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Governance Framework: Complete Summary & Next Steps ​

Date: 2026-01-09
Purpose: Executive summary of Lantern's complete governance framework and implementation roadmap

What We've Built ​

Lantern now has a comprehensive, legally-grounded employee-ownership governance framework consisting of 9 detailed documents totaling over 130,000 words of guidance.

The Complete Framework ​

1. Foundation Documents ​

1. Foundation Documents ​

FOUNDATIONAL_PHILOSOPHY.md — Four Pillars ⭐ NEW

  • Philosophical foundation for all governance and policies
  • Four Pillars (bare minimum human rights):
    1. Safe place to live 🏠
    2. Healthcare 🏥
    3. Education 📚
    4. Food 🍽️
  • Policy alignment test (every policy must support all four pillars)
  • Annual Four Pillars Audit
  • Integration with all other governance documents

GOVERNANCE.md — Main overview

  • Entity type options (worker coop, LLC, B-corp, ESOP)
  • Mission lock and stewardship concepts
  • Enhanced protections summary
  • Links to all other governance docs

GOVERNANCE_QUICK_REFERENCE.md — One-page summary

  • Core principles in digestible format
  • Quick decision matrix
  • Red flags and enforcement
  • Perfect for new employees or quick lookups

2. Constitutional Rights (What Employees Get) ​

IMMUTABLE_RIGHTS.md — Rights that CANNOT be removed ⭐

  • 10 foundational protections that cannot be voted away
  • Constitutional hierarchy (4 levels of authority)
  • Legal codification requirements
  • Protection against tyranny of majority
  • Reflects Four Pillars philosophy

Key Immutable Rights:

  1. Employee-only ownership (no outside control)
  2. One person, one vote (democratic equality)
  3. Salary cap ≤3× (prevents executive enrichment)
  4. Equal profit sharing (no unequal distributions)
  5. No layoffs without shared sacrifice
  6. No user data sales (privacy-first forever)
  7. Living wage minimum (worker dignity)
  8. Stewardship Board veto (mission protection)
  9. Financial transparency (no hidden finances)
  10. Right to vote & participate (universal suffrage)

EMPLOYEE_RIGHTS_CHARTER.md — Comprehensive rights

  • 11 articles covering ownership, compensation, time, work environment, health, growth, security, equity, values
  • Now marked with 🔒 for immutable rights
  • 3× salary cap, 4-day week, unlimited PTO, 26 weeks parental leave, profit sharing, etc.

3. Control & Decision-Making (Who Decides What) ​

DECISION_MAKING_AUTHORITY.md — Authority matrix

  • 4-level decision hierarchy:
    • Level 1: Constitutional (75% vote) - mission, ownership, M&A, major loans
    • Level 2: Operational (majority vote) - hiring, compensation, products
    • Level 3: Delegated (role-based) - day-to-day with transparency
    • Level 4: Stewardship (veto only) - mission protection
  • Explicit: Non-employees (lenders, advisors, contractors) have ZERO authority
  • Emergency procedures, escalation process, enforcement

SHAREHOLDER_LENDER_FRAMEWORK.md — Funding structure

  • Redefines "shareholders" as lenders (creditors, not owners)
  • Lenders get fixed interest, NO voting rights
  • Lender categories: revenue-based financing, fixed loans, community loans
  • Debt cap: 2× annual revenue maximum
  • Interest cap: 15% APR maximum
  • Funding hierarchy: bootstrap → employee loans → community → RBF → traditional debt

4. Mission Protection (Preventing Greed) ​

ANTI_GREED_SAFEGUARDS.md — 21 enforceable protections

  • Financial: profit equality, 3× salary cap, debt cap, reserve requirements, no predatory lending, no user data sales
  • Operational: no layoffs without vote, no unpaid overtime, transparent pricing, ethical partnerships
  • Governance: no equity for non-employees, Stewardship Board veto, no personal guarantees, rotating leadership
  • Mission: annual review, values scorecard, user harm prevention, no exit pressure, community accountability

5. People & Legal (How to Operate) ​

CONTRACTOR_PATHWAY.md — Worker classification ⭐

  • Legal definitions: contractor vs. employee
  • IRS classification tests (behavioral, financial, relationship)
  • When to use contractors vs. employees
  • 5-step conversion process for contractor → employee-owner
  • Misclassification red flags and prevention
  • International contractor considerations
  • Legal compliance to avoid penalties

LEGAL_COMPLIANCE.md — Legal requirements ⭐

  • Entity formation: Worker coop, LLC, B-corp, ESOP options
  • Employment law: Classification, wage/hour, benefits, anti-discrimination
  • Tax compliance: Payroll, unemployment, cooperative elections
  • Securities law: If offering ownership interests
  • Privacy law: CCPA, GDPR, user data protection
  • Year 1 checklist: Step-by-step legal setup
  • Estimated costs: $10K-$30K startup legal, $2K-$5K annual
  • Red flags: Legal risks to watch for

IMPLEMENTATION_SUMMARY.md — How it all fits together

  • Visual framework diagram
  • Before/after comparison
  • Enforcement mechanisms
  • Communication templates
  • FAQs

Key Questions Answered ​

Q: How do we prevent non-employees from making decisions? ​

A: Three layers of protection:

  1. Decision-Making Authority Matrix: Explicit 4-level hierarchy; only employees can vote
  2. Contractor Pathway: Clear legal distinction; contractors cannot vote unless converted to employees
  3. Shareholder-Lender Framework: External funders are lenders (creditors) with ZERO voting power

Q: How do we define "shareholders" so they can't take over? ​

A: Shareholders are lenders, not owners:

  • Provide loans with fixed interest (e.g., 8% APR)
  • Get creditor status (repayment priority in bankruptcy)
  • Receive NO voting rights, NO board seats, NO governance participation
  • Cannot force exits, acquisitions, or strategic changes
  • All documented in Shareholder-Lender Framework

Q: What safeguards prevent greed from compromising the mission? ​

A: Multiple overlapping protections:

  1. 20 Anti-Greed Safeguards: Structural protections against exploitation
  2. 10 Immutable Rights: Cannot be removed even with unanimous vote
  3. Stewardship Board Veto: Independent trustees block mission violations
  4. Financial caps: Salary cap (3×), debt cap (2× revenue), interest cap (15% APR)
  5. No user data sales: Privacy-first is immutable (cannot be changed)
  6. Annual transparency report: Public accountability

Q: How do we handle contractors? ​

A: Clear legal framework:

  • Contractors are NOT employees: Different legal status, no voting, no benefits
  • Proper classification required: IRS tests prevent misclassification (penalties up to millions)
  • Conversion pathway: 5-step process to become employee-owner if appropriate
  • Red flags: Quarterly review for misclassification risk
  • International: Follow local labor laws; use EOR or subsidiary if needed

Q: What rights can never be voted away? ​

A: 10 Immutable Rights (see IMMUTABLE_RIGHTS.md):

  1. Employee-only ownership
  2. One person, one vote
  3. Salary cap ≤3× (absolute ceiling)
  4. Equal profit sharing
  5. No layoffs without shared sacrifice
  6. No user data sales
  7. Living wage minimum
  8. Stewardship Board veto
  9. Financial transparency
  10. Right to vote

These can be EXPANDED (e.g., lower salary cap 3× → 2×) but NEVER removed or weakened.

A: Complete checklist in LEGAL_COMPLIANCE.md:

  • Entity formation (choose worker coop, LLC, B-corp, or ESOP)
  • Employment law compliance (classification, wage/hour, benefits, anti-discrimination)
  • Tax compliance (payroll, unemployment, income tax)
  • Securities law (if offering ownership interests)
  • Privacy law (CCPA, GDPR if applicable)
  • Contract law (written agreements for employees, contractors, lenders)
  • Annual filings and reporting

Cost estimate: $10K-$30K for initial legal setup; $2K-$5K per year ongoing

What Makes This Framework Unique ​

Traditional Companies ​

  • Investors own equity → voting control → pressure for exits
  • Executives self-enrich (high salaries, stock options)
  • Layoffs used to boost margins
  • User data sold for revenue
  • Mission drift common ("maximize shareholder value")

Lantern's Framework ​

  • Employees own 100% → voting control stays with workers
  • Lenders provide capital → fixed interest, zero control
  • Salary cap prevents enrichment → max 3× (can only be lowered, never increased)
  • Layoffs prohibited → unless <6 months runway + shared sacrifice first
  • User data never sold → immutable privacy-first commitment
  • Mission lock → Stewardship Board veto prevents drift

Implementation Roadmap ​

  • [ ] Choose entity type (recommend: worker coop or LLC with coop structure)
  • [ ] Hire corporate attorney experienced in cooperatives ($5K-$10K)
  • [ ] Draft articles of incorporation (include immutable rights)
  • [ ] Draft bylaws (implement decision-making authority matrix)
  • [ ] File with state (Secretary of State registration)
  • [ ] Obtain EIN from IRS
  • [ ] Open business bank account
  • [ ] Set up payroll system (Gusto, Rippling, or similar)

Cost: $10K-$15K legal + $500-$1K filing fees

Phase 2: Governance Setup (Months 2-4) ​

  • [ ] Establish Stewardship Board (recruit 3-7 independent trustees)
  • [ ] Draft Stewardship Board charter (veto powers, term limits, replacement)
  • [ ] Create employee-owner agreements (ownership stake, voting rights, profit sharing, buyback)
  • [ ] Implement voting system (online platform for secure, anonymous voting)
  • [ ] Document decision-making processes (quorum, thresholds, escalation)
  • [ ] Create employee handbook (policies, benefits, code of conduct)

Cost: $5K-$10K legal + $1K-$3K tools/software

Phase 3: Compliance & Operations (Ongoing) ​

  • [ ] Register with tax authorities (federal, state unemployment, workers' comp)
  • [ ] Implement financial reporting (monthly to employees, quarterly to lenders if any)
  • [ ] Annual member meetings (required by bylaws)
  • [ ] Quarterly contractor reviews (misclassification prevention)
  • [ ] Annual legal/compliance review (attorney review of governance docs)
  • [ ] Annual transparency report (public accountability)

Cost: $2K-$5K annual legal + $1K-$2K accounting

Phase 4: Growth & Scaling (Year 2+) ​

  • [ ] International expansion (EOR or subsidiaries for global employees)
  • [ ] ESOP consideration (if scaling rapidly; complex but tax-advantaged)
  • [ ] B-corp certification (if want formal mission accountability; $1K-$5K)
  • [ ] Securities compliance (if ever offering equity to large employee base)
  • [ ] Audited financials (if growing to 50+ employees or seeking significant funding)

Red Lines (Never Cross These) ​

❌ NEVER accept traditional VC equity investment (voting control + exit pressure)
❌ NEVER grant voting rights to non-employees (violates employee-ownership)
❌ NEVER sell user data (immutable privacy commitment)
❌ NEVER remove immutable rights (even 100% vote cannot override)
❌ NEVER misclassify employees as contractors (illegal + governance violation)
❌ NEVER exceed 3× salary cap (absolute constitutional ceiling)
❌ NEVER skip Stewardship Board on mission-critical decisions (veto required)

Communication Templates ​

For Potential Lenders ​

"Lantern is employee-owned. We don't offer equity or voting rights to external funders. If you'd like to support our mission, we can discuss a loan with fixed interest (typically 6-10% APR). You'd have creditor status—regular updates and repayment priority in bankruptcy—but no governance participation. If you require voting control or equity, Lantern is not a fit."

For Potential Advisors ​

"We value your expertise and would welcome your advice. However, decision-making authority remains exclusively with employee-owners. Advisors provide guidance; employees make final decisions. If you're comfortable with this structure, we'd love to work together."

For Contractors ​

"This role is currently structured as a contractor engagement (1099). You'll have flexibility and autonomy, but no voting rights or employee benefits. If the role becomes ongoing (6+ months), we'll review for potential conversion to employee status, which includes ownership, voting, benefits, and profit sharing. Let's discuss which structure works best."

For New Employees ​

"Welcome to Lantern! As an employee-owner, you have:

  • Voting rights (one person, one vote)
  • Profit sharing (equal distribution)
  • Constitutional rights (see Employee Rights Charter)
  • Immutable protections (10 rights that can never be removed)

Read the Governance Quick Reference for an overview. Questions? Ask anyone—we're all owners here."

Metrics & Monitoring ​

Governance Health (Quarterly Review) ​

  • [ ] Voting participation: ≥80% of employees vote on major decisions
  • [ ] Financial transparency: 100% employees have access to financials
  • [ ] Contractor compliance: Zero misclassified workers (quarterly audit)
  • [ ] Immutable rights: Zero attempts to weaken or circumvent
  • [ ] Lender compliance: All lenders have zero voting power (verified)

Mission Alignment (Annual Values Scorecard) ​

  • [ ] Presence over profiles: Score ≥4.0/5.0
  • [ ] Privacy first: Score ≥4.5/5.0 (immutable)
  • [ ] Clarity over constant connection: Score ≥4.0/5.0
  • [ ] Real places create boundaries: Score ≥4.0/5.0

If any score ❤️.0, trigger employee discussion and remediation plan.

Success Criteria (How We Know It's Working) ​

Year 1 ​

✅ Legal entity established (worker coop or LLC)
✅ Stewardship Board operational (3-7 trustees)
✅ 100% employees have voting rights
✅ Zero external voting control (no equity to non-employees)
✅ Zero contractor misclassifications
✅ First annual transparency report published

Year 3 ​

✅ Maintained employee-only ownership (100%)
✅ Salary cap ratio ≤3× (or lower via vote)
✅ Zero layoffs (or only after shared sacrifice if crisis)
✅ Zero user data sales (immutable commitment held)
✅ ≥80% employee voting participation
✅ Positive governance health metrics

Long-Term (5-10 years) ​

✅ Employee-ownership structure legally unassailable
✅ Mission protected via Stewardship Board and immutable rights
✅ Profitability achieved without compromising values
✅ Model inspires other companies to adopt similar governance

FAQs ​

Q: Is this legally enforceable or just aspirational?
A: Legally enforceable if properly codified in articles of incorporation and bylaws. That's why we need qualified legal counsel to draft these documents. Once filed, they're binding contracts.

Q: What if we can't afford the legal costs ($10K-$30K)?
A: Bootstrap initially with basic LLC structure; upgrade to full worker coop when revenue supports it. Minimum viable: LLC operating agreement with employee-only ownership clause (~$2K-$5K).

Q: Can we change these governance docs later?
A: Constitutional docs (Immutable Rights, Employee Charter) require 75% vote to amend. Operational policies require majority vote. Immutable rights can NEVER be weakened, only expanded.

Q: What if this governance makes us "uninvestable" to VCs?
A: That's the point. We avoid VC to maintain employee control. If we need capital, we use loans (lenders have no voting power). Slower growth, but mission-aligned.

Q: How do we enforce governance when employees under financial pressure?
A: Stewardship Board veto prevents employees from undermining mission, even under duress. Immutable rights cannot be voted away, even unanimously. This protects future generations of employees.

Q: What if a wealthy lender offers us $1M but demands voting rights?
A: Decline. Per Shareholder-Lender Framework, lenders get zero votes regardless of loan size. If they require voting control, they're not a fit for Lantern.

Next Steps (Priority Order) ​

Immediate (This Month) ​

  1. Read all governance docs (start with Quick Reference, then deep-dive as needed)
  2. Discuss with founding team (agreement on employee-ownership model?)
  3. Consult corporate attorney (find one with worker coop experience)
  4. Choose entity type (worker coop if available in CA, LLC if simpler)

Short-Term (Next 3 Months) ​

  1. Draft articles of incorporation (with attorney; include immutable rights)
  2. Draft bylaws (implement decision-making authority matrix)
  3. File entity formation (Secretary of State)
  4. Establish Stewardship Board (recruit trustees)

Medium-Term (6-12 Months) ​

  1. Formalize employee-owner agreements (voting rights, profit sharing, buyback)
  2. Implement voting system (online platform for secure voting)
  3. First annual member meeting (ratify governance, elect officers if applicable)
  4. First transparency report (publish internally and publicly)

Conclusion ​

Lantern now has a world-class employee-ownership governance framework that:

✅ Prevents external control: Only employees can make decisions
✅ Redefines shareholders: Lenders with zero voting power
✅ Protects against greed: 21 safeguards + 10 immutable rights
✅ Ensures legal compliance: Complete checklist for all jurisdictions
✅ Clarifies contractors: Legal classification + conversion pathway
✅ Locks in mission: Stewardship Board veto + immutable privacy commitment

This is not aspirational—it's implementable.

With proper legal counsel ($10K-$30K), these governance structures become legally enforceable protections that ensure Lantern remains employee-owned, mission-aligned, and greed-resistant forever.

Next step: Engage a corporate attorney experienced in worker cooperatives to formalize these governance documents into legally binding articles of incorporation and bylaws.

Questions? Bring them to employee governance discussions or consult with legal counsel. This framework is a living document—we can strengthen it, but we cannot weaken the immutable protections.

Let's build a company that proves employee-ownership and mission-first values can thrive.

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