CouchSurfing:
Expressions of Concern from the General Membership

October, 2011

Who are we and why are we concerned?

We represent thousands of CouchSurfing (CS) members, donors and volunteers. We found meaningful work and global connections to each other through our commitment to the ideals of CS as a non-profit organization.

CouchSurfing Intl. was established as a non-profit corporation in April 2003 and registered with the state of New Hampshire as a public charity in 2007. It was dissolved and its assets were acquired by a newly-created for-profit C-Corporation with the name “Better World Through Travel Inc” in Delaware in August 2011. Since its inception, the organization received >US $6,000,000 in member donations and verification fees. Community volunteers freely donated volunteer labor, time and talent which created much of the network’s current value. (12) We find it difficult to believe that the verification income was insufficient to operate a travel website and disagree that these gifts should be sold to investors. We believe that these gifts belong to the community that created them.

We believe these changes betray the relationship the organization had with its network of volunteers and members, the relationship that shaped CouchSurfing into what it is today, and are concerned that its values will not persist.

Why are we entitled to an opinion? What is our history with CS?

Volunteers built the website and the community network – promoting CS while travelling, organizing events and welcoming new members. Members did more than use the website as a free service; they invested earnest effort to create a common new set of accepted values: global hospitality, respect for cultural differences, tolerance of social choices, trust in community, open sharing of time and self in the pursuit of informal diplomacy and friendship. They promoted these ideals and were encouraged to do so by the management, who said that CouchSurfing would always remain a non-profit organization (1, 2).

Our history is intimately tied with the life and growth of CouchSurfing as a non-profit. We provided oversight, guidance, research data for scholars, money, time and talent. CouchSurfing Intl. applied for the IRS 501(c)(3) status in 2007, but was denied in 2011 because the IRS disagreed with their assertion that it was charitable, not social, in nature. CouchSurfing’s finances and non-profit governance were chaotic and non-standard. The organization gradually reduced the amount of financial information it shared with the community, and, increasingly ignored warnings about spending decisions that could compromise the 501(c)(3) status: the managers spent no money on charitable or educational programming during its life as a non-profit. The redacted IRS letter of 501(c)(3) denial is linked below. (8)

In August 2011, CouchSurfing began operating as a for-profit C Corporation. Its founder and CEO, Casey Fenton, secured $7.6 million in venture capital for an undisclosed share of the company to investors, two of which are Benchmark and Omidyar, the others unknown (3, 4, 5). The company is now incorporated in Delaware and registered in California.

Legally, CouchSurfing is now a C Corporation. Additionally, it has applied for, and received, the B Corp certification, issued by B Labs for a fee (6). According to B Labs, a company must have been operating for at least 6 months before qualifying for B Corp certification; this requirement was not met by the for-profit CouchSurfing C-Corporation (11). B Corp certification does not guarantee legal consequences, for failing to adhere to its standards, and does not require independent verification of the report on which the assessment is based; only 20% of the submitted survey responses are required to be documented. For those standards to be strictly enforced, with legal consequences for non-compliance, CouchSurfing would need to be reorganized as a Benefit Corporation.

Officially, the management offered “no other choice”, as justification for their re-incorporation as a for-profit C-Corporation, and furthermore said that the transformation would improve the organization. We feel entitled to object to these events because we collectively built the connections solidifying the network and promoted its use globally.

Why should anyone care?

Members feel personally betrayed (9, 10). CouchSurfing, as a community, was built by the members, for the members, under the explicit guarantee from its founders that CouchSurfing will always remain a public non-profit entity. The management convinced members that they were creating a value for public benefit and then sold that value. The use of CouchSurfing for profit is forbidden to all members, as per Terms of Use 2i, yet the founders and investors, also members, have taken the liberty to break the agreement to abide by the rules prescribed by this document. (13)

In addition to personal negative emotion, members realize that charity’s fraud hurts all charitable giving; it contributes to a culture of cynicism that encourages people to accept fraudulent activity as the cost of doing business in a competitive world. We reject both the passivity of cynicism and the normalization of fraud.

We do not accept failure to attain the 501 (c)(3) exemption as a justification for a for-profit CS future. CouchSurfing managers have created a corporate form which is not held accountable to the same standard in which members believed they were contributing in neither spending nor governance nor disclosure. We also believe the B Corp label is being advertised in a misleading way to obscure issues of transparency. Past behavior of the organization outlined here, by no standard, inspires trust in the managers’ voluntary effort to run CouchSurfing as a socially responsible business.

We think you should care because CouchSurfing as you know it cannot exist without the input of idealists who care for and believe in its mission, and for them to believe it, it needs to be genuine.

What is our position?

We demand that CouchSurfing be true to the ideals it claims to support; yet we are not willing trust in-house communication. We demand that CouchSurfing be restructured as a Benefit Corporation (7), and allow all members the opportunity to delete any information uploaded, and permanently sequestered, on the company’s servers. We believe that the C-Corporation was not created, in the interest of the community but, in the investors’ and founders’ financial interests.

We demand that shares, issued to management, be placed in a charitable trust or foundation serving the CS mission since they represent a value created by, and belonging to, the community. The change in legal designation, to for-profit Benefit Corporation, will legally oblige transparency and accountability of the management and members who generously contribute to our common mission; we expect no less of those who control its stakes.

We strongly believe we do have a say and will be taken seriously by the management, as our concerns are echoed by the most active members, those that play a major role in creating the CouchSurfing experience.

References

1.       http://www.couchsurfing.org/group_read.html?gid=7161&post=330266#post359529

2.       http://www.couchsurfing.org/group_read.html?gid=7161&post=330266#post333183

3.       http://www.couchsurfing.org/news/article/145

4.       http://blog.couchsurfing.org/casey/2011/09/couchsurfings-new-president-and-ceo/

5.       http://blog.couchsurfing.org/casey/2011/08/what-happened-to-501c3/?fb_comment_id=fbc_5006936117302_633137_5006947767302

6.       http://www.bcorporation.net/

7.       http://3blmedia.com/theCSRfeed/California-Benefit-Corporation-Bill-Governor-Brown%E2%80%99s-Desk

8.       http://www.irs.gov/pub/irs-wd/1125045.pdf

9.       http://www.couchsurfing.org/group.html?gid=45507

10.   http://www.facebook.com/groups/147236205364838/

11.   http://www.bcorporation.net/index.cfm/fuseaction/company.report/ID/5e086197-f44e-4448-9519-5e35d5bde1e2

12.   http://www.couchsurfing.org/mission_and_vision.html?link=organization_finances.html&title=Finances

13.   http://www.couchsurfing.org/terms.html

 

 

 

 

 

 

Summary

 

1.       As volunteers and donors to the non-profit CS entity, we feel our good will was betrayed when CS incorporated as a C-Corporation.

2.       We doubt the integrity of CouchSurfing International’s status as a socially responsible B-Corp certified corporation, given its past management as a non-profit.

3.       We feel that CouchSurfing International’s non-profit management team failed to get the 501c3 or manage the donation money appropriately; we therefore object to these same managers being shareholders of the CouchSurfing C-Corporation. We request that these shareholders place their shares in a charitable foundation.

4.       We object to CouchSurfing’s use of our uploaded personal data for profitable gain.

5.       We want legally binding future guarantees of accountability and transparency in operations and, to this end, demand CouchSurfing’s reorganization into a Benefit Corporation.

6.       We feel we are entitled to these demands given the value we, collectively, contributed to the success of CouchSurfing International.

7.       We ask you to support us because we believe the CouchSurfing experience as we know it cannot be preserved in these circumstances and because we don’t have to set a precedent for a non-profit organization being privatized for personal enrichment.

 

 

Questions for CS’ Managers and Board of Directors

 

1.       What justifies the secrecy behind the details of the current corporation (ownership)? (If it is legally allowed, why is that right exercised; what is the motive?)

2.       Likewise, what is the non-legal motive to exercise the right to not publish the full IRS denial letter?

3.       Members agreed to submit data and use the network operated by a non-profit entity. Regardless of what’s legally possible, how do you justify changing the way you manage that data one-sidedly?

4.       Volunteer contributions in time, expertise and money were given to a non-profit entity. What do you say to volunteers who would not have contributed if they knew what just happened [the change to C Corp] was possible?

5.       Would you be willing to issue voting rights to all volunteers working on the code and let them decide whether it goes Open Source? If not, please provide rationale on why you believe they do not have the right to make that call.

6.       Why did you not exercise the right to protest to the IRS denial and keep the information that you were denied from members?

7.       A lot of people have been refused straight answers in Skype calls and were told you [Casey] must consult other people to answer some questions. Yet you [Casey] claim you personally guarantee staying true to the mission. Do you or do you not have the amount of control required to do so?

8.       The 2010 independent audit documents US$ 3,9000,000 in carry forward losses. What are they, how were they generated and how were they covered?

9.       Who serves on the CS Board of Directors, currently? Who will serve, as voting members, in the future? Who will serve as non-voting members?

10.   When can we see the the corporate bylaws which you say prevent a future shareholder lawsuit attempting to force the company to maximise profits? What safeguards are there against a majority of the board taking a decision to maximise profits at the expense of the mission/vision? How can you be certain that they will supersede the law if challenged?

11.   Will you answer questions given to you by the members of the group opposing the change publically and in your own name instead of by proxy using Skype?

12.   Do you believe that CS members have a right to own, and delete, their own data?

13.   If you depend on others inside the organization to decide on whether CS will reincorporate as a Benefit Corporation, why did you accept a change that allowed you to lose your say?

14.   Can you understand we’re concerned about the motives of people within the organization that would not want to be bound by legal requirements a Benefit Corporation brings?

15.   What do you believe is the true motive expressed to members by CouchSurfing? Will it continue to be a hospitality network?