originally published for AREA magazine online
Mucca Pazza (on money)
Interview by Kristen Cox
Back in August 2008 when the Rude Mechanical Orchestra rolled through town playing a show at the Co-Prosperity Sphere, I chatted with Elanor Leskiw of Mucca Pazza while hanging outside on the street. It was during our exchange, after hearing about their creative corporate structure where they issue socks as shares to band members, I thought how perfect it would be to interview the members of Mucca Pazza who helped shape this here thing for AREA’s “Everybody’s Got Money Issues.” Tinkering with a point system, standard deviations, ballotbin, c-corp, socks, nerdom, and task forces, Mucca Pazza may be re-hashing what an Employee Stock Ownership Plan (ESOP) would look like for a large group of radical, music makers destined to sustain their art-making for the long haul. I sat down with Mark Messing (MM), Elanor Leskiw (EL), and Meghan Strell (MS) of Mucca Pazza to learn the ins and outs of how this model came to be and what lies ahead for the troupe.
KC – How did it start? What were the initiating questions in finding the right structure for Mucca Pazza?
MM – It’s a chance to get together with thirty people and to experiment with structure that involves money and intellectual property. Independence is really important for this group. And you don’t necessarily have that with a non-profit board. And I think people wanted to control the profits that came in. Almost like we wanted to be our own foundation and give the money to one another or others as we saw fit. I learned two early principles from having put together musical projects before. I realized that there were two qualitative differences. One was when we’re all together doing it for the fun, there’s a certain quality of experience and work that people are willing to put in. And then when I had a project that had funding and we established a pay rate, that people quantified their participation and they would hold back. And so one of the goals of this experiment was to figure out how we could create a structure where people didn’t’ feel they needed to hold back.
EL – We were leaning non-profit. We knew we needed a solution for a tax ID number cause we had income that needed to be credited to some body or something.
MS – And a lot of bands tend to go towards LLC, and a lot of theaters tend to go non-profit and so we looked at both structures.
KC – What was it like to decide what structure to take?
EL – We had a task force to study what the different forms were about, the difference between non-profit, commercial, and LLC, basically. And we also talked about our history a lot so that we could have a definition of this group in mind when we were deciding which form to take. Whatever form we took legally we wanted it to match what we were already doing, as the structure was working really well.
MS – It’s nice that some of the structure’s there, so we don’t have to reinvent everything, but we’re definitely changing, shaping the structure to fit our needs and who we want to be, so to influence the business structure and not vice versa. We are interested in reinventing a way of working together.
MS – It turned out c-corp (commercial corporation) was the one that was going to let us be who we were already.
EL – And we thought we were a non-profit cause it feels like charity cause no one makes any money.
KC – Still?
MM – Yes. We are starting to pay ourselves very small artist fees, quarterly, but it is such a large group. They are based on people’s participation, so we measure people’s time and interest. And the reason we do that is because the most valuable thing with our structure is flexibility. No one is required to spend a minimum amount of time, but the amount of time you spend determines how much influence you have on the project.
EL – We take a percentage of the income and we say, “o.k X percent of all income is going to towards artist fees.” So then we have this pool of money that instead of getting divided evenly among owners or whatever, it’s divided according to the point system. And that’s paid out every three months.
MS – So points become cash and stocks become long-term investment.
KC – So the socks represent the shares of stock?
EL – (Elanor pulls out mucca pazza shareholder socks.) Year one sock [a mini x-mas stocking]. Here’s year two sock [a baby footie].
MS – But it was really about not taking ourselves too seriously and yet we still needed a physical representation of a stock, but it could be anything, so why not a sock!
KC – How would the shares change by the year?
EL – Well we started with 29 initial shareholders. 29 owners. Every year if you’ve been an active member – there is a formula that sort of evaluates participation based on attendance and volunteer hours. And if you pass that threshold of ‘active member’, you are issued another sock. And you have to be an active member for three full fiscal quarters (of the year). Measuring all that gets a little more in detail, but that’s how you earn a sock. And so every year you earn another sock if you’re an active participant.
MS – At this point most people would have 2 socks.
MM – So theoretically, someone may not be very active for a couple of years and get behind on socks. But we want to make sure there is no stigma about not being active.
MS – We needed to have flexibility so that the people who did have time and energy to invest in the project could invest, you know, and have something to show for it.
KC – What is an actual dividend, I mean artist fee?
EL – probably around $50-$60 for three months.
MM – So the really highly paid performers made maybe $400-500 in performances. And that includes touring – sometimes 10 days consecutively. Lots of hours. And even though we are a commercial corporation we have a little good will out there and people have just offered services to us for free because they like us. We’ve gotten some accounting, and valuable consulting.
KC – What kind of services have you been advised on that have been helpful?
MS – In addition to getting incorporated and getting that paperwork in, we looked at a lot of by-laws for other marching bands and read them and sort of took them apart and put them together again to make it look like us and what we’re already doing. And then we had a business advisor, Brad Farris, to go to and say, “Do we need this part? What does this mean?” A lot of what we were already doing was fine and he helped us change the language, really. More than changing what we were doing, we were figuring out to say it in businessesse.
KC – Anything else that you have had people’s guidance around?
ML – That business consultant had a lot to say, right?, specific warnings about corporations and precedents. [in nasal voice] “You should put in your by-laws that you aren’t allowed to sue each other.” (laugh)
MS – Processes for coming and going. And if band members die. You know, stuff that you’re not really wanting to talk about or think about when you’re starting. But you know, if you’re going to have shares, what happens to a share if someone leaves the band? The idea with the by-laws is that they are a guide for worst-case scenarios. So that you know everything should get worked out through conversation, but you have the by-laws to turn to if you have an awkward situation. Everybody’s read and signed on to them.
MM – It was a revelation too that the laws are kinda set up to where things are fair among owners. It’s just among owners and employees that it’s not very fair. So If everyone’s an owner there’s a lot of precendence there to protect people. And of course if you have a company with 40,000 people and everyone were owners you’d still want different responsibility because people have different levels of interest and time. That was really interesting to find out.
MS – In an LLC, there would only be 30 stocks. We made 1,000 and we can give out more every year so we can build equity in the company. But if we were a LLC, every owner would have an equal share and then if somebody left the band, then you’d have to recalculate everything. If you brought someone in, everybody’s share would shift. So, it was a lot less flexible.
MM – We decided to have everyone be an owner but then control their influence according to their participation. And that’s where the by-laws came in. So we wanted to have a way of people gaining their investment over time if they stayed with the group for ten years. We thought they would deserve a larger reward than someone who came for a year or two and experimented and took off.
KC – Is the formula really complicated?
MS – We decided we would do points and so we figured out what our activities are: doing gigs, rehearsals. Load in and load out for gigs was really important cause a few people got stuck with doing that all the time and we wanted to acknowledge that. So we just started tracking points in kind of a minutia sort of way.
MM – Meghan and Tom Howe came up with this algorithm to evaluate the points, to decide where the threshold was for active status.
MS – It was a standard deviation from the mean of the participation of active shareholders.
KC – What did that equal to constitute ‘active’?
MS – It was about 18, on average 11 – 18 per quarter. So let’s say if you had earned 15 points, you’re active that quarter. If you earn less than that, then you’re just marked inactive and you can be inactive for a quarter and still get a sock, but if you’re inactive for two quarters then you know, you put in maybe 30 points and somebody else is putting in 60, 80 or 90 and at some point, you gotta make a call as to who is making the bigger long-term investment.
KC – Is it per hour of time?
MS – No. If you make a rehearsal you get a point. If you load in, you get a quarter a point. If you load in and out, you get half a point. If you do sound check you get half a point and if you do a gig, you get a point.
What are the main task forces?
Tour, the board – in and of itself is a task force. The financial. There’s the bus force – eventually, we will have a bus.
MM – And then once the bus is purchased, then the bus task force will be in charge of maintaining it and re-designing it for friendly fuel and all that sort of thing, and then eventually maybe buy whatever license we need in order to transfer goods across state lines. Because (laughter) since we’re traveling, we might as well ship things as well and work with others groups that way. There’s a publishing task force, which tries to motivate the group to continue to write new music and get it published.
KC – Does that include the production, recording, CD stuff?
MM – That’s more like a record label task force. We call that the promo task force. We have a theatrical task force, which is working on some film ideas and educating the group with the theatrical side of things, about the quality of our performance.
KC – Is it working?
MM – It’s working beautifully so far as long as we are honest about what it is and this is reminding me that while we do have owners, we also have two employees. And we have contractors, a sound person or a merch person who comes in on occasion. Employees are people who are doing things that a lot of us don’t have time to do because the money we get is not enough to sustain us as a living wage, or even a part time wage. So the proceeds we get from gigs and CD sales are mostly invested back into the structure and that includes a couple of employees that are part of the infrastructure.
And in terms of paying our expenses for what we have to do, it’s working. The next trick is keeping our energy up over the years. If we pass a threshold to where the intellectual property that we’re putting out there or the number of people that we reach in the areas that we travel starts to change, or balance a little to where we are making a part-time wage, then that would make it sustainable for some people.
KC – Would you say your philosophy, the way you approach the corporation, is collective, the way you work together. Do you ever call yourself a collective?
EL – We call ourselves mucca pazza. We call ourselves cows. We call ourselves nerds really, more than anything.
MM – It’s a funny contradiction of where we are, even though we’re ideal in some ways, we want to make a socially-conscious corporation. But it’s still at stage one. If someone gets hurt, we’re not at a point where we can take care of them. We can’t offer health insurance. Right now what you get financially is based on your ability to perform. And that’s a survivalist, darwinian model. So we hope that eventually we’ll have enough beyond our sustainability that we can do things like that. And the first step, that’s really important to us, is to have a minimum number of benefits per year. So we feel like we’re giving back into the larger system that allows us to exist.
Where are the challenges?
MS – One of the things I’m fascinated with is the way 30 people communicate. I can only remember one gig when everyone was there. I think it was in New York. There’s often a gig where someone is missing. So that’s the flexibility working. At rehearsals, at the share holder meetings, not everybody is ever in the room at the same time. But, with email and google docs and spreadsheets, we communicate. We sign up for gigs online. Something get’s posted, you check the box if you can go, then if there are enough checks, the manager books the gig. We voted to modify by-laws with ballotbin.com (free online web election and survey service). Not everybody could be at the meeting, so within 48 hours of the meeting, we could all vote online. It was perfect for us.
KC – So that’s not so much a challenge. Sounds like it’s working.
MS – Well, it’s something I’m really fascinated by.
EL – It’s a CONSTANT challenge (laughter).
KC – Have you had to make any difficult decisions, or have hard conversations?
MM – Yes there are hard conversations. And this was a surprise to me. I always thought that if we set up this system that everybody loves, a relative utopia, that it will run along smoothly and there won’t be any problems. But no matter how perfect the system is, people still have their history and their baggage. And so we play out our relationships the way you do in any social structure. So communication and conflict resolution are still just as important as they are in any other structure. Occasionally we have someone who is thoughtless, or there’s a mistake, something gets broken, there’s no way around it. You just have to call people on the phone, sit down around a table and talk through the problem. I’ve been trying to get people to come with me on conflict resolution visits (laughter).