Our current financial institutions are failing us. This article explores a number of new public benefit financial institutions like a new stock exchange, public benefit banks, a new form of venture capital and the like. Each of these new models is designed to serve humanity and the planet, not the other way around.

::::::::

More wealth has now become concentrated in the hands of the elite than in the years leading up to the stock market crash of 1929. The middle class has lost trillions of dollars in accumulated wealth, largely transferred to the top of the economic pyramid.

Much has been written about this phenomenon, but solutions are in short supply. Doesn't so much power concentrated in so few hands leave the rest of us powerless? Actually no, there are vast resources available to us.

Those resources reside in the "wealth of the commons," that is, the natural and human resources in our hands and heads. The key is figuring out ways to redeploy those resources to directly benefit society and the planet, not just the few.

The current system can survive only if we keep feeding it. By turning our energies in other directions, we can fundamentally change the world for the better.

The futurist Buckminster Fuller famously said "You never change things by fighting the existing reality. To change something, build a NEW model that makes the existing model obsolete." We at the Commonwealth Group have taken his words to heart.

Today we have unprecedented tools for collective efforts, like the Web, email, social networks and so on, that can rapidly assemble groups of likeminded people around a common goal. All it takes is a small, dedicated group to develop a plan and take it to the rest of the world. As Margaret Mead said, "Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has." We think it is time to change the world.

Below are a number of ways we have come up with that can help to change the world for the better.

Financial systems are the key

At the heart of all our institutions is the need for money. Money is directed and controlled by the world's financial systems -- ripe and ready for fundamental change. The near collapse of basic credit to small business and the artificial propping up of the "too big to fail" Wall Street banks are just some of the signs that those financial systems are already collapsing.

In the meantime, as in nature, other organisms spring up in the gaps left by the old dominant system and the more those new organisms nurture and support each other, the more likely their survival.

Applying those ideas to financial systems, we have identified the following areas where we can create new means by which the world of finance can serve us rather than the other way round. We refer to these replacements as Public Benefit Financial Institutions.

Stock exchange

No financial institution has come to epitomize the worst of the current system more than the speculation driven excesses of stock exchanges. Exchanges have been called nothing more than gambling casinos favoring insiders who increasingly appear to control the game.

Stock exchanges should fill a vital role in providing businesses with capital. Yet they seem consumed with the buying and selling of exotic financial instruments from which vast fortunes are made, often at the expense of others, rather than focus on that less profitable role of providing capital.

It is not just the financial manipulators that benefit while hurting the rest of society. We also find that companies listed on those exchanges are caught up in a similar "profit at all costs" game. Short-term profit-driven behavior that trumps all other objectives appears to be behind their unparalleled influence over our governments, the despoiling of our environment and the destructive cycles of our economies.

What is needed is a new kind of stock exchange, one that returns to the fundamental role of providing capital to companies and is an honest arena for shareholders to buy and sell their ownership interests in those companies. It should also be one that rewards the corporate behavior that benefits society and the planet, so that companies not only prosper but behave in ways that we all would like.

Such a stock exchange is not only possible, it is being created. For more details, see Public Benefit Stock Exchange.

Banks

Right alongside stock exchanges stand the mega banks, the "too big to fail" (or more correctly "too big to exist") institutions who inflict enormous harm while pursuing their own interests.

They now appear to be primarily focused on their profits and are rarely fulfilling their mandate of providing the loans needed to keep our economies afloat. Such institutions may benefit their owners, managers and a limited number of others, but certainly not Main Street.

What we need is a new form of banking, designed to serve the rest of society and not a select few. We call this Public Benefit Banking and a nationwide movement is underway to establish this new form of banking. See http://www.commonwealthgroup.net/banking.html for articles on this topic.

Private equity/venture capital

Small business is the engine of job creation around the world. The U.S. Small Business Administration estimates that over 70% of all new jobs are created by companies with fewer than 20 employees. If one of our chief goals is to nurture job creation here and around the world, we need to ensure that money is available to those small businesses.

Anyone who has tried to start a new company, needing capital to survive and grow, knows how incredibly difficult that task can be. Our outline of the Conventional Funding Model give a good feel for the challenges entrepreneurs face in trying to raise funds.

If we are to change that paradigm, we need to come up with another way to get capital into the hands of those entrepreneurs. Because we cannot ignore the issues that cause these funding difficulties, we have developed a Breakthrough Funding Model for Small Companies that provides a means to bring substantial amounts of institutional funds down into local, small companies while providing solutions for those institutional funding sources that address the key problems of the conventional funding model. While we have built this program to specifically fit our CEED Program, the system has universal application.

It aggregates a large number of investments in many small companies into a common entity that is able to go public, thereby providing participants with the means to extract their investment capital without having to liquidate or sell the small companies that received the individual investments. At the heart of this approach is the idea of power in numbers, implemented in a structured way.

Corporate cooperatives

Our unique funding model contains a key ingredient that can be a solution for another class of companies existing small and medium sized companies who either need more capital to grow or need a means of allowing their investors to get their investment back with profit. Like the CEED Program, it aggregates multiple smaller companies into one or more larger ones, all built from the ground up rather than the top down (the current dominant theme).

We call this model "corporate cooperatives" in that it resembles cooperatives, which are normally a collection of individuals in some joint effort, but in this case the individual units are individual corporations who band together for their mutual benefit. Like individuals in a cooperative, each corporation still maintains their individual identity, but realize greater power and capabilities by joining forces with others.

Cooperatives achieve critical mass and effectiveness by the aggregation of many individuals in such institutions as credit unions. Corporate cooperatives are intended to provide a group of smaller corporations a similar critical mass in the one area where they individually might not survive and succeed on their own being a public company.

Public companies often wield far more economic clout than their private counterparts, primarily because they are able to access much larger amounts of funds, and usually at much lower cost, than private companies. That is because owners can freely buy and sell their ownership interest (shares) in those companies through the public stock markets, whereas the owners of private companies are very restricted in their ability to buy and sell their shares. Corporate cooperatives give the owners of those smaller companies the ability to own freely tradable shares. See Corporate Cooperatives for a more in-depth exploration of this concept.

Base of the Pyramid (BoP)

Fair and just economic development can only occur if we also address the needs of less developed countries. Progress has been made on helping the 4-5 billion poor at the base of the economic pyramid. One major success has been found in microcredit, an idea originated by the Grameen Bank and its Nobel Prize-winning founder, Muhammad Yunus.

Microcredit has been successful in lifting millions of people out of poverty, especially women and their families. However, microcredit alone will not suffice. Most of its beneficiaries reside not at the very bottom of the economic pyramid, which is populated with the homeless, often beggar population, but rather those with a home (no matter how modest) who populate the next layer up.

However, these microcredit beneficiaries usually do not build businesses that can grow into family businesses passed on generationally or that can be expanded to additional locations. That economic stratum resides just above the typical microcredit beneficiary and likewise microcredit rarely provides them with the resources they need. Yet that same community is also off the radar screen of traditional funding sources like banks, finding itself just below the lowest layer normally served by traditional financial institutions.

We see this unsatisfied gap being filled by two mechanisms. The first is a BoP variant of our CEED Program and its unique funding model. That is, a program that can provide both funding and a support structure for new small businesses that would sit just above microcredit candidates. These businesses would typically employ a number of workers (whether from the owner's family or not) and be capable of expansion both in size and location. And like the CEED Program model, this would best be done with proven, replicable businesses models.

In the developed world, the most successful model built around the idea of replicating businesses is franchising. Some have taken that basic idea and are now promoting the idea of micro-franchises in the developing world (see Microfranchising at the Base of the Pyramid, for current thinking). One problem with microfranchising relates to financing of the franchisees and the revenue sharing models of traditional franchises. We would add to that mix the CEED funding model and how the providers of capital can realize a different profit means than through franchise fees and royalties alone (the traditional franchising revenue model), thereby increasing the number of microfranchising opportunities.

The corporate cooperative concept likewise has a place at the base of the pyramid. Like smaller companies in the developed world, similar companies in less developed countries can benefit by banding together, especially as that might afford them access to the public capital markets and other benefits of public companies. This BoP variant of corporate cooperatives, in combination with the BoP variant of the CEED Program, microfranchising and the CEED funding model, all taking advantage of the public benefit stock exchange, can yield dramatic improvements in BoP economic development.

Legislative changes needed

Finally, we citizens can do many things for ourselves to change the economic paradigm, but some can only be done by our elected representatives at the state and federal levels.

We are working to introduce new -- and modify existing -- statutes to establish an environment that nurtures and supports our other efforts in creating a more socially and environmentally responsible business community. The key effort at the state level concerns state laws governing the creation of corporations and similar business entities, and in particular, the rules under which they must operate.

We have also identified certain state statutes and federal tax and securities laws that currently work against our goal of helping businesses large and small grow in socially responsible ways, and are working to secure modifications to these regulations.

Measuring corporations

There is one other area where corporations can be influenced to change their behavior. That has to do with the way the investment community evaluates companies. Recently there has been a substantial movement to incorporate additional key performance indicators in those evaluations along social, environmental and governance (ESG) dimensions.

These ESG metrics can be used by stock exchanges and the investment community to push corporations into directions that will prove more beneficial for the company, its owners, employees, customers and suppliers, as well as society and the planet. See this section of our website for more information on both these legislative and metrics efforts.

Authors Website: http://www.commonwealthgroup.net

Authors Bio:
Michael Sauvante is a California entrepreneur with over 30 years business experience. He has founded and run over a half dozen small companies, mostly in the San Francisco Bay Area and Silicon Valley. Along the way he accumulated a great deal of knowledge about entrepreneurism and all the issues that entrepreneurs have to contend with. He has had considerable start-up experience which has led him down many paths, including: extensive experience with new venture definition and creation, team building, fund raising, licensing, patents, joint venture agreements, mergers and acquisitions, spin-outs, and the whole topic of sustainability and the triple bottom line (social, environmental and economic bottom lines).

Michael Sauvante is the Executive Director of the Commonwealth Group (www.commonwealthgroup.net), creator of multiple new progressive business concepts concerning stock exchanges, banks, venture capital and community economic development, and is the principal author of the eBook, "So, You Want To Be An Entrepreneur?"

Previously, Mr. Sauvante co-founded a high technology holding company (Seertech Corporation, 2005-2007) to consolidate multiple companies (Rolltronics, VoltaFlex and InnoSigns) launched by Mr. Sauvante and to provide a platform for growing new ones. He was the entrepreneurial catalyst and visionary of the team. He is knowledgeable and experienced in licensing, and occasionally wears an inventor's hat.

Mr. Sauvante previously worked at HP Labs, during which time he initiated a new business development project intended to take technologies that were not finding commercial outlets within the company and provide them a more conducive environment to survive and grow.

Before working at HP, he founded and managed NovaQuest, an IT consulting company; NovaQuest/proQuaestus, a software company that developed an international trade database related to commodity classification and customs duty rates; Interconnect Options, which specialized in telecommunications systems; Warm Springs Development Associates, a real estate development company that led the initial development phase of a 700-acre high technology industrial park in Fremont, California; and I.E.S. Construction Services, a services company in the heavy equipment field of the construction industry.

In 2002, Mr. Sauvante was recognized by the World Economic Forum from Davos Switzerland as one of approximately 35 "Technology Pioneers" selected from around the world. He is known for his progressive thinking in the field of sustainability and corporate social and environmental behavior and responsibility.

His full bio can be seen at: http://www.commonweatlthgroup.net/sauvante.html