Pirates (not the software kind) have something Twitter doesn’t – a business model

Who would have thought. I mean really we’re talking about pirates here – of the Somalia kind – and one would think that this is the last place that you would some kind of business model but apparently they do indeed have one. At least according to the newest Security Council to Somalia report (link leads to PDF report) these Somali pirates operate on a very corporate level when it comes to handing out the spoils of their piracy.

The section of the much larger report that deal with this is titled Annex III – Piracy business model and starts out with this

The typical piracy ‘business model’ has evolved since the Monitoring Group’s

December 2008 report (S/2008/769). The success and expansion of pirate militias

has necessitated new organizational arrangements and practices. Although

leadership of pirate networks remains anchored in Puntland and central Somalia,

participation in maritime militias and investment in pirate operations is open to a

broad cross-section of Somali society. The refined business model guarantees every

participant in the operation, if successful, a well-defined percentage or share of the

ransom money.

The typical piracy ‘business model’ has evolved since the Monitoring Group’s December 2008 report (S/2008/769). The success and expansion of pirate militias has necessitated new organizational arrangements and practices. Although leadership of pirate networks remains anchored in Puntland and central Somalia, participation in maritime militias and investment in pirate operations is open to a broad cross-section of Somali society. The refined business model guarantees every participant in the operation, if successful, a well-defined percentage or share of the ransom money.

Like every good corporate entity payments are based on shares owned as well as fixed costs:

To be eligible for employment as a pirate, a volunteer should already possess a firearm for use in the operation. For this ‘contribution’, he receives a ‘class A’ share of any profit. Pirates who provide a skiff or a heavier firearm, like an RPG or a general purpose machine gun, may be entitled to an additional A-share. The first pirate to board a vessel may also be entitled to an extra A-share.

At least 12 other volunteers are recruited as militiamen to provide protection on land if a ship is hijacked, In addition, each member of the pirate team may bring a partner or relative to be part of this land-based force. Militiamen must possess their own weapon, and receive a ‘class B’ share — usually a fixed amount equivalent to approximately US$15,000.

After a successful job pay-outs went down like this

When ransom is received, fixed costs are the first to be paid out. These are typically:

• Reimbursement of supplier(s)

• Financier(s) and/or investor(s): 30% of the ransom

• Local elders: 5 to 10 %of the ransom (anchoring rights)

• Class B shares (approx. $15,000 each): militiamen, interpreters etc.

The remaining sum — the profit — is divided between class-A shareholders.

hat tip to BoingBoing

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