worker cooperative intro

RED EMMA'S • INTRO TO WORKER COOPERATIVES

Intro to Worker Cooperatives

Version 0.1, April 2014


History of cooperatives

There are many antecedents for cooperatives in the commons—the many ways that communities have shared control of their means of survival for the majority of human history.



Cooperatives proper really only get started as a response to the rise of industrial capitalism in 18th and 19th centuries: the basic idea is that by banding together, people have more economic power.



Most early cooperatives were consumer cooperatives; workers forming associations to purchase larger quantities at better prices, selling them to themselves in cooperatively owned stores.



The Rochdale Society of Equitable Pioneers, founded in 1844, laid the basis for the modern cooperative movement


What is a cooperative?

1. Voluntary and Open Membership

2. Democratic Member Control

3. Member's Economic Participation

4. Autonomy and Independence

5.●

5. Education, Training, and Information

6. Cooperation among Cooperatives

7. Concern for Community



1. Voluntary and Open Membership● Cooperatives are voluntary organizations, open to

all people able to use its services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.



2. Democratic Member Control● Cooperatives are democratic organizations

controlled by their members—those who buy the goods or use the services of the cooperative—who actively participate in setting policies and making decisions.



3. Members' Economic Participation● Members contribute equally to, and democratically

control, the capital of the cooperative. This benefits members in proportion to the business they conduct with the cooperative rather than on the capital invested.



4. Autonomy and Independence● Cooperatives are autonomous, self-help

organizations controlled by their members. If the co-op enters into agreements with other organizations or raises capital from external sources, it is done so based on terms that ensure democratic control by the members and maintains the cooperative’s autonomy.



5. Education, Training and Information● Cooperatives provide education and training for

members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperative. Members also inform the general public about the nature and benefits of cooperatives.



6. Cooperation among Cooperatives● Cooperatives serve their members most effectively

and strengthen the cooperative movement by working together through local, national, regional and international structures.



7. Concern for Community● While focusing on member needs, cooperatives

work for the sustainable development of communities through policies and programs accepted by the members.


Cooperatives today

● 1 billion people worldwide in cooperatives● 300 largest co-ops have annual revenues of $1.6

trillion● 130 million people in co-ops in the US●

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Types of cooperatives

● Consumer cooperatives– Co-op grocery – REI

● Financial cooperatives– Credit union

● Producer cooperatives– Organic Valley, Land of Lakes, Ocean Spray

● Purchasing cooperatives

– ACE Hardware● Housing cooperatives● Worker cooperatives

– Red Emma's!

● Hybrid cooperatives


Worker cooperatives: political economy

In a standard capitalist employment situation, a worker receives a wage, but the product of their labor is worth more than what they are paid. That surplus is turned into profit, and the owner of the capital controls its distribution.

● In a worker cooperative, the workers jointly own and control the capital,

and they can decide how to allocate any surplus

themselves in a democratic fashion.

Strictly speaking, there is no profit and no wages.


Worker cooperatives: examples

Mondragón:

Founded during the Franco years by a Catholic priest and a handful of workers, now a major complex of cooperatives that acts at multinational scale.



Emilia-Romagna:Massive interconnected network of coops in an area of Italy that was a few decades ago one of the poorest, now one with the least unemployment and highest average standard of living. Multiple (Communist, reformist, and Catholic!) co-op federations building regional power, with support of government policies encouraging reinvestment in the co-op economy.



Argentina

Worker cooperative sector

exploded in the wake of the 2001 financial crisis.



Isthmus Engineering

(Madison, WI)

Advanced industrial automation, about 30 worker-owners.

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Equal Exchange (MA)

About 100 worker owners, dedicated to providing a platform for large scale truly fair trade coffee sales in the US

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Cooperative Home Care Associates (NYC)

About 1000 worker-owners in a company of 2000; women of color (primarily) doing formerly precarious domestic care work. Institutionalized the gains of an innovative SEIU organizing drive. ●



Evergreen (Cleveland, Ohio)

About 75 worker-owners in three co-ops, designed to service stable demand for goods & services from large non-profits like universities & hospitals, and to create green jobs in underserved communities.●



WAGES (Bay Area)

A nonprofit incubator for green housecleaning cooperatives for immigrant women. ●

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Real Pickles (MA)

Company operating a 100% solar-powered local organic pickle factory crowdfunded a conversion to a worker cooperative to lock in its social mission for the long haul.

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New Era Windows

After occupying their factory twice, a portion of the UE workers in Chicago decided to go the worker cooperative route, and successfully bought out enough the old company to restart production cooperatively.

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Cincinnati Union Coop Initiative

Multiple unions working together to create green worker-owned jobs

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Worker cooperatives: legal/financial

Cooperatives?

Some states have provisions for cooperative ownership structures, these may or may not be suited to worker cooperatives.

In states like Maryland, you have to fake it, by using other business structures and tweaking them for use as the legal basis of a cooperative.


Option #1: Corporation

Each cooperative member owns a share in the business; all shares are equally valued and have equal voting power.

Advantages: Lower corporate income tax, separate corporate person which can do things like own the assets of the company, possibility of using shares to raise external (none-voting) equity

Issues: Corporations are required by law to have certain governing structures, which may not be compatible with all models of workplace democracy.



Option #2: Limited Liability Company (LLC)

Each cooperative member is an equal partner in the business; an operating agreement spells out cooperative rights and responsibilities.

Advantages: Much more flexibility to define a structure that reflects you actual concrete commitment to workplace democracy.

Issues: All profit and ownership of property passes through to members at the individual level, where it's taxed at a potentially higher rate.



Worker cooperatives: management

A default option, especially for small, politically motivated cooperatives, is the collective structure, where management and governance are both maximally horizontal and everyone does everything.



The collective model doesn't necessarily scale well:● In a collective of 5, there are just 10 person-to-person relationships

that need to work well for the project to function● In a collective of 10, there are 45● In a collective of 25, there are 300● In a collective of 50, there are 1,225● In a collective of 100, there are 4,950● ….●



Solution:

Separate management from governance, with management happening collectively at a departmental level, and governance happening through a representative elected body.



One further complication related to scale is that while small collectively managed teams work well for some kinds of work, they aren't necessarily the best option for running an efficient business in certain situations.● Sometimes tighter coordination is needed to match production to

sales demand● Sometimes cooperative members lack necessary business expertise● Sometimes the business has other priorities besides maximal internal

democracy (i.e. higher wages, more jobs created, or more ethical products in the marketplace)



Solution:

Incorporate a more traditional business structure, with a board of directors governing the project, possibly including external advisors who aren't worker-owners, and with that board hiring management to direct business operations.



Equal Exchange:

Very hierarchical and traditional business structure, but with ultimate democratic control of the company located in the worker-owners.


Worker cooperatives: challenges

Education● Need the general public to take coops seriously● Need more technical expertise and know-how

Capital Access● Starting sustainable businesses isn't cheap, but most sources of

business credit don't work easily for cooperatives

Policy● Need incentives for co-ops● Need public support for co-op infrastructure and development


More info....

● Advocacy & networking:

● USFWC● NCBA

● Legal:● SELC● UB CDC

● Policy :● Democracy

Collaborative● BCWB●

● Other support:● Union Coops● Shift Change● Grit TV/Yes!

● Financing:● The Working

World● NCDF

● Technical assistance:

● DAWN & DAWI