value creation. But could virtual governance techniques also be harnessed by conventionally-structured corporations to speed up decision making and reduce bureaucratic overheads?
Numerous events occur in a company’s day to day operation which need to go through a formal governance procedure of some kind. When executives want to make a big purchase they may need written approval from the board of directors. If the board decides to issue new shares and raise investment they usually need formal approval from a majority of shareholders. Before the CEO of a venture capital backed startup can issue options to an executive they might need a special “class consent” from the investor.
These governance procedures provide checks and balances that ensure a business is run in the interests of all its stakeholders. They are defined by clauses scattered throughout the company’s articles, investment agreements and other documents. But there is a cost to these safeguards. Every time a governance process runs it creates a delay and absorbs clerical effort. The problem is well illustrated by looking at the process of securing shareholder approval through a written resolution.
The first challenge is working out what consent is needed from which shareholders. There might be multiple classes of shares with a variety of different powers. Once this has been established the written resolution is drafted along with any consents needed for specific share classes. The correct combination of documents is then sent as email attachments to each shareholder along with guidance on how to complete them.
Each shareholder prints the documents, ticks some boxes to indicate their votes, inserts the date and signs their name in the appropriate places. In some cases they might need to get a witness to sign and fill in their address and profession. When the documents are completed the shareholder scans all pages, attaches the resulting files to an email and sends it back to the company. Finally the shareholder puts the physical copy of the executed document in the post to be archived at the company’s offices.
As the executed documents arrive back at the company someone needs to check each one to make sure it’s been completed correctly. There are invariably mistakes, in which case the shareholder in question must be asked to repeat the process. Each shareholder’s choices are collated, including the consents from specific share classes. Eventually it becomes clear whether enough support has been received for the action can proceed.
This is exactly the kind of fiddly, labour-intensive process where virtualisation can make a big difference. One Click Orgs has designed a written resolution module that uses the internet to completely rethink how a written resolution works. The module’s designed to be used by established corporations with conventional articles. At its heart is a virtual model of the company’s corporate structure including all the different share classes, the thresholds for making decisions and the identities of shareholders, board members and senior executives. Issuing a written resolution using the One Click Orgs system starts with a duly authorised executive or board member entering the text on a web interface, adding form elements like check-boxes as required, then clicking a button to activate it.
At this point an email is automatically sent to all shareholders alerting them that a written resolution has been issued and linking them to a secure web page where they can read the text and respond. If any class consents are required they are automatically generated for the relevant shareholders. Once a shareholder has made their choices and digitally signed to execute the resolution the company receives an alert and a monitor tracking progress towards the approval threshold is automatically updated. Once the threshold is reached an email is automatically sent to everyone confirming that the decisions has been formally approved.
A virtualised written resolution of this kind could secure shareholder consent in a day compared to a week with the conventional approach. The effort for the company and the shareholder is greatly reduced. The scope for misunderstanding and error is almost completely obviated.
Previous technological advances have been used to speed up established governance processes without significantly changing their form. An eighteenth century shareholder would have received a written resolution from a courier who would have come by foot, horse-back, carriage or boat. The manner of the documents’ delivery has changed beyond recognition but the form of the document itself and the manual processes surrounding it are essentially the same today.
Combining virtual governance modules will eventually enable a company to automate complex transactions such as issuing new shares, including submitting electronic filings to the state regulator and updating the company’s books to reflect the new share capital. One Click Orgs’ project to virtualise the London Hackspace is the first practical experiment retrofitting elements of virtual governance onto a pre-existing corporate structure. I have a feeling it will not be the last.
Joi Ito joins One Click Orgs advisory board
Posted by Charles Armstrong | Filed under Project team
Today we’re hugely excited to announce that Joi Ito has joined One Click Orgs’ advisory board. Joi has contributed to a succession of ground-breaking internet ventures as an entrepreneur and investor. His current role as CEO of Creative Commons puts him in the thick of the collision between established legal concepts and the internet which is One Click Orgs’ home territory.
It was a fireside discussion about emergent democracy with Joi at Foo Camp 2008 that planted the seed for CIRCUS foundation’s Themis project and the chapter on emergent democracy I contributed to O’Reilly’s “Open Government” book. The Themis project gave birth to One Click Orgs so there’s a poetic circularity in Joi getting involved with the project now.
In joining One Click Orgs’ advisory board Joi is in the distinguished company of Oliver Goodenough (Co-Director Berkman Center Law Lab, Harvard University), David Johnson (Senior Resident Fellow, Center for Democracy and Technology) and Matt Jones (Partner, BERG). Joi has some far-sighted ideas about how virtual corporate structures will enable changes in financial and organisational models. We look forward to working with him to turn some of these ideas into reality.
Video code walkthrough by Chris Mear
Posted by Charles Armstrong | Filed under Events, Presentations, Video
A month ago we posted the first part of the video introducing One Click Orgs’ collaboration with London Hackspace. Now here’s the second part in which Chris Mear walks through the current codebase. If you’re a developer thinking of getting involved in the project this would be a useful place to start and get your bearings.
One Click Orgs announces project with London Hackspace
Posted by Charles Armstrong | Filed under Customers, Events
I’m delighted to announce that One Click Orgs has formed a project with London Hackspace to create the world’s first virtualised non-profit corporation. London Hackspace is the UK’s leading hackerspace. It currently has more than 40 members and a space in Barnsbury, north London, where they get together to work on projects and socialise. London Hackspace was incorporated as a Company Limited by Guarantee in January 2009, which is the UK version of a non-profit corporation.
Over the last few months we’ve been talking to Russ and Jonty, founders of the Hackspace, to understand how they wanted the organisation’s governance to develop and plan the best approach to virtualising its legal structure. Unlike One Click Orgs’ existing platform for Associations where the legal structure is created from scratch, we’ll need to reverse engineer the Hackspace’s existing articles to replace references to meetings and paper notices with links to the electronic platform. This requires some delicate choreography.
The first step will involve passing a resolution that replaces the “Proceedings of the Board” section of the articles with new clauses permitting Directors to make proposals and vote on them anytime with the decisions logged electronically. Then we’ll make a model change to the platform to separate Members’ powers from Directors’. Next the sections dealing with “General Meetings”, “Proceedings at General Meetings”, “Members’ Powers” and “Votes of Members” will be replaced, virtualising the appointment of new members, the election of board members and removing the requirement to hold an annual general meeting. Finally the filing of annual returns to Companies House will be automated. As ever, the code and legal provisions created in the course of the project will all be released under open licences so anyone is free to reuse and adapt them.
This is an important project for a number of reasons:
- It will create a legal template that can be localised to different jurisdictions around the world which will make it a lot easier for people to set up hackerspaces.
- It will reduce the bureacratic overhead of running a hackerspace which for many people has to fit alongside a day job.
- It will open up new possibilities to involve the members of a hackerspace in how it is run.
- As well as hackerspaces the resulting platform will be relevant to a wide range of other non-profits.
- It will provide a natural “next step” for projects which have set up on the One Click Orgs platform for Associations (currently in closed Beta)
- The project will thoroughly test the UK’s 2006 Companies Act which includes a lot of innovations favourable to virtual corporations. In the process it will clarify what further legislative amendments are required for fully virtual corporations so we can campaign for those revisions to be made.
We’re organising a special hacknight at the Trampery this Thursday from 7pm to 10pm to get started on the project so come along and code with us if you’re in the neighbourhood.
Chris and I made a short presentation at last week’s London Hackspace Meetup, which we filmed. Here’s the first part in which I introduce the project. The second and third parts showing Chris’ demo and code walkthrough will follow.
March Hackday Report: Rails 3 and more
Posted by Chris Mear | Filed under Hackdays
One Click Orgs is moving from our original platform, Merb, to the new Rails 3 framework (the result of the merging of the Rails and Merb projects).
Why Rails?
Merb has served us well since One Click Orgs’ first commit, back in December 2008. We’ve produced a solid beta release on it. But with the recent release of the Rails 3 beta, and with the One Click Orgs 1.0 release not a million miles away, it was time to make a decision on how we move forward.
Although some standalone version of Merb will probably continue to exist in the future, Rails 3 will be getting a lot more attention, as the official successor to Merb 1. Rails itself is already a more popular framework, and with that comes more developers who are familiar with it, and wider community support for hosting and troubleshooting. If One Click Orgs wants to attract more developers to the project, and be straightforward to set up and install, then moving to Rails makes sense.
If those were our only goals, of course, you might ask why we don’t switch to something like PHP, which everyone knows and which runs everywhere. We did consider this, but the Merb/Rails way of doing things has let us produce quality results quickly, and we’d like to continue with a similar set of tools. Merb 1 and Rails 3 are more similar than they are different, and moving to Rails is more akin to switching dialects than it is to rewriting the entire codebase from the ground up, which would be a major undertaking.
So, with a bit of effort now, we’re able have confidence in future support for our platform, retain our existing investment in experience and code, and potentially open up One Click Orgs to a wider audience of developers and users.
Hackday Progress
Our work to move to Rails 3 is now substantially complete. We’ve just had our March Hackday at The Trampery, where Charles, Colin, Jan, Martin and myself tested out the latest work on the Rails 3 port. We managed to fix a lot of the glitches with it, and just a few issues remain to be sorted before the Rails version of One Click Orgs becomes our next official beta release.
As well as the Rails 3 work, David Bovill (who, through LocalEyes, is also one of our beta users!) worked on prototypes of a mobile voting interface and a system for graphing the distribution of proxy votes. And, finally, we were joined remotely by Russ Garrett of the London Hackspace, with whom we’re working on the early stages of our 2.0 roadmap.
Remember, you can follow and participate in the development of One Click Orgs by visiting our GitHub project, joining our dev mailing list, or dropping into the IRC channel.
Announcing One Click Orgs advisory board
Posted by Charles Armstrong | Filed under Project team
We’re delighted to announce the formation of One Click Orgs’ advisory board and honoured that three outstanding figures have agreed to support the project by being part of it:
Oliver Goodenough is co-director of the Law Lab at Harvard University’s Berkman Center and also professor of law at Vermont Law School. He leads Harvard’s “Virtual Corporations” project and is one of the architects of the amendmants passed by the State of Vermont making it the world’s first jurisdiction to support entirely virtual corporations.
David Johnson is Senior Resident Fellow at the Center for Democracy and Technology. Prior to this he was Visiting Professor at New York Law School where he established the “Virtual Company” project. David (working with Oliver Goodenough) was an architect of the legislative reforms creating the Vermont Virtual Corporation. He is particularly interested in the potential of virtual organisations to enable new forms of peer production.
Matt Jones is a partner at BERG, the London-based design consultancy. He was a co-founder of the travel website Dopplr, director of user experience for the Nokia NSeries range and creative director behind the original BBC News website.
Oliver, David and Matt’s experience and wisdom will be invaluable in guiding One Click Orgs’ strategy over the coming months.
First five groups selected for beta programme
Posted by Charles Armstrong | Filed under Customers
We’re delighted to announce the first five groups selected to participate in the One Click Orgs beta programme. The groups are:
WordCamp UK (UK)
Open Font Library (International)
Open Kollab (USA / International)
Crafting Gentleness (N Ireland / International)
We’ll be setting up platforms for each group over the coming week. In proper OCO style the final decision was made via a vote on our governance system. We’re looking forward to working with each of the groups and learning how we can best support their goals. We’ll be announcing the next batch of beta participants in the near future.
Say hallo to One Click Orgs Beta
Posted by Charles Armstrong | Filed under Releases
At last week’s planning meeting we decided (with a One Click Orgs vote, naturally) that the platform was ready to enter Beta release. Since the start of 2009 three groups have been using the Alpha platform and giving us valuable feedback. With the new 0.5 release we’re opening an invitation to 20 groups to use One Click Orgs and help guide the next stage of development. Our partners at the Open Knowledge Foundation have kindly made hosting facilities available to support this.
We’ve already got a dozen groups lined up for the Beta. If your group would like to join them and be one of the first to run on a virtual platform write to us at open [at] CIRCUS-foundation [dot] org or send a message via our Facebook group. Meanwhile we’ve published a simple Beta FAQ answering some of the key questions from groups that are interested.
One Click Orgs at Berkman governance summit in Washington DC
Posted by Charles Armstrong | Filed under Events, Presentations
Last month I was invited to Washington DC to present One Click Orgs at the Summit on Next-Generation Governance Models organised by Harvard University’s Berkman Center for Internet and Society. This one-day summit brought together fifty senior academics, figures from the Obama administration and technologists.
There was a huge amount of interest in the project. It was a particular pleasure to meet Oliver Goodenough (Co-Director of the Berkman Center’s Law Lab) and David Johnson (Senior Resident Fellow at the Center for Democracy and Technology). They were jointly responsible for the reforms passed in the Vermont state legislature in 2008 opening the way for virtual corporations. Both Oliver and David have graciously agreed to join One Click Orgs’ Advisory Board.
One of the most interesting topics discussed at the Berkman summit was the way that virtual corporations could undermine key planks of the corporate regulation regime. Currently the vast majority of corporations are registered in the jurisdiction in which they’re located. The notable exception is the United States where the state of Delaware has a long-standing reputation for business-friendly company law which has led a lot of ventures to incorporate there.
The emergence of virtual corporations threatens to cut the tie between the location of a business and the jurisdiction where it registers. Just as shipping businesses register their fleets under “flags of convenience” such as the Bahamas where regulations are looser and multi-national firms organise their tax affairs around the laxest regimes, businesses will increasingly be free to incorporate in whichever jurisdiction in the world has the most favourable company law. This raises a host of questions about how governments will be able to fulfill their responsibilities to protect consumers and shareholders from abuses and fraud.
The invention of artificial personality and limited liability by the UK Parliament in the nineteenth century reflected a quid pro quo where joint-stock corporations gained significant privileges and protections in return for which they submitted to state regulation and agreed to place key information in the public domain. That bargain is now in danger of unraveling.
Virtual corporations pose many other questions for society. The internet has given rise to millions of online communities which will soon have an easy route to acquire legal personality. Are we ready for a world where “guilds” in the online game World of Warcraft can become corporations, own assets, have their own governance systems and enter into contracts with the rest of the world?
Important advantages are offered by virtual corporations. They will permit entrepreneurs to set up a venture in a matter of hours in response to a new opportunity and greatly reduce the bureaucratic friction involved in running a company. But we need to be sure that the regulatory regime keeps up with the challenges presented by this new world.
Org formation process completed
Posted by Charles Armstrong | Filed under Hackdays, Video
The last outstanding chunk of functionality for One Click Orgs v1.0 was the process for forming a new organisation. During the hackday held in London on 22 August we got it built. In this video Chris shows it in action.
One Click Orgs hackday 22 August 2009 from CIRCUS foundation on Vimeo.
Hackday in progress in Charles' summer house
