A software… cooperative?

June 9th, 2010 / Plausible Labs
By: landonf

We often receive inquiries about how Plausible Labs works, what we do here, and what our goals were in deciding to form as a cooperative.

Since people are interested in how we’re organized and what it’s like to work here (more so now that we’re hiring), and our bylaws can be a bit overwhelming to read, I decided to put together a brief FAQ on what our cooperative is, how it’s run, and what our goals are as a company.

How are employees compensated?

Our goal is for salaries to be competitive and market rate. End of year profits are split between the cooperative and it’s members — last year we invested 25% of year-end profits back in the company, and distributed 75% to members. Profit sharing is entirely independent of rank or seniority at the company.

How is the cooperative different from traditional company?

Our main goal in forming the cooperative was to find a way to align employee’s own interests more closely with the corporation’s interests. In terms of legal structure, we’re very similar to a standard corporation — the main differences we’ve adopted to meet this goal are in terms of governance and shareholders.

In a standard stock corporation, the CEO is beholden to the board of directors, and the board is ultimately beholden to the shareholders. The same applies to our co-operative; we have both a yearly-elected board and a CEO, as well as shareholders. However, unlike most stock corporations, only members (employees) of the co-operative may be shareholders, and they may only hold one share.

The board is free to make day-to-day business decisions — while the position of CEO is required by California’s corporate law, the CEO can not act independently of the board. Likewise, there are certain decisions — such as modifying the bylaws — that require a full vote of all shareholders.

Since the board is beholden to the shareholders, and the shareholders may only be employees of the organization, it creates a unique alignment of the corporate, shareholder, and employee interests. Profit sharing is one facet of this — in deciding how to invest the corporation’s resources and time, the board and shareholders must also take into account the employee’s personal interests and the resulting affect on their end-of-year dividends.

What’s the work/life balance like?

It really depends on the state of the company and the member’s own short-term goals, but generally speaking, we stick to a 40 hour work week. Sometimes the opportunity demands more — back in March, we all agreed to fly out to NYC and spent two weeks of 12 hour days working on the Comics iPad application.

What kind of work do you do?

We’re currently focused on contracting work for iPhone and Android, and we’re especially interested in work related to publishing, media, and local/community involvement. We also release a number of our libraries and tools as open source.

While we’re very interested in middleware, tools, and other product development, it requires funding. Our corporate structure requires us to be self-funded; we’ve engaged in contracting to build up our reserve of capital and bring on additional coworkers.

As we’ve grown, we’ve been able to better establish ourselves in the contracting market, charge reasonable rates for our services, and take on larger projects. It’s our goal to leverage this position to hire additional engineers and dedicate part of our contracting profits to product development, allowing us to eventually move the company to being more (but not entirely) product-focused.

How do you become a member/employee? Do you have to buy your share?

After an initial six month candidacy period, our bylaws require that — subject to a consensus vote — we either offer an employee full membership, or extend the candidacy period. If the candidate declines or we do not wish to offer full membership at that time, than the cooperative must either terminate the candidate’s employment or extend the candidacy period.

Each full member must be a share-holder in the cooperative corporation — a capital contribution (currently $1k) purchases the member’s share in the corporation. When a member leaves the cooperative, the coop will automatically redeem this amount in exchange for debt:

Article IX (F): When a member’s membership in the corporation is terminated for any reason, the amount in her or his Member Account (including the original capital contribution) will automatically be redeemed in exchange for debt. The corporation shall repay the debt within five years of the membership termination, with interest accruing at the discount rate — as set by the Federal Reserve Bank of San Francisco — plus two percent (2%), on the amount outstanding at the end of each fiscal year.

No capital contribution is required until a candidate’s application for full membership is offered and accepted, which will not occur until after a six month candidacy period. This is intended to provide the co-op members suitable time to evaluate whether they wish to extend an offer of full membership, and the candidate time to evaluate whether they wish to invest in their share of the co-operative. Like any investment in a corporation, the capital contribution provides a cooperative with additional working capital — however, in the case of Plausible Labs, the current contribution amount of $1,000 is not sufficiently large as to provide a significant percentage of our available capital, but it does help offset a small percentage of the hiring costs.

Some cooperatives — such as Arizmendi Bakery — tend to rely much more heavily on member contributions for working capital, and as such may have higher contribution requirements.

More Questions?

Have a question that isn’t covered here? Feel free to email us at contact@plausiblelabs.com.