Any experiences with California Social Purpose Corporation -(was Flexible Benefit Corporation)?

Chrysallis Corporate Governance Overview

In creating Chrysallis we set out to establish a corporate governance structure that would be integral in its design and operation: it would be mission driven, guided by core values, and foster healthy human development across its domain of activities. The goal of the Chrysallis structure was to include the best of contemporary governance principles, such as rigorous fiduciary duty and the ability to raise capital as needed, while also transcending the serious limitations of the modern industrial-age paradigm from which they derive. 

Our motivation was simple: We believe that as corporations continue to accumulate a lion's share of humanity's collective power and capital, and given that they now operate in a fluid, transnational manner, the life-sustaining systems of the 21st century will only thrive if the regulative systems by which corporations conduct their affairs evolve to a similarly worldcentric moral purview. In short, corporations need a conscience, and that conscience needs the power necessary to guide real behavior. In practice this meant we had to examine and evolve the nature of the social contract among the owners of a corporation, its fiduciary overseers in the form of the board of directors, and management as agents for the owners.  We did so in a way that preserves the existing protections afforded by the US Constitution and state law, while also animating a worldcentric corporate conscience in the form of a clear mission and stated core values.

The modern architecture of corporations, arising originally from the European monarchs and later proliferating with the industrial revolution, evolved to focus strictly on profit maximization as the goal and basis of the social contract between owners and their managing agents. As philosopher Jurgen Habermas has pointed out the modern industrial era's scarce resource was value and resource optimization, and so this social contract was, arguably, functionally fit for purpose for the two centuries in which it came to predominance. This focus, moreover, emphasized the role of positivistic or exterior-oriented rule and regulative mechanisms. (The reasons for this are no doubt complex, but likely derive from the rise of the Cartesian worldview that countervailed against previous interior-orienting mythic systems of social regulation vis a vis the church.)

In the 21st century, however, we now face serious threats to life-sustaining systems in every domain and the goal of resource optimization is no less valid but is transcended as the primary hard problem. We are faced instead with the need for the immense power and resources held by the new overlord of social function - the corporation - to be wielded with a conscience that can account for system concerns at all levels of human life beyond just customer and shareholder concerns to societal and global concerns as well. But to do so the corporate structure called for required a balance that combines three elements: 

1. Resource (profit) maximization within the context of its mission, but also not exclusive of its broader social and environmental context 
2. A regulative mechanism whereby the corporation as a societal actor takes seriously the moral responsibility of its power and 
3. An adequate power-wielding mechanism within the corporation itself that can regulate the behavior of the agents within it. 

In short, we endeavored to setup a corporation that would be both mission and profit driven; be imbued with a worldcentric moral conscience regulated by core values; be protected fully by US law; and, perhaps most importantly, be governed by power mechanisms wielded by people whose stage of consciousness is deeply post-conventional (i.e., construct-aware, Torbert's Alchemist, Wilber's Turquoise, etc.).

It took us several months to design a structure that met our goals, and since implementing it we have had dozens of requests from others to share what we did. Here’s how we did it (though it may not be the only way to meet our requirements):

1. We incorporated in the state of Nevada, which has the most progressive corporate governance statutes in the US, and which allows the board of directors to consider the well-being of society alongside profit in its decision-making.  This gave us the statutory foundation for the rest of the structure.

2. We established at the ground floor that the company is driven by mission and regulated by core values by explicitly including both in its bylaws and founding documents. This set out our guiding intentions in the formation of the corporate collective, a key step that acts to cohere the meaning and norming of the initial culture: the team and shareholders begin to share both a semantics and syntax of collective behavior. 

(In our case, we purposely set out to establish the collective as a Turquoise/Alchemist “Foundational Community of Inquiry,” to use Bill Torbert’s language. Order of meaning-making (i.e., stage of development) is one way to dimensionalize the design of a collective, but there are many others. We chose order of meaning-making because of the sensitive nature and grand scope of Chrysallis’s mission as a human development platform and the essential bearing that meaning-making constructs have on our ability to enact integrative human developmental systems themselves. Simply: our mission relied on it.)

3. We then established a Core Values subcommittee of the board of directors to act as the conscience of the company in any instance where a major decision by the board or management might contradict the company's core values, mission or might disproportionately harm overall planetary well-being. Because of the complexity of these discernments they cannot be handled strictly in the exteriors - that is, through credos, core values charters, voting agreements, etc. - the territory is too complex and nuanced to be reduced to rules. Indeed, quite the opposite: an important characteristic of a foundational community of inquiry includes resting in the tension of oppositional ideas while allowing the freshness of emergent possibilities to be considered, acted upon and continually re-viewed. This is an organization whose core values must ultimately rest in the minds and hearts of embodied leaders to make their best judgments moment by moment. 

4. Of course this only shifted the challenge from the structural exteriors (which modern law is adequately good at anyway) to human interiors. Because of the degree of consciousness necessary to embody the company's core values and make these discernments adequately, we established a gating mechanism for inclusion on to the core values committee: First, we use highly sophisticated and validated psychometric assessments (e.g., those available through Developmental Testing Service). Second, we really get to know core value committee candidates over the course of time and see them operate, especially keeping an eye on 5 key areas: relationship to money and scarcity; core ego gratification needs; emotional triggers and developmental blindspots; behavior and cognitive patterns under stress; and scope of moral concern and perspective-taking.

5. Finally, we come to the tricky territory of power: we had to give the committee real power to perform its duty but sidestep the problems of consolidated power. First we gave the committee a proxy to vote a block of super-voting stock that can effectively control the company in the event that it needs to do so. This voting mechanism is carried by a simple majority of the 3 member committee. Then, in order to protect the founder who is giving up control (but not economic interest) over the voting of his shares to the committee, the founder was given the sole power to nominate members of the committee. This gives him the power to control the depth and character of who is considered to wield his shares but, once approved, prevents him from wielding undue influence over the running of the company (i.e., the Darth Vader move). This gives him a very deep incentive to choose candidates who have the aptitude and altitude necessary to fulfill the vision and values upon which the company was formed, something we believe is still a sacred right of a founding entrepreneur.

In closing, it is not an exaggeration to say that one of the more powerful innovations called for in a world dominated by the corporate form of resource ownership is the animation of a particular kind of worldcentric conscience in corporate behavior. But to do so a unique set of features have to be designed into the company to give the board of directors the legal protection they need to make broader judgments on the one hand and on the other to bestow the company with the kind of interior-oriented discernments that only human consciousness can provide. A special design has to be used in order to ensure that this consciousness is capable of the kinds of tasks and perspectives that it will be called upon to navigate. Finally, the power has to be redistributed in such a way that gives the company's depth-orientations - namely its core values and its mission - the force they need while avoiding the traps inherent in consolidating power in the hands of any one person, no matter how developed they may be. 

When all of these requirements are met, the corporate structure can truly be on its way to an integral mode of operation. It may, perhaps, meet the most important test of the integral corporation: Is it a real actualization social holarchy for all its members, for society, and the natural world in which it is embedded?

Robb Smith, February, 2012