The Hellō Cooperative
To address the governance concerns of a centralized service by of a corporation that exists to only maximize profit, Hellō is governed by a not-for-profit cooperative, Hello Identity Co-op, with a mission of enabling billions of users to prove who they are to millions of developers. While corporations are owned by shareholders, cooperatives are owned by their members for the benefit of the members.
Representing Different Stakeholders
The Hello Identity Co-op has three classes of members: any person using the Hellō service is a member of the user class; any organization can join as a member of the corporate class by executing the corporate membership agreement and paying corporate membership fees; and all Hellō employees are employee members.
Balancing Stakeholder Interests
The user and corporate member classes have equal representation with each class electing three directors. Employees are represented by one elected director.
Separating Policy and Execution
The board of directors represents member interests and sets the policies for management to operate within. Management is responsible for running the interchange to best serve the needs of customers and the members while working within the bounds of the policies set by the board, which include the Hellō Tenants.
1) What is a cooperative?
Cooperatives are businesses that are owned, controlled, and run by their members. Cooperatives can exist to distribute the cooperative’s profits back to members or – as is our case – exist for a mission.
2) What are other examples of successful cooperatives?
Both Visa and Mastercard were initially cooperatives jointly owned by the member banks. Today there are over 3 million cooperatives around the world, with some of the largest being Groupe Crédit Agricole in France, REWE Group in Germany, Zenkyoren in Japan, and State Farm in the United States.
3) Will Hellō become like Visa or Mastercard?
No. While we aspire to have the same or greater impact on digital identity that Visa and Mastercard had on payments, we want to mission oriented and serving all stakeholders rather than be rent seeking. One of the regrets of Dee Hock, founder and early CEO of Visa, was that only banks were members and neither cardholders nor merchants had a voice. We address this with all users being members of Hellō, and corporate membership is open to any organization that wishes to join.
4) Why not a non-profit foundation?
Foundations are typically governed by a board of directors that are chosen by the existing board and/or donors. We think it is critical that our stakeholders have a direct voice in who represents them.
5) Will profits be distributed to members?
While some cooperatives distribute profits based on the patronage of their members, Hellō is a mission-oriented cooperative that exists to provide governance over the interchange.
6) Why aren’t developers members?
We could not devise a mechanism for developers to be democratically represented. We use the developer term to represent the entity that is incorporating Hellō into their applications and web sites. Unlike user and corporate members which have the same type of entity (a human or a corporate entity), the developer can range from a single person to a trillion-dollar organization. As the developer is the customer, we concluded that developers interests are adequately represented, and that the governance model prevents rent seeking.
7) Why are people using Hellō called “user members”?
They are people that “use” a Hellō Wallet. While there are some negative connotations to the term “user”, the term is well understood to mean the person interacting with software.
8) How does the board of directors govern the interchange?
The board of directors sets policies using the Policy Governance® model. From PolicyGovernance:
Policy Governance separates issues of organizational purpose (ENDS) from all other organizational issues (MEANS), placing primary importance on those Ends. Policy Governance boards demand accomplishment of purpose, and only limit the staff's available means to those which do not violate the board's pre-stated standards of prudence and ethics.
9) What are the disadvantages of a cooperative structure?
The most significant challenge for cooperatives is access to capital, as traditional equity is not available to offer investors. We address this with the dual shareholder class corporation that operates the interchange, and view the added complexity is worth the benefits of being governed by our members. The challenges facing democracies are also challenges for cooperatives, such as special interest groups. We hope that having explicit representation from different stakeholders will blunt those challenges.