Worker cooperative

The Rochdale Society of Equitable Pioneers was established in 1844 and defined the modern cooperative movement

The first successful cooperative organization was the consumer-owned Rochdale Society of Equitable Pioneers, established in England in 1844. The Rochdale Pioneers established the ‘Rochdale Principles’ on which they ran their cooperative. This became the basis for the development and growth of the modern cooperative movement.[7] As the mechanization of the Industrial Revolution was forcing more and more skilled workers into poverty, these tradesmen decided to band together to open their own store selling food items they could not otherwise afford.[8]

With lessons from prior failed attempts at co-operation in mind, they designed the now famous Rochdale Principles, and over a period of four months, they struggled to pool one pound sterling per person for a total of 28 pounds of capital. On 21 December 1844, they opened their store with a very meager selection of butter, sugar, flour, oatmeal, and a few candles. Within three months, they expanded their selection to include tea and tobacco, and they were soon known for providing high quality, unadulterated goods.[9][10][11]

The International organization representing worker cooperatives is CICOPA. CICOPA has two regional organizations: CECOP- CICOPA Europe and CICOPA Americas.

The old Co-operative building behind the Gateshead Millennium Bridge in Newcastle upon Tyne

When the current cooperative movement resurfaced in the 1960s, it developed mostly on a new system of "collective ownership" where par value shares were issued as symbols of egalitarian voting rights. Typically, a member may only own one share to maintain the egalitarian ethos. Once brought in as a member and after a period of time on probation usually so the new candidate can be evaluated, they would be given the power to manage the coop without "ownership" in the traditional sense. In the UK, this system is known as common ownership.

Some of these early cooperatives still exist, and most new worker cooperatives follow their lead and develop a relationship to capital that is more radical than the previous system of equity share ownership.

In the United States, there is no coherent legislation regarding worker cooperatives nationally, much less Federal laws, so most worker cooperatives make use of traditional consumer cooperative law and try to fine-tune it for their purposes. In some cases, the members (workers) of the cooperative in fact "own" the enterprise by buying a share that represents a fraction of the market value of the cooperative.

In Britain, this type of cooperative was traditionally known as a producer cooperative; and while it was overshadowed by the consumer and agricultural types, it also made up a small section of its own within the national apex body, the Cooperative Union. The 'new wave' of worker cooperatives that took off in Britain in the mid-1970s joined the Industrial Common Ownership Movement (ICOM) as a separate federation. Buoyed up by the alternative and ecological movements and by the political drive to create jobs, the sector peaked at around 2,000 enterprises. However, the growth rate slowed, the sector contracted, and in 2001 ICOM merged with the Co-operative Union (which was the federal body for consumer cooperatives) to create Co-operatives UK, thus reunifying the cooperative sector.[12]

Since 2006, Co-operatives UK's Worker Cooperative Council wrote and updated a worker co-operative code, the booklet that "sets out what anyone should expect and should work together to achieve, as a member of a worker co-operative".[13]

In 2018, Google announced a $1 million grant to a platform cooperative development kit in collaboration with 5 pilot cooperatives, which are all worker-owned.[14]

According to an analysis of all businesses in Uruguay between 1997–2009, worker cooperatives have a 29% smaller chance of closure after controlling for variables such as industry.[15] In Italy, worker owned cooperatives that have been created by workers buying a business when it's facing a closure or put up to sale have a 3 year survival rate of 87%, compared to 48% of all Italian businesses.[16] A 2012 study of Spanish and French worker cooperatives found that they “have been more resilient than conventional enterprises during the economic crisis."[17] In France, the three year survival rate of worker cooperatives is 80%-90%, compared to the 66% overall survival rate for all businesses.[18] During the 2008 economic crisis, the number of workers in worker owned cooperatives in France increased by 4.2%, while employment in other businesses decreased by 0.7%.[19]

A 2006 study found that wages on co-ops pay in Italy were 15 to 16 percent lower than those that capitalist firms paid on average, and were more volatile, while employment was more stable. After controlling for variables, such as schooling, age, gender, occupation, industry, location, firm-size, user cost of capital, fixed costs, and deviations in its real sales, this changed to 14 percent. The authors suggest this is due to worker cooperatives being more likely than capitalist firms to cut wages instead of laying off employees during periods of economic difficulty.[20] A study looking at all firms in Uruguay concluded that when controlling for variables such as industry, firm size, gender, age and tenure, workers employed in a worker-managed firm earn 3 percent higher wages compared with similar workers employed in the conventional firms. However, this wage premium declines significantly with increasing pay and becomes negative for top earners.[21] According to research by Virginie Perotin, which looked at two decades worth of international data, the tendency for greater wage flexibility and employment stability helps explain why some research observes higher and others lower pay in worker cooperatives relative to conventional businesses.[22] A study by The Democracy Collaborative found that in the US, worker cooperatives can increase worker incomes by 70 to 80 percent.[23]

In the Mondragon Corporation, the world's largest worker cooperative, the pay ratio between the lowest and the highest earner was 1:9 in 2018. The ratio is decided by a democratic vote by the worker-members.[24]

In France, the pay ratio between the highest and lowest paid 10% of the employees is 14% lower in worker cooperatives than in otherwise similar conventional firms.[25]

According to Virginie Perotin's research which looked at two decades worth of international data, worker cooperatives are more productive than conventional businesses.[22] Another 1987 study of worker cooperatives in Italy, the UK, and France found “positive” relationships with productivity. It also found that worker cooperatives do not become less productive as they get larger. A 1995 study of worker cooperatives in the timber industry in Washington, USA found that “co-ops are more efficient than the principal conventional firms by between 6 and 14 percent”.[26]

According to a study drawing on a questionnaire from the population of the Italian province of Trento, worker cooperatives are the only form of enterprise that fosters social trust between employees.[27] A survey conducted in Seoul suggests that in conventional firms, employees become less committed to their job as their work becomes more demanding; however, this was not the case in worker cooperatives.[28] In the US, home health aides in worker cooperatives were significantly more satisfied with their jobs than in other agencies.[29] One 1995 study from the US also indicates that “employees who embrace an increased influence and participation in workplace decisions also reported greater job satisfaction”[30] and a 2011 study in France found that worker-owned businesses “had a positive effect on workers’ job satisfaction.”[31] One 2019 study indicates that “the impact on the happiness workers is generally positive”.[32]

Worker cooperatives have a wide variety of internal structures. Worker control can be exercised directly or indirectly by worker-owners. If exercised indirectly, members of representative decision-making bodies (e.g. a Board of Directors) must be elected by the worker-owners (who in turn hire the management) and be subject to removal by the worker-owners. This is a hierarchical structure similar to that of a conventional business, with a board of directors and various grades of manager, with the difference being that the board of directors is elected.

If exercised directly, all members meet regularly to make—and vote on—decisions on how the co-operative is run. Direct workers' cooperatives sometimes use consensus decision-making to make decisions.[39] Direct worker control ensures a formally flat management structure instead of a hierarchical one. This structure is influenced by activist collectives and civic organizations, with all members allowed and expected to play a managerial role. Such structures may be associated with political aims such as anarchism, libertarian socialism, distributism, and participatory economics.[40][41][42]

Some workers' cooperatives also practice job rotation or balanced job complexes to overcome inequalities of power as well as to give workers a wider range of experiences and exposure to the different jobs in a workplace so that they are better able to make decisions about the whole workplace. The Mondragon Bookstore & Coffeehouse is a good example of a workplace that does this.

The term 'worker collective' is sometimes used to describe worker cooperatives which are also collectives: that is, managed without hierarchies such as permanent manager roles.[43]

Common ownership is practiced by large numbers of voluntary associations and non-profit organizations as well as implicitly by all public bodies. Most co-operatives have some elements of common ownership, but some parts of their capital may be individually owned.

The principle of common ownership was codified in UK law in the Industrial Common Ownership Act 1976 which defines a "common ownership enterprise" as:

a body as to which the registrar has given, and has not revoked, a certificate stating that he is satisfied—

(a) that the body is—

(i) a company which has no share capital, is limited by guarantee and is a bona fide co-operative society; or

(ii) a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014; and

(b) that the articles of association or rules of the body include provisions which secure—

(i) that only persons who are employed by, or by a subsidiary of, the body may be members of it, that (subject to any provision about qualifications for membership which is from time to time made by the members of the body by reference to age, length of service or other factors of any description which do not discriminate between persons by reference to politics or religion) all such persons may be members of the body and that members have equal voting rights at meetings of the body,

(ii) that the assets of the body are applied only for the purposes of objects of the body which do not include the making over of assets to any member of the body except for value and except in pursuance of arrangements for sharing the profits of the body among its members, and

(iii) that, if on the winding up or dissolution of the body any of its assets remain to be disposed of after its liabilities are satisfied, the assets are not distributed among its members but are transferred to such a common ownership enterprise or such a central fund maintained for the benefit of common ownership enterprises as may be determined by the members at or before the time of the winding-up or dissolution or, in so far as the assets are not so transferred, are held for charitable purposes; and

(c) that the body is controlled by a majority of the people working for the body and of the people working for the subsidiaries, if any, of the body.

The principle is typically implemented through inserting two clauses in a company's Memorandum of Association, or an industrial and provident society's rules:

• The first provides that the company’s assets shall be applied solely in furtherance of its objectives and may not be divided among the members or trustees.
• The second provides for "altruistic dissolution", an "asset lock", whereby if the enterprise is wound up, remaining assets exceeding liabilities shall not be divided among the members but shall be transferred to another enterprise with similar aims or to charity.

British law has been reluctant to entrench common ownership, insisting that a three-quarters majority of a company’s members, by passing a "special resolution", have the right to amend a company’s memorandum of association. This three-quarters majority above applies to most limited companies, except that it is possible since 2006 to entrench altruistic dissolution in an industrial and provident society registered as a "community benefit society" ("bencom"). This statutory asset lock is not available to societies registered as 'bona fide' co-operatives. However, such entrenchment has also been written into the community interest company (CIC), a new legal status that was introduced in 2005.

Section 1.2 of the Industrial Common Ownership Act authorised the Secretary of State for Industry to make grants and loans to bodies "constituted for the purpose of encouraging the development of common ownership enterprises or co-operative enterprises" up to a total of £250,000 over a period of five years, with the proviso that grants should not exceed £30,000 in any year. Grants to promote common ownership enterprises were made to the Industrial Common Ownership Movement and the Scottish Co-operatives Development Committee, while loans were administered through Common Ownership Finance Ltd.[44] This section was repealed in 2004.

In 1978, the UK government set up the national Cooperative Development Agency and in subsequent years common ownership was promoted as a model to create employment, and approximately 100 local authorities in the UK established co-operative development agencies for this purpose.[45][46]

A very significant early influence on the movement has been the Scott Bader Commonwealth, a composites and specialty polymer plastics manufacturing company in Wellingborough, Northamptonshire, which its owner Ernest Bader gave to the workforce in installments through the late 1950s to early 1960s. Contrary to the popular concept of common ownership organizations as being small organizations, this is a high-technology chemical manufacturer whose turnover has exceeded £100 million per annum since the early 1990s with a workforce of hundreds. In London, Calverts is an example of an established worker co-operative with a policy of pay parity. From the collective movement, one of the most successful ventures is probably Suma Wholefoods in Elland, West Yorkshire.

Worker co-operation is well established in most countries in Europe, with the largest movements being in Italy, Spain, and France.

The European Cooperative Statute, which has been in force since 2006, permits worker cooperatives to be created by individuals or corporate bodies in different EU countries. It is a loose framework that devolves much detail to the national legislation of the country in which the European Cooperative Society (ECS) is registered. It permits a minority of shares to be held by 'investor members' which are not employees.

Workers' associations were legalized in 1848 and again in 1864. In 1871, during the Paris Commune, workshops abandoned by their owners were taken over by their workers. In 1884 a chamber of workers' cooperatives was founded. By 1900 France had nearly 250 workers' cooperatives and 500 by 1910. The movement was to rise and fall throughout the twentieth century, with growth in 1936, after the Second World War, between 1978 and 1982 and since 1995.

In 2004 France had 1700 workers' co-operatives, with 36,000 people working in them. The average size of a co-operative was 21 employees. More than 60% of co-operative employees were also members.[70] French workers' co-operatives today include some large organisations such as Chèque Déjeuner and Acome. Other cooperatives whose names are generally known to include the magazines Alternatives économiques and Les Dernières Nouvelles d'Alsace, the driving school ECF CERCA and the toy manufacturer "Moulin Roty".

Pencavel et al. (2006) found that in the north of Italy, the area where the most co-ops are located, employing around over 4% of the labour force, actually paid their workers 14% less than capitalist firms and their wages were more volatile. This was after controlling for various variables, such as schooling, age, gender, occupation, industry, location, firm-size, user cost of capital, fixed costs, and deviations in its real sales.[20] The cooperative movement in Emilia-Romagna, Italy, successfully melds two divergent philosophical currents: Socialism and Catholicism.[71] With more than a century of cooperative history, the region includes more than 8,000 cooperatives.

One of the world's best known examples of worker cooperation is the Mondragón Cooperative Corporation in the Basque Country.[72]

In the United Kingdom, the Labour Party's enthusiasm for worker cooperatives was at its highest in the 1970s and 1980s, with Tony Benn being a prominent advocate. A small number of such co-operatives were formed during the 1974 Labour Government as worker takeovers[73] following the bankruptcy of a private firm in a desperate attempt to save the jobs at risk. However the change in ownership structure was usually unable to resist the underlying commercial failure.[35] This was true in particular of the best known, the Meriden motor-cycle cooperative in the West Midlands which took over the assets of the ailing Triumph company, although there were instances of successful employee buy-outs of nationalized industries in the period, notably National Express.[74] Meanwhile, many more worker co-operatives were founded as start-up businesses, and by the late 1980s, there were some 2,000 in existence. Since then the number has declined considerably.

Co-operatives are typically registered under either the Companies Act 2006 or the Co-operative and Community Benefit Societies Act 2014 (IPS), though other legal forms are available. A number of model rules have been devised to enable cooperatives to register under both acts; for workers' cooperatives, these rules restrict membership to those who are employed by the workplace. Most workers' co-operatives are incorporated bodies, which limits the liability if the co-operative fails and goes into liquidation.[39]

The largest examples of a British worker cooperatives include, Suma Wholefoods, Bristol-based Essential Trading Co-operative and the Brighton-based Infinity Foods Cooperative Ltd.[75]

In Israel, worker cooperatives emerged in the early 20th century alongside the Kibbutz, the collective farming movement. The Kibbutz is a cooperative movement that was founded on Zionist ideas, with the intention to cultivate land and increase the number of Jewish settlements. By the 1970s, the Histadrut (Israel Labour Federation) controlled a significant number of corporations, including Israel’s largest bank—Bank Hapoalim (literally the Worker’s Bank). By the 1990s, the Histadrut had lost its power and influence and many worker cooperative corporations were sold or became public companies. Israel’s biggest public transportation company, Egged, is still a workers cooperative. However, Egged employs workers who are not cooperative members and are paid at a lower wage than worker-members.

National organization

The United States Federation of Worker Cooperatives is the only organization in the U.S. representing worker cooperative interests nationally. Offering a voice on national level, promoting the worker co-operative model, uniting co-ops at conferences and providing a base of support and technical assistance to the worker co-operative community.[76]

Regional organizations

The Eastern Conference for Workplace Democracy[77] and Western Worker Co-operative Conference[78] hold conferences every other year for their respective regions. In addition, there are national and regional nonprofit organizations that focus on providing technical support and assistance to both create new worker cooperatives (start-ups) and conversions of existing businesses into worker cooperatives, usually when the business owner is retiring and wants to sell the company. These organizations include Democracy at Work Institute (created by the U.S. Federation of Worker Cooperatives), Cooperative Development Institute, Ohio Employee Ownership Center, Vermont Employee Ownership Center, Rhode Island Center for Employee Ownership, Project Equity, and others.

Cooperation Jackson is a federation of cooperatives based in Jackson, Mississippi, which seeks to build worker-owned coops and other locally-operated institutions.[79][80]

The Freedom Quilting Bee was a notable cooperative founded in Alabama during the midst of the Civil Rights movement, and was instrumental in helping underprivileged black workers in the area escape poverty, amassing enough success to fill orders for major department stores such as Sears while helping to spark contemporary interest in quilting.

Worker co-ops in Canada are represented by the Canadian Worker Co-op Federation (CWCF). Members of the CWCF are found throughout English Canada.[81]

Ontario has its own federation with well-developed standards.[82][83] Quebec has a distinct worker co-operative history, and is presently organised into a number of regional federations.

After the revolt on 1 January 1994 from EZLN, the indigenous people in Chiapas started the reconstruction of their Zapatista coffee cooperatives.[84]

Hugo Chávez, in his effort to democratize the workforce, established a lot of worker-owned and operated cooperatives the moment he got into office, in 1998. By 2006, there had been 100,000 worker co-ops set up, which represented around 1.5 million workers. From day one, he made sure to give them cheap start-up credit, technical training, and preferential treatment with government purchases of goods and equipment. Not even a year later, in 1999, he increased the number of co-ops that got tax incentives.[85] Around 16% of the workforce was employed in these co-ops in 2005, but a 2006 census showed that 50% of the co-ops were either functioning improperly or were simply created just to get access to public funds.[86]

In response to the economic crisis in Argentina, many Argentinian workers occupied the premises of bankrupt businesses and began to run them as worker-owned cooperatives. As of 2005, there were roughly 200 worker-owned businesses in Argentina, most of which were started in response to this crisis.[87] The documentary film The Take described this phenomenon.

According to a recent statement by the International Co-operative Alliance, cooperative businesses in Argentina employ nearly 20 million people across a number of business sectors from health care to housing to factory work and beyond. These businesses are increasing in number at a drastic rate, with over 6000 having been created in 2012 alone.[88]

India has a substantial set of laws, rules & regulations for enterprises in the co-operative sector.

The Indian Coffee Houses in India were started by the Coffee Board in the early 1940s, during British rule. In the mid-1950s the Board closed down the Coffee Houses, due to a policy change. The thrown-out workers then took over the branches, under the leadership of A. K. Gopalan and renamed the network as Indian Coffee House. This history is recorded in Coffee Housinte Katha, a book in Malayalam, the mother tongue of A. K. Gopalan. The author of the book is Nadakkal Parameswaran Pillai one of the leaders of the ICH movement. Another very large network of worker coops is Kerala Dinesh Beedi, originally started by exploited beedi rollers.[89]