I.     Introduction.

     A.     Purpose and Scope.

          1.     An alternative economic system is necessary because capitalism¹ causes economic inequality by concentrating wealth and power in the hands of a few, exploits labor by paying low wages and few social benefits, and encourages overexploitation of natural resources. The new economic system must necessarily be able to compete with capitalism in a national and global market economy. The system must spread wealth throughout communities, raising the standard of living, and reduce capital accumulation while promoting innovation, efficiency, and economic growth within a market economy, all the while without causing economic upheaval or revolution. The best alternative economic system to accomplish those goals is Commons Capitalism by use of its economic driver, the Commons Capitalism Entity (CCE).

          2.     The best description of Commons Capitalism, albeit terse, is as follows: It is a viable hybrid economic system that is neither capitalism, nor socialism. Commons Capitalism (1) integrates the capitalist principles of profit-making and market competition with the management of net profits as a commons (a) to equitably distribute business wealth through past, present, and future workers (b) to enrich communities via tiered redistribution and (2) reduces the concentration of that wealth in the economic elite.²

          3.     A concise description of a Commons Capitalism Entity is as follows: A CCE consists of a nonprofit corporation (a commons corporation) that has no shareholders, members, or stakeholders combined together with a wholly owned for-profit subsidiary entity which would be a corporation or limited liability company (subsidiary). The commons corporation may own more than one subsidiary. Each CCE would hold title to the means of production, and the earned surplus (or net profits) would be held as a “commons” to be distributed to past, present, and future workers.

          4.     Commons Capitalism may cause some results that are convergent with the goals of socialism, i.e., spreading wealth within a community and reducing the concentration of wealth in individuals; however, socialism is characterized by social ownership³ of the means of production,⁴ as opposed to private ownership⁵⁶⁷ In Commons Capitalism, the means of production would not be socially owned, but privately owned by each CCE. No CCE would be owned directly or indirectly by the public, community, collective, cooperative, or employees as the CCE is designed to have no stakeholders or any other potentially vested or contingent beneficiaries.

          5.     Commons Capitalism is one part of a tripartite that nurtures societal well-being,⁸ promoting private sector initiatives by paying premium wages, profit sharing, and Nordic-style social benefits to workers who, in turn, spread that wealth throughout their communities. The remaining parts of the tripartite are government services (social welfare, universal health insurance, state ownership, and taxation) and Non-Governmental Organizations (NGOs). Commons Capitalism does not require any governmental action, including special tax dispensation or public ownership of property. Additionally, it is not a charitable organization; it benefits only a private class of people, namely workers.

     B.     Objective of This Research.

          1.     Commons Capitalism, as an economic system, is an entirely new concept; however, it is based on traditional laws, customs, and economics to be competitive under modern market conditions, nationally and globally, to ultimately outcompete and replace the greater portion of capitalism. Commons Capitalism is hard to conceptualize because, as a society, we have had a capitalistic perspective on the economy and society for three-hundred fifty years. Many observers try to conceptualize the Commons Capitalism Entity as nothing more than a workers’ cooperative and dismiss it out of hand. Others may try to discard it by giving Commons Capitalism no more credence than they would a perpetual motion machine. However, understanding the concept of Commons Capitalism and its economic driver, a Commons Capitalism Entity, may be like appreciating a complex piece of literature. As Vladimir Nabokov said about such literature, you can’t read it; you can only reread it. Reread this research until you fully understand and appreciate these ideas.

II.    Organic Structural Requirements of CCEs.

     A.     Initial Considerations.

Before determining the structure and the consequent operational mechanics of a CCE certain organic requirements are necessary for a CCE to be viable. If a CCE cannot achieve any of those requirements, the CCE’s success as an economic going concern and accomplishing its chartered purposes are greatly diminished. Those requirements are as follows:

          1.     Separate business organizations must be formed for the commons corporation and each subsidiary entity of a CCE.

          2.     The commons corporation must have no shareholders, members, or stakeholders.

          3.     All officers and directors must be restrained from alienating personnel (e.g., hire, fire, or promote) and property (e.g., buy, sell or lease).

          4.     The state of incorporation for the commons corporation must allow for the most dynamic management system possible which includes

               a.     Delegating the functions of the board of directors,

               b.     Using designators to appoint directors,

               c,     Prescribing the qualifications for the directors, and

               d.     Allowing any director of the commons corporation to bring a derivative suit against the corporation and other directors.

          5.     The commons corporation must be able to organize in a choice of multiple jurisdictions. Each subsidiary entity must operate independently of all other subsidiary entities.

          6.     Both the commons corporation and the subsidiary entity must be able to operate in all foreign (state) jurisdictions.

     B.     Addressing the Organic Requirements.

          1.     Separate Business Organizations. The directive of the subsidiary entity, i.e., to make a reasonable profit, must be unfettered and totally oblivious to the extent possible of the mission of the commons corporation. The commons corporation and the subsidiary entity have different priorities and missions. The differing organizational structures, such as the emphasis on equity and profit in the subsidiary entity versus mission focus in commons corporation—affect business practices and decision-making.⁹¹⁰ The subsidiary entity’s mission is to make, at a minimum, a reasonable profit and cannot be hamstrung by trying to attain the goals of the commons corporation. Therefore, the organizational structure of the subsidiary entity will be that of a wholly owned subsidiary corporation or a limited liability company having its own officers who will operate independently of the management and direction of the commons corporation, subject to the board of directors of the subsidiary, as discussed infra.

          2.     No Shareholders, Members, or other Stakeholders. For existential reasons, a commons corporation must not have stakeholders of any form. The corporation must reinvest net profits distributed from the subsidiary entity into the corporation’s missions. Without shareholders, in particular, the corporation would have no pressure to distribute dividends. Also, the nonprofit corporate organization will prevent employees from claiming a present beneficial interest in net profits. Consequently, the corporation can avoid legal complexities related to ownership rights, profit-sharing, and shareholder derivative suits.¹¹ If individuals could benefit financially or exert undue influence as members or shareholders, conflicts might arise between personal profit and the organization’s mission objectives. It can then allocate funds at its discretion for retirement and disability benefits and to reserve funds for future acquisitions. Table 1, Column B., references those states (including the District of Columbia) that allow nonprofit corporate organizations to have no requirement for members or shareholders. To the extent a statute varies from that attribute, the respective statute is footnoted. It should be noted that those states footnoted in the red section of Table 1, Column B., that require members are disqualified as organizational states for commons corporations.

          3.     Restraints on Alienation of Personnel and Property. The corporation must prevent the unfettered ability of its officers, directors, and those governing its subsidiary entity to alienate personnel and property because such unchecked authority risks undermining the interests of the CCE. Such concentrated decision-making power—for example, the unilateral ability to hire, fire, or promote personnel and to buy, sell, or lease property—can lead to mismanagement and deviation from the CCE mission, as demonstrated by the fraud and financial misconduct¹² surrounding leadership decisions in organizations like the National Rifle Association of America under Wayne LaPierre.¹³ In contrast, embedding a workers’ committee veto into the governance framework ensures that decisions affecting both human and material assets are subject to worker, i.e., third-party, oversight and accountability, thereby reinforcing ethical and sustainable management. This approach aligns with the foundational purposes of commons capitalism and its distinctive financial structure.

          4.     Dynamic Management System. Many states have enacted parts or all the Model Nonprofit Corporations Act (MCNA). The MCNA is a model set of statutes governing nonprofit corporations proposed for adoption by state legislators. Thirty-seven out of the fifty states have adopted a version of the MCNA.¹⁴ The more progressive states adopting the proposed MCNA statute regarding “duties of the board of directors statute,” such as Arizona Revised Statute § 10-3801,¹⁵ allow for a more dynamic management system. Those jurisdictions listed in Table 1, jurisdictions 1-21 in the green section, largely reflect enactments of the MCNA.

               a.     Delegating Functions of the Board of Directors. The commons corporation is obligated to apportion its net profits among five distinct divisions—each governed by an independent director as delineated, infra. To safeguard the autonomy of each division’s administration, neither the director nor the division’s personnel and assets shall be subject to the direct control of the executive director. This arrangement is chiefly designed to forestall any undue accumulation of property or influence by the executive director for personal gain. Moreover, if the governing state statutes permit, the corporation—by virtue of its charter—may allocate specific board functions to individual directors, thereby obviating the necessity for comprehensive oversight of each division by the board. Additionally, the corporate charter and bylaws can be structured to shield each division’s director from interference by the executive director. The states authorizing such delegation by nonprofit corporate organizations are identified in the green section of Column C. in Table 1.

(Under Construction)