GL007: Worker Cooperative

1. Overview

A worker cooperative is a business that is owned and controlled by its employees. Unlike traditional hierarchical organizations where ownership and control are concentrated in the hands of a few founders or external investors, worker cooperatives distribute ownership and decision-making power among the people who directly create value for the enterprise—the workers themselves. The core purpose of this model is to create a more equitable, democratic, and empowering workplace, where the benefits of the business are shared among those who contribute their labor. This structure directly addresses the problem of labor exploitation and wealth inequality that is often prevalent in conventional business models. By placing workers at the center of the enterprise, worker cooperatives seek to create more stable, dignified, and meaningful work, while also fostering a stronger sense of community and shared purpose within the organization.

The modern cooperative movement has its roots in the 19th century, with the Rochdale Pioneers in England being one of the most well-known early examples. However, the concept of worker ownership and self-management has been around for much longer, with historical precedents found in various forms of collective production and mutual aid societies. The principles of worker cooperation were further developed and popularized by various thinkers and activists throughout the 20th century, and today, worker cooperatives can be found in a wide range of industries and sectors around the world. In the context of commons-aligned value creation, worker cooperatives represent a powerful alternative to the extractive logic of capital-driven enterprises. By prioritizing the well-being of their members and the communities they serve, and by embedding democratic principles into their governance structures, worker cooperatives can contribute to the creation of a more just, sustainable, and regenerative economy.

2. Core Principles

1. Voluntary and Open Membership: Worker cooperatives are voluntary organizations, open to all individuals able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination. [1]

2. Democratic Member Control: Worker cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. In a worker cooperative, each member has one vote, regardless of their capital contribution. [1]

3. Member Economic Participation: Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members allocate surpluses for any or all of the following purposes: developing their cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership. [1]

4. Autonomy and Independence: Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy. [1]

5. Education, Training, and Information: Cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of cooperation. [1]

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. [1]

3. Key Practices

1. Democratic Governance and Decision-Making: This is the cornerstone of a worker cooperative. It involves establishing clear and transparent processes for collective decision-making, such as regular all-member meetings, consensus-based decision-making, or the election of a board of directors that is accountable to the membership. [2]

2. Equitable Profit Sharing: Worker cooperatives distribute profits (or surplus) among their members based on their labor contribution, not on the amount of capital they have invested. This is often done through a patronage system, where each member’s share of the surplus is determined by the number of hours they have worked or the value of their labor. [2]

3. Member Education and Training: To ensure that all members can participate effectively in the governance and management of the cooperative, it is essential to provide ongoing education and training on topics such as financial literacy, cooperative principles, and democratic decision-making. [1]

4. Shared Leadership and Responsibility: While worker cooperatives may have managers or coordinators, leadership is often distributed and shared among the members. This can involve rotating leadership roles, creating committees to oversee specific areas of the business, and fostering a culture of mutual accountability and support. [2]

5. Commitment to Community: Many worker cooperatives have a strong commitment to their local communities. This can manifest in various ways, such as sourcing goods and services locally, supporting other local businesses, and participating in community development initiatives. [1]

6. Transparent Financials: Open-book management is a common practice in worker cooperatives. This means that all members have access to the cooperative’s financial information, which allows them to make informed decisions and hold the cooperative accountable. [2]

7. Conflict Resolution Mechanisms: To address disagreements and conflicts that may arise within the cooperative, it is important to have clear and fair processes for conflict resolution. This can include mediation, peer-to-peer conflict resolution, or the establishment of a grievance committee. [2]

4. Implementation

Implementing a worker cooperative model requires careful planning and a commitment to democratic principles. The first step is to form a core group of individuals who are passionate about the idea and are willing to put in the time and effort to make it a reality. This group should then develop a clear vision and mission for the cooperative, as well as a set of bylaws that will govern its operations. It is also important to conduct a feasibility study to assess the viability of the business idea and to develop a comprehensive business plan. Once the cooperative is legally incorporated, the members can begin to raise capital, acquire the necessary assets, and start operating the business.

Throughout the implementation process, it is crucial to prioritize member education and training. This will ensure that all members have the skills and knowledge they need to participate effectively in the governance and management of the cooperative. It is also important to create a strong and inclusive culture that values collaboration, mutual respect, and open communication. There are many resources available to help aspiring worker cooperatives, including legal and technical assistance providers, as well as networks of other cooperatives that can offer support and guidance. Real-world examples of successful worker cooperatives include the Evergreen Cooperatives in Cleveland, Ohio, which have created a network of green, worker-owned businesses, and the Arizmendi Bakery in the San Francisco Bay Area, which is a well-known and beloved worker-owned bakery.

5. 7 Pillars Assessment

6. When to Use

• When seeking to create a more equitable and democratic workplace: The worker cooperative model is ideal for founders who are committed to sharing power and profits with their employees.
• When starting a business in a community that has been historically marginalized or excluded from economic opportunities: Worker cooperatives can be a powerful tool for building community wealth and creating good, dignified jobs.
• When the nature of the work is collaborative and requires a high degree of trust and communication: The cooperative model can foster a strong sense of teamwork and shared purpose.
• When there is a desire to create a business that is rooted in and accountable to the local community: Worker cooperatives are more likely to make decisions that benefit the community, as their members are also community members.
• When converting an existing business to employee ownership: The worker cooperative model provides a clear legal and governance structure for transitioning a business to worker ownership.
• For businesses in industries with high employee turnover: The cooperative model can increase employee retention and engagement by giving workers a stake in the success of the business.

7. Anti-Patterns and Gotchas

• Lack of a strong and inclusive culture: A worker cooperative is only as strong as its culture. If the culture is not inclusive, democratic, and participatory, the cooperative is likely to fail.
• Failure to provide adequate member education and training: If members are not equipped with the skills and knowledge they need to participate effectively in the governance and management of the cooperative, they will not be able to make informed decisions.
• Concentration of power in the hands of a few individuals: Even in a cooperative, there is a risk that power can become concentrated in the hands of a few individuals. It is important to have checks and balances in place to prevent this from happening.
• Difficulty accessing capital: Worker cooperatives can have difficulty accessing capital from traditional lenders, who may not be familiar with the cooperative model. It is important to explore alternative sources of financing, such as community development financial institutions (CDFIs) and cooperative loan funds.
• Ignoring the need for effective management: While worker cooperatives are democratic, they still need effective management to be successful. It is important to have clear roles and responsibilities, and to ensure that the cooperative has the management expertise it needs to thrive.
• Becoming too inwardly focused: It is important for worker cooperatives to remain connected to the broader cooperative movement and to the communities they serve. This can help them to stay true to their values and to avoid becoming isolated.

8. References

1. [7 Cooperative Principles - Values of a Co-op

   NCBA CLUSA](https://ncbaclusa.coop/resources/7-cooperative-principles/)

2. [What Is a Worker Cooperative? Principles and Benefits

   Indeed.com](https://www.indeed.com/career-advice/career-development/worker-cooperatives)

3. What Is A Worker Cooperative? – U.S. Federation of Worker Cooperatives
4. Worker cooperative - Wikipedia
5. Steps to Starting a Worker Co-op - Democracy at Work Institute