Managing the complexity of climate change�https://papers.ssrn.com/abstract_id=3636845

Presented online 7 October to 17th Hellenic Society for Systemic Studies (HSSS) National & International Conference, joined organized with the 11th European Union for Systemic (EUS) International Congress.

Keynote presentation 8:15 – 8: 45 pm Sydney time

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By Shann Turnbull PhD

sturnbull@alumni.harvard.edu

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Principal: International Institute for Self-governance

Sydney, Australia, Cell: +61418 222 378

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In the meanwhile, degradation of the atmosphere, oceans, fresh water, soils and bio-diversity will inevitably lead to a loss of human wellbeing that result in many humans suffering a “Ghastly future”*

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Climate change is a wicked complex problem:

Created by a plague of people on the planet

Requiring a reduction in the population

from around 8 to 2 billion people

This could take centuries

*Bradshaw, C. J. A., Ehrlich, P. A, & et. al (2021), in: Dale Nimmo (ed.), Underestimating the Challenges of Avoiding a Ghastly Future, Frontiers in conservation science, 13 January, https://www.frontiersin.org/articles/10.3389/fcosc.2020.615419/full

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Wicked tragedies of the global commons

Require complex inter-related global solutions

engaging with 8 billion citizens

Ashby (1957) informing us the impossibility of directly amplifying control of complex variables without a requisite variety of supplementary co-regulators.

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Ostrom (2009) informing us that the tragedies of the commons can resolved without markets or State hierarchies by adopting her eight design rules for introducing polycentric governance

Survival of perhaps some or our progeny, scattered in hot circular economies, located above raised sea levels could be achieved by applying the insights of:

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Recommended survival strategy for humanity

The tax incentive for shareholders would be conditional upon them changing corporate constitutions to enhance the Ostrom design rules so that CEO’s of the US Business Round Table could meet their 2019 objective of providing benefits for all their stakeholders.

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By providing benefits to all stakeholders, corporations would become what Ostrom describes as a Common Pool Resource (CPR). But unlike natural CPRs, that was the focus of her research, corporations could act proactively to contribute remedial initiatives to mitigate problems locally.

Introduce self-funding tax incentives to transform corporations to become co-regulators for globally managing locally the multiple complex variables of climate change so as to engage with most of the eight billion stakeholders creating the problem.

“Polycentric governance” describes distributed decision-making

(Practiced by Indigenous Australian for over 65,000 years)

Australian controlling body for skiing.

As the honorary CEO of the non-incorporated Australian National Ski Federation from 1974-78 I wrote its first corporate constitution that federated each self-governing State Council, made up or self-governing clubs that would compete with each. The States competed against each other, but cooperated to form a self-governing Federation to compete against other nations, but cooperate with them to create a self-governing World controlling body, that in turn cooperated with other sports to form the self-governing Olympic Committee.

No need for Markets or State Hierarchies as articulated by Ostrom in her Nobel Prize acceptance speech (2009).

Australian Institute of Company Directors

A progenitor organisation prior to 1990 was the non-profit Company Directors Association of Australia. I joined its single board in 1976. When its founding chair/CEO retired to manage his family CDA “service” companies I rewrote its constitution in 1978. Self-governing checks and balances were introduced at each level of the holarchy that included the polycentric state bodies to motivate local initiatives to create the largest organisation of its kind in the world with over 45,000 members.

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Examples established by Shann Turnbull in 1970’s

Businesses containing “polycentric republics”

The John Lewis Partnership, UK, 1945 (pp. 190-194)

Formed with an employee buyout from 1929 to 1945. Now one of the largest retailers with around 80,000 employees with geographic distributed control forming “self-governing polycentric republics”

Mondragón Corporación Cooperativa (MCC), Spain, 1956, (pp. 200-225 etc.)

Established by Catholic priest to create employment and now a nested network of democratically self-governed vertical and lateral multi-stakeholder cooperatives with around 80,000 members forming networks of “self-governing polycentric republics”.

VISA International Inc. US, 1970 (p. 249, etc.)

Established by founding CEO Dee Hock allow competing banks to issue a common credit card with each bank having its own board to create “self-governing polycentric republics”. Became partially public traded in 2006 with employees now 19,500.

Japanese Keirestsu (p. 173, etc.) with supplier and customer firms as “self-governing polycentric republics” around a major shareholder being a trading house or bank.

Case studies of firms containing hundreds of constitutionally established boards or decision making centres identified in my PhD dissertation completed in 2000. Refer to: The governance of firms controlled by more than one board: Theory development and examples, https://papers.ssrn.com/abstract_id=858244

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Figure 6.1 Mondragón Corporacion Cooperativa (MCC)

With dates when components were formed up to 1996

(From page 130 of Turnbull PhD Thesis completed in year 2000)

80,000 worker owners (holons)

12 Relationship groups/holons

200 cooperatives (holons)

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https://papers.ssrn.com/abstract_id=858244

Nested self-governing units

Creating a holarchy of holons

Polycentric governance revealed:�On page 218 of Shann Turnbull PhD Thesis in 2000�

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Refer to : “Figure 6.3, Control network of Mondragon activities”, posted at:https://papers.ssrn.com/abstract_id=858244 ).

�Methodologies of analysis compared�Bytes make social constructs like costs irrelevant�For relating the governance processes in our brains to our social institutions�

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What are bytes?

• The capacity of any computer to receive, store process and/or communicate data is measured in bytes.
• A byte is made up of eight binary bits. Bits are represented be zeros or ones. So a byte can represent a “word”.
• Each bit represents perturbations in matter and/or energy that makes a difference.
• The transaction of bytes is dependent upon perturbations in matter and/or energy so minimizing bytes economizes the energy and/or matter to communicate or store data.
• Humans have limited ability to receive, store, process and transmit bytes as identified in my PhD Thesis. This provides a fundamental criteria for designing organizations to reliable govern complexity.

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UNITARY BOARD SUBJECTED TO:

Data & information overload without requisite variety of cross checking communications and control channels

Functions and activities of a unitary board

(Source: Tricker 1994: 245 & 287)

Australian Employee Ownership Association

© International Institute for Self-governance Slide No. 11

NETWORK GOVERNANCE INTRODUCES:

Decomposition of decision-making labour with distributed intelligence

Australian Employee Ownership Association

© International Institute for Self-governance Slide No. 12

Why and how polycentric governance provides sustainable competitive advantages

Australian Employee Ownership Association

© International Institute for Self-governance Slide No. 13

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Turnbull, S. & Guthrie, J. (2019) ‘Simplifying the management of complexity: As found in nature’, Journal of Behavioural Economics and Social Systems, 1(1): 51-73,

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From:

“Control and Communication in the Animal and the Machine”

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To:

Control and Communication in the Animal, Machine and/or Social Organisations (within and/or between any specie).

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By:

Using bits or bytes as the unit of analysis

Extending the remit of the Science of Cybernetics

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Turnbull, S. (2008a) ‘The Science of Governance: A Blind spot of risk managers and corporate governance reform’, Journal of Risk Management in Financial Institutions, 1(4): 360–368.

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Turnbull, S. (2002b) The science of corporate governance. Corporate Governance: An International Review, 10(4): 256–272, http://ssrn.com/abstract_id=316939.

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How economic models of humans do not reflect reality�

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Wearing, A. J. 1973. Economic Growth: Magnificent obsession, presented to the 44^th Australian and New Zealand Association for the Advancement of Science Congress, August, Perth, Australia. (Reproduced as Table 3.4 on page 103 of Turnbull PhD Thesis (2000). https://papers.ssrn.com/abstract_id=858244

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Economic models of human nature do not reflect reality�40 years later acclaimed scholars still assumed static models of human behaviour not dependent upon context!

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Jensen & Meckling (2013) state: Five alternative models of human behavior that are commonly used (though usually implicitly) are:

1. The Resourceful, Evaluative, Maximizing Model (REMM),
2. Economic (or Money Maximizing) Model,
3. Psychological (or Hierarchy of Needs) Model,
4. Sociological (or Social Victim) Model, and the
5. Political (or Perfect Agent) Model.

None of these five models are consistent with reality each human has various behaviors dependent upon his environmental context Wearing (1973) and Ostrom (2009).

Jensen, M. & Meckling W. (1994) ‘The Nature of Man” Journal of Applied Corporate Finance 7(2): 4-19, (Revised 2013). https://ssrn.com/abstract=5471

Wearing, A.J. (1973) Economic growth: Magnificent obsession, presented to 44^th Australian and New Zealand association for the Advancement of Science, Perth. (Reproduced in Table 3.4, p. 103 of Turnbull (2000).

Complementary ~ Contrary Nature of humans�(And of the universe)�

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Kelso, J. A. S. & Engstrøm. D. A. (2006) The Complementary Nature, Cambridge, MA, MIT Press (Introduced the tilde “~” symbol to show the interdependency between complementary~contrary relationships)

Chinese Symbol for Yan~Ying relationships

Kelso, J. A. S., Dumas, G. & Tognoli, E. (2013) ‘Outline of a General Theory of Behavior and Brain Coordination’, Neural News, 37, pp. 120-131.

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�Brains possess bi-directional coupling�Down-up ~ Up-down to create “tensegrity”�with checks and balances from active and reactive neurons� �

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Kelso, J. A. S., Dumas, G. & Tognoli, E. (2013) ‘Outline of a General Theory of Behavior and Brain Coordination’, Neural News, 37, pp. 120-131.

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Our brains have “no Chief Executive Officer Neuron”

Kurzweil, R. (1999) The age of spiritual machines: When computers exceed human intelligence, p. 84, New York: Viking.

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Toxic governance arises if an organization possesses:

1. A single board/committee/decision-making centre because its members obtain absolute power to identify and manage their own conflicts of interest to corrupt absolutely themselves the organization and society;
2. A simple command and control hierarchy as they can act unfairly, exploit, demean and/or abuse subordinates, require subservience and frustrate individual wellbeing by inhibiting human contrariness required to provide internal checks and balances and reliably manage complexity;
3. Property rights in excess of investors’ time horizons to overpay investors in a way not reported by accountants and so not noticed by others to create inequality, inefficiency and so bigger taxes and government.

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Removing toxic governance

Using tax incentive:

To change corporate constitutions:

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1. Introduce dynamic property rights to allow stakeholders to replace stakeholders at rate determine by extent of tax deduction.

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• Provide directors only the power to manage the business by separating the power to govern the corporation to a separate board elected democratically by shareholders to simplify directors duties and eliminate their systemic unethical and dysfunctional toxic conflicts of self-interest.

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• Introduce and resource a requisite variety of stakeholder advisory boards with qualified advocates to protect, and unlike regulators, promote mutual interests.

Enhancing Ostrom design principles

The tax incentive to change corporate constitutions would allow polycentric governance to be converted into an ecological form of governance as found in nature by:

1. Explicitly recognising the need to follow indigenous practices of bottom-up distributed decision-making;
2. Institutionalising polycentricity WITHIN, as well as between, organisations by applying the design rules to corporate constitutions
3. Introducing the need to establish systemic contested decision-making processes so as to introduce tensegrity with a requisite variety of decision-making centres and associated communication and control channels to allow self-regulation, self-management & governance;
4. Introducing dynamic property rights to limit:
• The ability of investors to become overpaid in a way accounting doctrines do not report because they do not recognise investor time horizons, and
• The size of organisations to human scale.

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Ecological governance identified by Ostrom can makes corporations a “common good” benefiting all stakeholders as wanted by worlds biggest investor (Fink 2018)

Separation of governance powers from management allows independent bottom-up and outside-in stakeholder intelligence to integrate governance into Corporate Social Responsibilities to monitor and control misconduct

Shareholder Annual General Meeting

Chaired by nominee of Stakeholder Congress

(Elects & approves pay for directors & governors)

Stakeholder Congress

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Board of governors

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Employee Assembly

Supply Forums

Customer Councils

Community

Committees

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Auditor,

Valuers, etc

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Management Board

(May include non-executive directors)

Elects & pays

Inform

(Informal reporting not shown)

Elects

Nominates

One cumulative vote per share per director

One vote per share to protect minorities

Advises on director nomination & pay to protect minorities

Informs with no votes

Nominates chair of shareholder meetings

Suggests Key Performance Indicators (KPIs) for hiring & paying directors

For publicly traded, large private firms, non profits and government corporations:

To make Shareholders and Regulators accountable for treatment of stakeholders

Determines KPIs for paying executives

Stakeholders become “supplementary” co-regulators to protect and further their own & mutual interests with entity

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Regulator

Accountable to Stakeholders & Gov.

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Firm accountable to regulator

Turnbull, S. (2002). A New Way to Govern: Organisations and society after Enron, The New Economics Foundation: London, http://www.corporation2020.org/Papers_files/Turnbull2.pdf

Ecological; governance creates:

“A new model of corporate governance”

Wanted by Larry Fink the biggest asset manager in the world in 2018 to provide benefits for all stakeholders and supported by 180 other members of the US Business Round Table in 2019

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Larry Fink, the CEO of BlackRock,� the largest investors in the World wants:� “A new model of corporate governance”�

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To provide benefits for all Stakeholders (2018)

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WASHINGTON – Business Roundtable today announced the release of a new Statement on the Purpose of a Corporation signed by 181 CEOs who commit to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.

https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans

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Business Roundtable Press Release, August 19, 2019

This would make corporations a “common good” promoting with global corporations promoting global common goods and services

Compelling political attractions

• Cost of tax incentive recovered from tax on stakeholder benefits and shrinking cost of welfare, regulation, and size of government;
• Politicians win votes from all citizens including investors and corporate executives like the US Business Round Table;
• Subsumes and democratises complicated and expensive employee share ownership plans and their tax costs;
• Citizens obtain direct voice and influence over corporations affecting them to enrich democracy reinforced by enterprises being kept to human scale by forming “offspring” businesses;
• Localising local ownership and control of alien enterprises to retain surplus profits locally to benefit voters.

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14 million US citizens possess employer shares valued at $1.4 Trillion driven by tax benefits

Appendix of Shann Turnbull 1975 book�Democratising the wealth of nations�https://papers.ssrn.com/abstract_id=1146062

Showing varies tax incentives required to provide investors with a bigger profit quicker in return for endowing stakeholders with their equity

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Metrics updated in :Turnbull, S. 1997, ‘Stakeholder governance: A cybernetic and property rights analysis’ Corporate governance: An international Review, 5(1): 11-23. Republished in: Tricker, R. I. (ed.), Corporate Governance: The History of Management Thought: pp. 401- 413, Ashgate Publishing: London.

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Details of separation or powers with Michael Pirson¹

Turnbull, S. & Pirson, M. 2019, ‘The future of management: network governance’, The European Financial Review, May 1, pp. 45-50, http://www.europeanfinancialreview.com/the-future-of-management-network-governance/.

Pirson M. & Turnbull, S. 2018, 2:45 minute video contribution to World Commons Week, October, 6-12, International Association for the study of the commons, refer to: https://www.youtube.com/watch?v=2II05m6m6wY&t=21s

Pirson, M. & Turnbull, S. 2017, ‘Decentralized governance structures are able to handle CSR induced complexity better’, Business and Society, pp. 1-31, http://ssrn.com/abstract=2709413.

Pirson, M. & Turnbull, S. 2015, ‘The future of corporate governance: Network governance – A lesson from the financial crisis’, Human Systems Management, 34 (2015), 81-89, http://ssrn.com/abstract=1570924.

Turnbull, S. & Pirson, M. 2012, ‘Could the 2008 US Financial Crisis been avoided with Network Governance?’ International Journal of Disclosure and Governance, 9(1): 1–27, http://ssrn.com/abstract=1855982.

Pirson, M. & Turnbull, S. 2012, ‘A New Approach to Fix Broken Governance’, ISEI Insight 13: 28-35, Second Quarter, IESE Business School, University of Navara, http://www.ieseinsight.com/doc.aspx?id=1366&ar=3.

Pirson, M. & Turnbull, S. 2011, ‘Corporate Governance, Risk Management, and the Financial Crisis- An Information Processing View’, Corporate Governance: An International Review, 19(5): 459–470 September, http://onlinelibrary.wiley.com/doi/10.1111/j.1467-8683.2011.00860.x/abstract.

Pirson, M. & Turnbull, S. 2011, ‘Towards more humanistic governance: Network governance structures’ The Journal of Business Ethics, 99(1): 101–114http://ssrn.com/abstract=1679450.

¹Pirson is an Associate Professor of management at Fordham University in New York City and a co-founder of the Humanistic Management Network, refer: https://michaelpirson.com/about/

Endowment corporations to democratise & localise wealth�Selected journal articles of Dr Shann Turnbull

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1973, 'Time Limited Corporations', Abacus: A Journal of Business and Accounting Studies, Sydney University Press, 9(1): 28-43, June.

1990, ‘Re-inventing corporations’, Journal of employee ownership, law and finance, 2(4): 109-136. (Re-published in Czech as Podniková Organizace, 1991).

1991, Statická Nebo Dynamnická Vlastnická Práva (Static or Dynamic Property Rights) Central Research Institute for National Economy, Prague, Kveten, (Ownership is never for ever, Localising corporate ownership, Socialising capitalism).

1993, 'Democratic Capitalism; Self-financing local ownership and control', Human Systems Management, 12(4): 333-348.

1993, 'Flaws and Remedies in Corporatization and Privatization', Human Systems Management, 12(3): 227-252.

1998, ‘Should ownership last forever?’ Journal of Socio-economics, 27(3): 341-353.

2000, 'Stakeholder Governance: A cybernetic and property rights analysis'. In: R. I. Tricker, ed. Corporate Governance: The history of management thought, pp. 401–413, Ashgate Publishing: London.

2014,. ‘A proposal for self-governing corporations’. In: Philip Blond, ed., The Virtue of Enterprise: Responsible Business for a New Economy, 52-54, January, ResPublica: London, http://www.respublica.org.uk/wp-content/uploads/2014/01/jae_The-Virtue-of-Enterprise.pdf.

1974 United Nations article published in four languages�

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Turnbull, S. 1974. ‘Fading our with a profit’, Development Forum, p. 3, United Nations: Geneva

Transfers surplus profits to stakeholders with less tax, size of governments to fund a universal wellbeing income

Three versions for PhD dissertation by Shann Turnbull�

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Turnbull, S. 2000, The governance of firms controlled by more than one board: Theory development and examples. PhD Thesis, Macquarie Graduate School of Management, https://papers.ssrn.com/abstract_id=858244

Turnbull, S 2013, (PhD summary) Transaction Byte Analysis for Researching Organisations, http://ssrn.com/abstract=2220047

Turnbull, S. 2014, Republished as: Designing resilient organisations: With operating advantages for the public, private, non-profit and government entities and their stakeholders, with Key Words, Concepts, Subsequent literature, and examiners report, Lambert Academic Publishing, Saarbruchen, Germany, https://papers.ssrn.com/abstract_id=2473393

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Awesome challenges for system scientists:�

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Educating political leaders, CEO’s and society that the natural order of things is not:

top-down hierarchies or markets:

But networks with bottom-up contested self-governing sub-systems that contain and share contested integrity of a requisite variety of both competing and cooperating channels of communication, control and distributed decision-making centres as found in the human brain.

Who is ready to accept the challenge?

When, when where and how?

Let me know at:

sturnbull@alumni.harvard.edu