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Governance & Ownership — Lantern ​

Core Governance ​

Decision-Making & Control ​

People & Compliance ​

  • Hiring Policy ⭐ NEW — Interview process (max 3 rounds) and family/friend hiring with guardrails
  • Contractor Pathway ⭐ NEW — Contractor vs. employee distinction and conversion process
  • Legal Compliance ⭐ NEW — Legal requirements and compliance checklist

Goal ​

Ensure Lantern remains employee‑led and mission‑protected so the product and community cannot be co‑opted by predatory investors or conglomerates. This document summarizes candidate legal structures, recommended protections, and a starter checklist for counsel.

Candidate ownership models (summary) ​

  • Worker Cooperative (employee-owned)

    • Pros: democratic control, direct employee alignment, hard to sell without member consent.
    • Cons: legal setup varies by jurisdiction; governance overhead.

  • ESOP (Employee Stock Ownership Plan)

    • Pros: employees gain equity value and financial upside.
    • Cons: can still be influenced by external capital unless voting and transfer rules protect the mission.

  • Mission Lock / Stewardship Foundation (golden share)

    • Pros: a nonprofit or foundation holds a special share or veto power that can block mission‑violating changes.
    • Cons: requires trusted stewards and careful drafting.

  • Hybrid (for‑profit with nonprofit steward)

    • Pros: the for‑profit entity operates the product while a nonprofit steward holds mission protections and governance vetoes.
    • Cons: requires governance clarity to avoid mission drift.

  • Dual‑class shares + transfer restrictions

    • Pros: founder/employee control via concentrated voting power and restricted transfers.
    • Cons: may limit outside financing options and needs carefully designed defensive clauses.

Combine employee ownership (Worker Coop or ESOP) with mission protections (stewardship board or mission lock). This provides both alignment and legal safeguards:

  • Employees hold a controlling share of economic interest and/or voting power (via coop or ESOP) and participate in governance.
  • A nonprofit steward or mission board holds a golden share or explicit veto rights over mergers, charter changes, and asset sales that would change Lantern’s mission.
  • Implement transfer restrictions (ROFR/ROFO), supermajority requirements for M&A, and clear anti‑dilution protections.

Rationale: This hybrid model supports employee financial participation while embedding durable mission protections that are hard to override via simple share purchases.

Sample protective clauses (non-binding, for discussion only) ​

  • Supermajority for Charter Changes: "Any amendment to the articles of incorporation that alters the company mission or permits a change of control requires approval by at least 75% of voting shares AND approval by the Stewardship Board."

  • Golden Share (Steward Veto): "A designated nonprofit steward holds a Class S share with veto authority over (i) any sale of substantially all assets, (ii) amendments to the mission statement, and (iii) issuance of new voting classes of stock."

  • Transfer Restrictions: "All transfers of shares shall be subject to a right of first refusal (ROFR) in favor of the company and existing shareholders, and to the company’s preemptive rights to purchase additional shares to prevent dilution."

  • Employee Consent for Sale: "A sale or change of control is effective only if at least two-thirds of employee-members approving the transaction provide consent."

NOTE: The above language is illustrative. Consult a qualified corporate attorney to create enforceable legal documents tailored to your jurisdiction.

Governance processes & operational protections ​

  • Establish a Stewardship Board or Foundation with 3–7 trusted members (could include community representatives, legal counsel, or independent trustees).
  • Define member voting rights and processes (e.g., one-member-one-vote for coop members; ESOP voting via trustee).
  • Regular audits and transparency: publish annual governance reports and financial summaries to members.
  • Succession & dispute resolution: written processes for trustee or board replacement and arbitration rules for member disputes.

Starter checklist (next steps) ​

  1. Decide primary legal form (worker coop, ESOP, or hybrid).
  2. Engage a corporate attorney experienced with cooperatives/mission locks and ESOPs.
  3. Draft articles of incorporation and bylaws including transfer restrictions, supermajority thresholds, and stewardship powers.
  4. Create Stewardship Board charter (powers, term lengths, replacement rules).
  5. Draft employee membership agreements (rights, vesting, buyback rules).
  6. Design ESOP plan if chosen (tax, valuation, administrative setup).
  7. File required corporate registrations and tax elections.
  8. Document governance processes, meeting cadence, and reporting.

Governance communications & culture ​

  • Educate employees and stakeholders on governance rights and responsibilities.
  • Keep governance docs and meeting minutes accessible (transparency strengthens mission commitment).
  • Consider an annual member vote for major policy changes with documented quorums and procedures.

Enhanced Protections Against External Control & Greed (2026 Update) ​

Lantern has implemented comprehensive safeguards to ensure that:

  1. Non-employees cannot make business decisions
  2. "Shareholders" are redefined as lenders (creditors, not owners)
  3. Mission and values cannot be compromised by greed

Key Protections Summary ​

1. Shareholder-Lender Framework ​

  • Traditional "shareholders" would gain voting control and pressure for exits
  • At Lantern, external funders are lenders only with fixed interest rates
  • Lenders have ZERO decision-making power — they are creditors, not owners
  • All business decisions remain 100% with employee-owners
  • See Shareholder-Lender Framework for full details

2. Decision-Making Authority ​

  • Only current employees can make business decisions
  • Non-employees (lenders, advisors, contractors, former employees) have zero authority
  • Clear authority matrix:
    • Level 1 (Constitutional): 75% employee vote required (mission, ownership, M&A, major loans)
    • Level 2 (Operational): Majority employee vote (hiring, compensation, products)
    • Level 3 (Delegated): Role-based authority with transparency
    • Stewardship Board: Limited veto power on mission violations only
  • See Decision-Making Authority for full matrix

3. Anti-Greed Safeguards ​

Twenty enforceable protections against greed-driven decisions:

  • Financial: Profit equality, 3× salary cap, debt cap (2× revenue), no user data monetization
  • Operational: No layoffs without vote, no unpaid overtime, transparent pricing, ethical partnerships only
  • Governance: No equity for non-employees, Stewardship Board veto, no personal guarantees, rotating leadership
  • Mission: Annual mission review, values scorecard, user harm prevention, no exit pressure, community accountability
  • See Anti-Greed Safeguards for all 21 safeguards

Why This Matters ​

Traditional startups often:

  • Accept VC funding → lose control to investors
  • Grant board seats to outsiders → non-employees make strategic decisions
  • Issue equity to "advisors" → dilute employee ownership
  • Pressure employees for exits → force acquisitions or IPOs
  • Cut corners on mission → maximize profit at any cost

Lantern's governance prevents ALL of these.

Funding Strategy (Ideally: Never Needed) ​

Goal: Bootstrapped profitability via merchant revenue

If funding needed, preferred order:

  1. Revenue from merchants (sustainable, mission-aligned)
  2. Employee reinvestment (employees loan to company at low interest)
  3. Community-supported loans (mission-aligned supporters)
  4. Revenue-based financing (repaid from revenue, no equity)
  5. Fixed-term loans (traditional debt, reasonable interest)
  6. Convertible notes (LAST RESORT, requires 75% vote + mission lock)

RED LINES (Never Accept): ❌ Traditional VC equity investment (voting control + exit pressure)
❌ Equity stake >10% to any non-employee
❌ Board seats for non-employees without 75% employee consent
❌ Loans with predatory terms (>15% APR, personal guarantees)

Quick Reference: What Non-Employees CANNOT Do ​

Lenders CANNOT:

  • Vote on any business decisions
  • Demand board seats or governance participation
  • Force acquisitions, IPOs, or exits
  • Veto employee decisions
  • Transfer loans without employee consent
  • Convert loans to equity without 75% employee vote

Advisors/Contractors CANNOT:

  • Make strategic or operational decisions
  • Vote on anything
  • Access employee-only financial information
  • Influence hiring, firing, or compensation

Former Employees CANNOT:

  • Retain voting rights after leaving (unless specified in buyback agreement)
  • Make decisions on behalf of current employees

Enforcement ​

  • Internal: Rotating employee committee investigates violations
  • External: Stewardship Board veto on mission violations
  • Legal: All contracts reviewed by counsel to ensure compliance
  • Transparency: Annual public report on governance and mission alignment

Final notes ​

This document is a starting point to guide internal discussions and counsel review. It is not legal advice. Engage qualified legal and tax advisors to formalize governance documents and ensure compliance with local laws.

If you'd like, I can draft sample bylaw language for one of the options (worker coop, ESOP, or hybrid) to review with counsel — which should I prioritize?

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