Profit-sharing arrangements among Somali pirates

The UN Dispatch went digging through the Security Council to Somalia report on Somali pirates, and discovered a fascinating and corporate arrangement for dividing the spoils:
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 of 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...

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

The Somali Pirates' Business Model (via Kottke)

(Image: Somali Pirates, Wikimedia Commons/US Navy, Public Domain)


  1. I remember reading Hakim Bey’s theories about how being a Barbary pirate was a better deal financially and socially than being some lower-class schlub in Christian Europe, and that was why it worked. And I remember thinking to myself: “I wonder if this is true…”

    And here we see that it might be. Or maybe those Somalis read ‘Pirate Utopias.’

  2. I think the somali pirate’s situation is not nearly as cut and dried as our news puts it. Before somalia imploded ships had to pay exhorbitant fees to pass through the straits there, fishing was regulated and followed international law, toxic waste dumping was not tolerated. This whole piracy thing started when shipping companies, knowing the somali government was basically gone started withholding payment, the first boardings were only to collect fees owed by contract. This then was followed by vicious fishing wars in which somali fisherman were frequently caught and killed in illegal long line nets. Recently illegal nuclear waste dumping has been rampant there. clearly the somali’s have gone a little far, but the US would do much worse (and has) when our international waters have been violated to a much lesser extent. A little research shows that the somali piracy is but a tiny piece of the problems occuring there.

    1. While I believe you that there is more going on than just people suddenly attacking our ships, if we do are doing something wrong it’s the work of the government to do something about it. And if the government isn’t doing anything then those pirates should should, in stead of attacking OUR ships, rally against their government OR stage a coup and do things differently. I feel no remorse when people handle in such an undiplomatic way.

  3. The first one (Pirate) has finally been shot. Personally, it’s taken way too long to get to this point. Merchant ships should have started protecting themselves the moment this issue started. It’s unbelievable how many ships have been hijacked. (Totally not a right-wing conservative here, but can’t stand the fact that no-one is actually doing anything to the pirates other than telling them to ‘leave us alone’.)

  4. Enter Cartman: “We drink and we pillage and we do what we please
    We get all that we want for free
    We’ll kick your ass
    And rape your lass
    Somalian pirates we
    So with a yo ho ho
    And with a yee hee hee
    We take to the African sea
    We’ll brave the squalls
    And bust your balls
    Somalian pirates we!!!!”
    Exit Cartman

  5. Though the situation has a muddled origin, I was pleased to hear that a pirate had been taken out by a mercenary. It is long overdue. As a retired private soldier I was wondering when someone would take the obvious step of hiring some adequate security and fighting fire with fire. I know people in the field and what was holding ship owners back was fears that they would get screwed in international court. The “private security” (mercenaries) that shot the pirate are basically well outside of international law, but what are you gonna do? the somali’s have been escalating the situation and better that pirates die than innocents who are not starting any violence, it’s about time someone shot back.

    1. Hear hear, a “decent” mercenary! Well, could you explain in what way is a mercenary a better human being than a pirate? And you claim that mercenaries are outside of the “international law”? Somewhat like pirates, but you are the “good guys”? Sounds to me like a B class holywood story. Not real at all. I’ll support pirates rather than mercenaries in any case.

  6. I don’t have any love of piracy in general and the Somali pirates in particular. However this sort of situation doesn’t just happen because some guys decide to become pirates. Having no functioning government in the country has to be a big part of the problem.

    As to why Somalia is so screwed up that it has no government, I have no idea, but I would bet money that the trade and foreign policies of the developed world have contributed to the situation. So, once again, we can’t just point the finger and say it’s not at least partly our own fault.

  7. Econtalk had an episode on Pirates of the 18th century:

    “Peter Leeson of George Mason University and author of The Invisible Hook talks with EconTalk host Russ Roberts about the economics of 18th century pirates and what we can learn from their behavior. Leeson argues that pirates pioneered a number of important voluntary institutions such as constitutions as a way to increase the profitability of their enterprises. He shows how pirates used democracy and a separation of powers between the captain and the quartermaster to limit the potential for predation or abuse on the part of the captain.”

  8. Rym • #5 & prepareducate • #9

    so the penalty for piracy is extrajudicial summary execution?

    1. The penalty for piracy is not extra-judicial execution. Shooting pirates in self defense is not summary execution. We do not say that someone who gets shot and killed trying to rob an armored car was “executed”. They got shot before they could kill the guard, in self defense. No difference here.

    2. Well, yes, if the pirates are coming at you with deadly force, you either submit, or fight back. What’s the alternative for the crew? You can make a distress call on your radio about the bad men shooting at you and trying to steal your boat, and wait for justice to intervene before you are killed, wounded, or taken hostage, or you can resist. Getting shot at is in the job description for pirate.

  9. Is it surprising they have a system? Thought that was part of the idea behind “organized” crime.

    I live in Nairobi. Not sure if I have seen any of the pirates around these parts. There are however quite a few wealthy Somalis. Guess you could say that the trickle down effect is boosting Kenya’s economy. These guys spend their money on land, houses, vehicles and loads of other stuff.

    I spoke with a Kenyan Somali living here. He mentioned that an interesting effect of the piracy in regards to the Somali coast is that a lot of the fish have come back. The pirates have scared off all the foreign fishing boats. Not sure if this can be verified or not.

    So Piracy – bad for corporations, good for the environment? eh.. maybe not.

  10. Probably not just fishing boats either, #14. They’re probably scaring off boats carrying garbage and waste that are dumping illegally, like so many boats did for a good amount of time before the pirates began showing up.

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