Worker-owner Cooperatives Taking Root in the US

People before Profit—the slogan for production cooperatives—is an option even in the United States. Within the past decade, three forms of worker-owned and/or managed types of organizing work places are now functioning. The most democratic structure, one that could potentially transform the economy from profiteering greed to meeting everyone’s needs, is the worker-ownership cooperative.

Out of 5.7 million firms in the United States, the Census Bureau considers that fewer than 300 are worker-owned cooperatives, but they are growing.The major coalition of worker-owner cooperatives is the United States Federation of Worker Cooperatives, which just celebrated its first 10-years. The USFWC has 100 member firms with 1600 individual worker-owners.

The national grassroots membership organization’s mission is, “to create a thriving cooperative movement through the development of stable and empowering jobs and worker-ownership. We advance worker-owned, -managed, and -governed workplaces through cooperative education, advocacy and development.”

They pay themselves a living wage and decide how to use profits. The range of incomes is 6 to 1. In the conventional economy, the federal minimum wage is $7.25 an hour, or about $15,000 a year. Several million workers earn less than that, even under half that. There is no maximum earning. Currently the top 100 CEOs earn between $18,717,013 (Stephen A. Roell of Johnson Controls Inc.) and $78,440,657 (Lawrence Ellison of The Oracle Corporation)—the latter sum translates to 5000 times that of the federal minimum wage earner.

The US is the world’s most unequal nation. The top 1% has a combined net worth that is more than triple the net worth of the other 99% combined. The bottom 40% own less than nothing, because they are sinking in debt, according to Wolff, E.N., “The asset price meltdown and the wealth of the middle class” National Bureau of Economic Research Working Paper 18559 (2012).

USFWC members connect benefits to each other and to the larger cooperative, and they support economic justice movements. The Federation provides training and organizing work to reach other workers across the nation. It is led by a 100% member-elected board of directors, numerous member committees and working groups, and a three-person staff.

Federation executive director Melissa Hoover was interviewed by John Duda on December 5, 2013. She spoke about how worker-cooperatives function.

When conversion of ownership occurs the new buying owners “need to have a strong culture of trust and participation, and some understanding of the business, which is not always the case. And even when there is a strong culture of trust, it can still be challenging to understand and implement effective cooperative governance, participatory management, shared decision-making. We just don’t learn those things in school and don’t practice them through most parts of our adult life.

Other coop networks can be found here.

Here is info about how to start one.

Ohio is a major user of worker-owned companies

The Evergreen Cooperative Initiative in Cleveland was launched in 2008 just as the economic crises set in. It seeks to cause an economic breakthrough in Cleveland.

Rather than a trickle down strategy, it focuses on economic inclusion and building a local economy from the ground up; rather than offering public subsidy to induce corporations to bring what often are low-wage jobs into the city, the Evergreen strategy is catalyzing new businesses that are owned by their employees.

Original funds came from a working group of Cleveland-based institutions:

The Cleveland Foundation, the Cleveland Clinic, University Hospitals, Case Western Reserve University, and the municipal government. The Evergreen Cooperative Initiative is working to create living wage jobs in six low-income neighborhoods (43,000 residents with a median household income below $18,500) in an area known as Greater University Circle (GUC).

They are experimenting with “innovative models of job creation, wealth building, and sustainability,” using local people. Many had been part of the 40% unemployed. Worker-owners earn a living wage and build equity in the firms as owners of the business.

“All of the Evergreen Cooperatives have a shared business philosophy. Our guiding corporate principles include:”

• Transform neighborhoods – one person, one business at a time
• Demand excellence and continuous improvement from our entire team
• Build nimble, results oriented, sustainable businesses
• Conduct business ethically and with integrity
• Use earth friendly practices in every business, every day
• Create innovative business solutions with our customers
• Build strong businesses through strategic planning, education, and professional development
• Delight the customer at all times

Evergreen Cooperatives currently operate three employee-owned enterprises: Evergreen Energy Solutions, started in 2008, installs solar panels and provides energy efficiency services; Evergreen Cooperative Laundry, started in 2009, is an industrial laundry serving institutional customers; and Green City Growers Cooperative, started in 2013, is an urban organic farm.

The organic farm’s first greenhouse is hydroponic based—growing plants using mineral nutrient solutions, in water, without soil—and is computer controlled. They use no pesticides or fertilizers. The 1.3 hectare greenhouse is growing three million heads of lettuce and 300,000 pounds of herbs annually. Distribution to local markets, institutions and restaurants is guaranteed within 48 hours of harvest.

Its 30 employee-owners decide who to hire (one becomes an owner after six months on the job if voted in), and where profits should go—one percent of which goes back into the neighborhoods.

When inaugurated in 2013, Mayor Frank Jackson of Cleveland said that this grower cooperative shows the way for “transforming our economy into a sustainable economy”. Worker-owners hope this will be a model for the nation.

One young worker-owner said, “We feel like we’re on a mission.” Others speak of “working harder and happier because it is ours, and we deliver to our neighbors.”

The Evergreen model is spreading around Ohio and beyond. Even some conservatives can see its practical benefits: a positive role in local economic development, bringing those who participate out of poverty, providing decent goods and services more affordable to the community.

“Shift Change” is a documentary about worker cooperatives in the United States and Mondragón. It is the latest of a score of documentaries made by Mark Dworken and Melissa Young.

One quotation from a participant is revealing.

”I’ve worked at large corporations where there’s a huge hierarchy. It takes a lot of energy to operate in an environment like that. We put our energy towards our product and projects.”

“Shift Change” will be broadcast on US public television PBS from July 1. It should eventually be possible to buy it.

Collective Bargaining and worker-ownership

In 2009, the United Steelworkers International Union (USW), North America’s largest industrial union with 1.2 million active and retired members, joined with Spain’s Mondragón and Kent State University’s Ohio Employee-Ownership Center (OEOC) to bring the successful Mondragón model to the US.

Mondragón is the world’s largest workers’ co-op. It was founded in 1956, and has enterprises in some 40 countries. At its peak, Mondragón in Spain had 100,000 worker-owners in 120 companies with collective annual sales of $25 billion. Because of some recent closures—due to great global competitiveness especially in China and India where workers receive low incomes that undermine decent wages—there are now about 80,000 members in 85 Spanish companies.

The new alliance of the steelworkers union, Mondragón and OEOC is a unique ownership scheme that includes collective bargaining with those who finance enterprises.

“OEOC brings to the effort 25 years of institutional expertise in the development of employee-owned businesses. The collaboration with the USW was announced in the national media in 2009, and in 2012 the three organizations followed up with the release of a how-to guide called `Sustainable Jobs, Sustainable Communities: The Union Co-op Model´”, wrote John Clay.

Clay continued: “They promote union co-ops as a solution to several deficiencies of the US workplace,” such as: “lack of democracy, wage disparity between highest- and lowest-paid employees, and job insecurity.  Some also hope these micro-level solutions might someday transform the US political economy at the macro level, helping solve problems like the growing wealth disparity between the 1 percent and the 99 percent,” which strains democracy, is stagnating for the US workforce, and causes community instability.

About one dozen projects in food growing, distribution, retail cooperatives, and renovating commercial buildings are currently underway in several major cities, such as Cleveland, Cincinnati, Pittsburgh, New York, Seattle, and Denver.

Some studies suggest that less than one million persons are organized in partial or total worker-owned companies, that is, less than one percent of the work force in the US. About 10,000 of those are the total worker-owner coops.

Gar Alperovitz, a political economist and historian, author of the recent book, What Then Must We Do, and co-founder of Democracy Collaborative, is optimistic about this movement.

“This is the most important time in American history since the 1770s revolution,” he told “The Real News” reporter Paul Jay, on January 27, 2014. He said that the experience of Mondragón shows that worker ownership can go to large scale but will not transform society or the economy alone.

Alperovitz pointed out that life in the Basque communities where Mondragón operates is better for the people there, with virtually no unemployment. Those recently laid off receive two years of pay and benefits from their own insurance companies. He said these production cooperatives could be part of a new planned economy but they must connect with politics.

Alperovitz gives General Motors as an example. He said that when GM collapses again, as he predicts it will, instead of it simply being nationalized and bailed out with tax money while continuing to operate as a private company with traditional profits and wages, it should be transformed into a transportation company with planning aimed at the good of the people, and its owners should be its workers.

“Democratic economic planning needs political democratic planning, that is, public decision-making, public control,” he concluded.

Employee Stock Ownership Plan

Four decades ago, Congress approved a less potentially transforming form of democratic enterprise known as Employee Stock Ownership Plan (ESOP). It became law in 1974 at a time of oil price crises, the Viet Nam war and Watergate. ESOP was viewed as a concession to great popular discontent. It offered tax incentives to companies to establish ESOPs, and a bit to banks to lend set-up funds.

“Congress should again encourage a cut for workers,” writes Gerald E. Scorse, who helped pass the bill requiring basic reporting for capital gains.

Before they were stopped, an estimated 10,300 corporations with ESOPs and similar plans were founded, with “about 10 million workers and almost a trillion dollars in total market value….about 3,000 closely held companies are majority or 100% owned by their employees; about 3,000 are 30% to 51% owned; and the rest have ownership ranging from about 5% to 30%,” Scorse wrote.

“Employee equity is part of the culture at companies of all sizes…Equity takes various forms: stock ownership, profit-sharing, gain-sharing (e.g., setting goals and reaping rewards for meeting them), stock grants, and stock options. The key is that all boats rise, not just the yachts…America needs more ‘citizen’s shares’ in 2014.”

The intent of the ESOPs was to establish “peoples’ capitalism”, with employees as owners of stock in their companies. “The use of the term ‘employee-owned’ is odd since the employees typically do not have voting rights attached to their stock like regular stockholders; those voting rights are held by a trust set up to manage their funds, ostensibly to safeguard the employees’ interests,” asserts Bernard Marszalek, a former member of Inkworks, a worker-managed, union-affiliated firm in Berkeley.

Nevertheless, the various forms of worker-ownerships, including ESOP, last longer than conventional owner-over-worker firms.

“Effects of ESOP Adoption and Employee Ownership,” a study by Steven Freeman of the University of Pennsylvania, surveyed 30 years of research and found, “not only that employee-owned firms are more profitable and productive, but that they also survive longer.”

In my brief research about these three ownership structures—two of which are basically new, or renewed, phenomena in the US—no one utters the big taboo term, socialism. While collective ownership is basically democratic and allows greater fulfillment for producers, they do not alter the marked-based economy, which is still profit-oriented, is unequal, and is brutally aggressive towards other countries and the planet.

Nevertheless, traditional capitalist production relationships are seriously questioned by increasing numbers of workers and even some local politicians. And the only self-declared socialist, Senator Bernie Sanders of Vermont, is a strong advocate of structural change. He seeks federal legislation that would make ESOPs possible once again for workers, who could also then obtain reasonable loans in order to start ESOPs and expand those already existing.

This movement is reform-oriented for the moment, but it has a revolutionary potential, especially as it advances in a unique political climate, in which the vast majority of citizens opine that they are opposed to warring in Syria and Iraq. The federal government is treading more cautiously than ever and has not acted in its usual juggernaut manner, yet. But when it does it may be confronted by angry masses, clamoring to end the wars and insist upon building an economy that puts people before profits.

Ron Ridenour is a veteran journalist and author of nine books, the latest is Tamil Nation in Sri Lanka. Read other articles by Ron, or visit Ron's website.