Corporate Governance Musings
Corporate Governance Musings
This page is a first draft about my premonitions revolving around Radicle.
For full disclosure, I am not a founding member, nor am I an active contributor to the code base.
I am an ardent fan and a believer in the potential of this project and the projects it will support.
The Promise of Radicle
First off, by "promise" I do not mean that this is a promise to you or me. The promise here is pointing to potential. Radicle has great - really astounding - potential.
Radicle has the capacity to touch the following main structures within software, and thereby upend much of corporate governance as we know it:
- Finance & Corporate Governance
- Software Licensing
- Wage & Labor Economics (HR)
Finance & Corporate Governance
Shareholders as a central entity
First off, it would behoove us to take a look back at how corporations - especially publically traded companies - are run today. I am not an expert by any means, but we can generally divide their stakeholders into the following groups:
- Shareholders; investors, founders, and to a smaller extent, employees
- Customers
How a company runs can vary a great deal, largely depending on how shares are divided up.
For example, it is a well known fact that Mark Zuckerberg controls 57% of Facebook's voting shares (page 46 of Facebook's Schedule 14A SEC filing. He lords over a 3 billion person fiefdom and his management style has been referred to as dictator-like from all ends of the political spectrum. Conversely, a company like Apple's largest individual shareholder is Arthur Levinson, who holds ~4M of the total ~16.8B shares, or just 0.4% (Yahoo Finance).
I don't think you need me to tell you that these are 2 companies that are governed quite differently from each other (hint: they don't see eye-to-eye with each other's business models).
So how are their shareholder structures similar?
Most publicly traded corporations have these two characteristics:
- Majority owned by a few founders
- Majority owned by institutional investors
In either case, the employees of such organizations have little to no say in how a corporation is run at the end of the day. This is because corporations' shares are not typically majority owned by employees. Harvard Business Review estimates that employee ownership of publically owned companies ranges between 10-40%. Nothing to scoff at, but typically not a majority share. Companies only answer to their employees insofar as it affects their relationship with the majority shareholders.
Taking a recent example, it has taken many real resignations, questionable firings, and unionizing efforts to get employees a seat at the table at Google. Employees want a say intracompany issues such as HR policies and also more far reach decisions around A.I. ethics, censorship, and whether to work with the military. It takes an outsize sacrifice on the part of individual people to make that happen.
Decision Making Lacks Transparency
While there is delegation in decision-making, any sense of authority on decisions is implied. That is to say, it can always be vetoed by a central entity, such as a CEO or some other management layer. Such veto power is arbitrary and can be extremely opaque. It is very rare that decision-making is made out in the open. More often than not, it is done amongst a select group of employees, away from the public, and hidden from the majority of employees.
Corporations, Censorship, and Centralized Attack Vectors
Whether through hacking or government intervention, corporations are inherently a single point of failure.
There are myriad of ways to make a software system resilient to natural disaster and hacks. For example, setting up data centers in multiple locations, much the way CDNs, the way AWS has locations around the world for high availability.
But they are never impervious to a government who soundly or arbitrarily regulates in such a way that partly or entirely shuts down a company's service.
Software Licensing
When it comes to making software sustainable over the long-run, there are essentially two tracks one can take:
- Corporate (IPO or Acquisition)
- Free or Open-Source Software (aka: FOSS)
Corporate Track
In the first track, a company goes public and becomes beholden to shareholders, who as alluded to earlier, will most likely be some combination of cofounders and institutional investors. Upon launching a product, their goal becomes that of delivering profits. While there are myriad of schemes - optimizing current products, launching new products, or lowering costs - the central path to revenue is licensing of the product to extract fees.
What is gained when going down this track?
- Liquidity to invest in R&D, capital, and human capital/labor
- Decision making is centralized and can be quick
What rut do we get stuck in?
- Beholden to shareholder interests and all the strings attached there
- Upon IPO or acquisition, focus can lean towards short-term rather than long-term benefits
- Decision making can be despotic, arbitrary and lack transparency
- Software is limited to those who can pay for it
You might be asking yourself: but what about "free" services such as Facebook or Youtube? In these cases, the profit seeking motives are aimed not only at the human capital employed at such companies, but also aimed at the users, leading to the abject commodification of things as sacred as human relationships. Addressing such companies here is a bit too much of a tangent. Here I am specifically addressing software companies that charge a fee for the usage of their software.
FOSS Track
The other track is launching software that is free or open-source (FOSS).
What is gained when going down this track?
- Contributors’ labor is highly mobile (i.e. easy to switch between one project to another)
- Decision-making is community driven and highly transparent
- Software is available to the masses
What rut do we get stuck in?
- Heavy reliance on completely free and volunteer labor
- Heavy reliance on crowdfunding and fundraising
- Decision-making can be relatively slow
Wage & Labor Economics
In highlighting the issues with current software development, we are pretty much beating a dead horse. But let us add into the mix issues around wage and labor economics. It is closely tied to the aforementioned issues.
Wage
- Exploitation: leaving aside pay gaps between genders or even between equally ranked and seemingly identical employees, employees are simply never paid at a rate equal or even near their actual productivity. As an example, an engineer might uncover savings of 12M. In that same period of time, it is unlikely that the engineer will see even 1/10th of that. The corporation is most likely to continue paying a nominal salary and stock benefit, while totally pocketing the added profit.
Labor
- Labor-Power: we can accept that employees willfully
- Alienation: employees are made to work on work they do not want to work on and have little to no say in. Added to this are the many layers of abstraction away from customers. Over time, this leads to alienation; that feeling that you are disconnected from and foreign to the products of your labor.
You might be asking yourself, if something can resolve all or many of these issues…
Is it a Marxist or a Libertarian wet dream?
Radicle's Promise
With Radicle, it has the possibility to be both.
Financing & Corporate Governance
- Projects can become self-funded from an earlier stage
- Project governance is driven by the community of token holders
- Decisions are time limited, creating community based decision-making, while remaining timely
Software Licensing
- Projects can become self-sustainable through licensing built upon smart contracts/NFTs
Wage & Labor Economics
- Contributors can be incentivised through project tokens
- Labor can move from one project to another more freely; not tied up to exclusive corporate contracts