Worker cooperative

A **worker cooperative** is a cooperative owned and self-managed by its workers. This control may be exercised in a number of ways. A cooperative enterprise may mean a firm where every worker-owner participates in decision making in a democratic fashion, or it may refer to one in which management is elected by every worker-owner, and it can refer to a situation in which managers are considered, and treated as, workers of the firm. In traditional forms of worker cooperative, all shares are held by the workforce with no outside or consumer owners, and each member has one voting share. In practice, control by worker-owners may be exercised through individual, collective or majority ownership by the workforce, or the retention of individual, collective or majority voting rights (exercised on a one-member one-vote basis). A worker cooperative, therefore, has the characteristic that the majority of its workforce own shares, and the majority of shares are owned by the workforce.

## History

Worker cooperatives rose to prominence during the industrial revolution as part of the labour movement. As employment moved to industrial areas and job sectors declined, workers began organizing and controlling businesses for themselves. Workers cooperative were originally sparked by "critical reaction to industrial capitalism and the excesses of the industrial revolution." The formation of some workers cooperatives were designed to "cope with the evils of unbridled capitalism and the insecurities of wage labor".

The philosophy that underpinned the cooperative movement stemmed from the socialist writings of thinkers including Robert Owenand Charles Fourier. Robert Owen, considered by many as the father of the cooperative movement, made his fortune in the cotton trade, but believed in putting his workers in a good environment with access to education for themselves and their children. These ideas were put into effect successfully in the cotton mills of New Lanark, Scotland. It was here that the first co-operative store was opened. Spurred on by the success of this, he had the idea of forming "villages of co-operation" where workers would drag themselves out of poverty by growing their own food, making their own clothes and ultimately becoming self-governing. He tried to form such communities in Orbiston in Scotland and in New Harmony, Indiana in the United States of America, but both communities failed.

Similar early experiments were made in the early 19th century and by 1830 there were several hundred co-operatives. Dr William King made Owen's ideas more workable and practical. He believed in starting small, and realized that the working classes would need to set up co-operatives for themselves, so he saw his role as one of instruction. He founded a monthly periodical called *The Co-operator*, the first edition of which appeared on 1 May 1828. This gave a mixture of co-operative philosophy and practical advice about running a shop using cooperative principles.

### Modern movement

The first successful organization was the 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. 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.

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 December 21, 1844, they opened their store with a very meagre 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.

The Co-operative Group formed gradually over 140 years from the merger of many independent retail societies, and their wholesale societies and federations. In 1863, twenty years after the Rochdale Pioneers opened their co-operative, the North of England Co-operative Society was launched by 300 individual co-ops across Yorkshire and Lancashire. By 1872, it had become known as the Co-operative Wholesale Society (CWS). Through the 20th century, smaller societies merged with CWS, such as the Scottish Co-operative Wholesale Society (1973) and the South Suburban Co-operative Society(1984).

### Today

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 symbolic of egalitarian voting rights. Typically, a member may only own one share to maintain the egalitarian ethos. Once brought in as a member, after a period of time on probation usually so the new candidate can be evaluated, he or she was given 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, 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.

In 2008 Co-operatives UK launched The Worker Co-operative Code of Governance, an attempt to implement the ICA approved World Declaration.

## Definition of worker cooperative

Many definitions exist as to what qualifies as a workers' cooperative. CICOPA, the International Organisation of Industrial, Artisanal and Service Producers’ Cooperatives, gives an 8-page definition in their World Declaration on Workers' Cooperatives, which was approved by the International Co-operative Alliance General Assembly in September 2005. Below is the section on the basic characteristics of workers' cooperatives:

1. They have the objective of creating and maintaining sustainable jobs and generating wealth, to improve the quality of life of the worker-members, dignify human work, allow workers’ democratic self-management and promote community and local development.
2. The free and voluntary membership of their members, in order to contribute with their personal work and economic resources, is conditioned by the existence of workplaces.
3. As a general rule, work shall be carried out by the members. This implies that the majority of the workers in a given worker cooperative enterprise are members and vice versa.
4. The worker-members’ relation with their cooperative shall be considered as different from that of conventional wage-based labour and to that of autonomous individual work.
5. Their internal regulation is formally defined by regimes that are democratically agreed upon and accepted by the worker-members.
6. They shall be autonomous and independent, before the State and third parties, in their labour relations and management, and in the usage and management of the means of production.

Workers' cooperatives also follow the Rochdale Principles and values, which are a set of core principles for the operation of cooperatives. They were first set out by the Rochdale Society of Equitable Pioneers in Rochdale, England, in 1844 and have formed the basis for the principles on which co-operatives around the world operate to this day.

Even though there is no universally accepted definition of a workers' cooperative, they can be considered to be businesses that make a product, or offer a service, to sell for profit where the workers are members or worker-owners. Worker-owners work in the business, govern it and manage it. Unlike with conventional firms, ownership and decision-making power of a worker cooperative should be vested solely with the worker-owners and ultimate authority rests with the worker-owners as a whole. Worker-owners control the resources of the cooperative and the work process, such as wages or hours of work.

As mentioned above, the majority – if not all - of the workers in a given worker cooperative enterprise are worker-owners, although some casual or wage workers may be employed with whom profits and decision making are not necessarily shared equally. Workers also often undergo a trial or screening period (such as three or six months) before being allowed to have full voting rights.

Participation is based on one vote per worker-owner, regardless of the amount of shares or equity owned by each worker-owner. Voting rights are not tied to investment or patronage in the workers' co-operative, and only worker-owners can vote on decisions that affect them. In practice, worker co-operatives have to accommodate a range of interests to survive and have experimented with different voice and voting arrangements to accommodate the interests of trade unions, local authorities, those who have invested proportionately more labour, or through attempts to mix individual and collective forms of worker ownership and control.

As noted by theorists and practitioners alike, the importance of capital should be subordinated to labour in workers' cooperatives. Indeed, Adams et al. see workers' cooperatives as "labor-ist" rather than "capital-ist":

"Labor is the hiring factor, therefore the voting and property rights are assigned to the people who do the work and not to capital, even though the worker-members supply capital through membership fees and retained earnings...Any profit or loss after normal operating expenses is assigned to members on the basis of their labor contribution."

Nevertheless, recent developments in the co-operative movement have started to shift thinking more clearly towards multi-stakeholder perspectives. This has resulted in repeated attempts to develop model rules that differentiate control rights from investment and profit-sharing rights. Workers' co-operatives have often been seen as an alternative or "third way" to the domination of labour by either capital or the state (see below for a comparison).

In short, workers' co-operatives are organised to serve the needs of worker-owners by generating benefits (which may or may not be profits) for the worker owners rather than external investors. This worker-driven orientation makes them fundamentally different from other corporations. Additional cooperative structural characteristics and guiding principles further distinguish them from other business models. For example, worker-owners may not believe that profit maximisation is the best, or only, goal for their co-operative or they may follow the Rochdale Principles. As another example, worker cooperatives’ flattened management structure and more egalitarian ideology often give workers more options and greater freedom in resolving work-place problems.

Profits (or losses) earned by the worker's cooperative are shared by worker owners. Salaries generally have a low ratio difference which ideally should be "guided by principles of proportionality, external solidarity and internal solidarity" (such as a two to one ratio between lowest and highest earner), and often are equal for all workers. Salaries can be calculated according to skill, seniority or time worked and can be raised or lowered in good times or bad to ensure job security.

### Internal structure

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. 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 and participatory economics.

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 work place 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.

## Political philosophy of workers' cooperatives

The advocacy of workplace democracy, especially with the fullest expression of worker self-management, such as within workers' cooperatives, is rooted within several intellectual or political traditions:

* The alleviation of alienation in the workplace, especially in regard to Marxist thought
* The encouragement of Participatory or direct democracy
* Radical but popular-democratic strategies for the overthrow of capitalism, for example, several strains of socialist and anarchist thought.
* Autonomy and self-control, especially within anarchist thought.
* Cooperating with other Worker Cooperatives

Workers' cooperatives are also central to ideas of Autonomism, Distributism, Mutualism, Syndicalism, Participatory economics, Guild socialism, Libertarian socialism as well as others.

## An economic model: The labor-managed firm

Economists have modeled the worker cooperative as a firm in which labor hires capital, rather than capital hiring labor as in a conventional firm. The classic theoretical contributions of such a "labor managed firm" (LMF) model are due to Benjamin Ward and Jaroslav Vanek.

In the neoclassical version, the objective of the LMF is to maximize not total profit, but rather income per worker. But such a scenario implies "perverse" behavior, such as laying off workers when output price rises so as to divide increased profits among fewer members. Evidence supporting such behavior is lacking however; a review of the empirical economics literature is found in Bonin, Jones, and Putterman But alternative behavioral models have been proposed. Peter Law examined LMFs that value employment as well as income. Nobel Laureate Amartya Sen examined pay according to work and according to need. Nobel Laureate James Meade examined behavior of an "inegalitarian" LMF.

Generally, the evidence indicates that worker cooperatives have higher productivity than conventional companies although this difference may be modest in size. Economists have explained clustering of worker coops through leagues or "supporting structures" Regions where large clusters of worker cooperatives are found supported by leagues include Mondragón, in the Basque Region of Spain, home of Mondragón Cooperative Corporation and in Italy, particularly Emilia-Romagna. Leagues provide various kinds of scale economies to make coops viable. But as leagues need coops to start them the result is a chicken or egg problem that helps explain why few coops get started.

## By country

Worker cooperatives in Europe

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 which 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.

#### France

Workers' associations were legalised 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. French workers' co-operatives today include some large organisations such as Chèque Déjeuner and Acome. Other cooperatives whose names are generally known include the magazines *Alternatives économiques* and *Les Dernières Nouvelles d'Alsace*, the driving school ECF CERCA and the toy manufacturer "Moulin Roty".

#### Italy

The cooperative movement in Emilia-Romagna, Italy successfully melds two divergent philosophical currents: Socialism and Catholicism. With more than a century of cooperative history, the region includes more than 8,000 cooperatives.

#### Norway

The employee-owned IT company Kantega has several times has been recognized as one of the 100 Best Workplaces in Europe.

#### Spain

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

#### UK

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 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. This was true in particular of the best known, theMeriden 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 nationalised industries in the period, notably National Express. 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.

The largest examples of a British worker cooperatives include, Suma Wholefoods, Bristol-based Essential Trading Co-operative, Brighton-based Infinity Foods Cooperative Ltd and the retail giant John Lewis Partnership (although it only uses the term occasionally).

### Middle East

#### Israel

In Israel worker cooperatives emerged in the early 20th century alongside the Kibbutz, the collective farming movement. The Kibbutz was, and is, a cooperative movement which was founded on Zionist ideas, with the intention to cultivate land and increase the number of Jewish settlements. Admission to a Kibbutz is contingent on passing a selection committee. In recent years there have been 2 cases of non Jews being accepted to a Kibbutz.[*citation needed*] 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 lost its power and influence and many worker cooperative corporations were sold or became public companies. Israel’s biggest public transportation company, Egged – Israel Transport Cooperative Society, is still a workers cooperative. However Egged employs workers who are not cooperative members and are paid at a lower wage than worker-members.

### In North America

#### USA

**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. United States Federation of Worker Cooperatives membership directory.

**Regional Organizations**

The Eastern Conference for Workplace Democracy and Western Worker Co-operative Conference hold conferences every other year for their respective regions.

**Local Organizations**

Local networks and secondary co-operatives - co-ops of co-operatives - are spread throughout the country.

#### Canada

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

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

#### Mexico

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

### South America

#### Argentina

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. 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.

See also recovered factory.

#### Venezuela

*See also List of Venezuelan Cooperatives.*

Venezuela began to see an upsurge of worker cooperatives after Hugo Chávez' election in 1999. Upon Chávez' election, the Venezuelan Constitution was re-written as an extension of his "Bolivarian Revolution" movement. The government saw cooperatives as a way to democratize capital and decentralize the state. The new constitution added terms and conditions which aided the starting of new cooperatives. The government also created tax exemption programs in 2004, which incentivized cooperative building and allowed for cooperatives of various sizes to emerge.  These tax exemptions led to many on-paper cooperatives, which were in reality, businesses claiming to be cooperatives but instead just taking advantage of tax breaks.The cooperative creation process was also simplified in 2001, when new cooperatives were made exempt from registration charges and, if qualified, gained access to state contracts and loans.

According to some,[*who?*] Venezuela is home to the most vibrant cooperative movement in the world. In Venezuela there are approximately 946,000 members, in 83,769 cooperatives, in all sectors of the economy.

### Asia

#### India

Indians own the largest worker cooperative in the world: Indian Coffee Houses.[*citation needed*] The Indian Coffee Houses in India were started by the Coffee Board in 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.

## Comparison with other work organizations

There are significant differences between ends and means between firms where capital controls labour, or firms where the state controls both labour and capital. Worker-ownership has been described as "a Third Way (centrism)." These distinctions are easily seen when measured by essential elements of commerce: purpose, organization, ownership, control, sources of capital, distribution of profits, dividends, operational practices, and tax treatment. The following chart compares the commercial elements of capitalism, socialism, and cooperative worker-ownership. It is based on US rules and regulations.

## See also

* Employee-owned corporation
* Industrial democracy
* Workers' control
* Economic democracy
* Economics of participation
* Voluntary association
* Collectives
* Benefit Corporation

Other workers' cooperative thinkers
* Frank T. Adams
* Michael Albert
* Hilaire Belloc
* Kevin Carson
* George Cheney
* G. K. Chesterton
* G.D.H. Cole
* Chris Cornforth
* Robert A. Dahl
* Sam Dolgoff
* Gregory Dow
* David Ellerman
* David Erdal (Dr)
* Charles Gide
* Edward Greenberg
* David Griffiths
* George Holyoake
* Derek C. Jones
* William King
* Naomi Klein
* Michael Moore
* Robert Oakeshott (academic)
* Robert Owen
* Carole Pateman
* Robert Paton (Professor)
* Friedrich Wilhelm Raiffeisen
* The Rochdale Pioneers
* David Schweickart
* E. F. Schumacher
* Stephen C. Smith
* Roger Spear
* Leland Stanford
* Jaroslav Vanek
* Beatrice Webb
* Sidney Webb
* William Foote Whyte
* Richard D. Wolff

Videos about workers' cooperatives
* *Anarchism in America*
* *Five Factories: Workers' Control in Venezuela* - Directed by Dario Azzellini and Oliver Ressler.
* *Capitalism: A Love Story*

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35. **Jump up^** "Zapatista coffee". Retrieved 2 May 2015.
36. **Jump up^** Benjamin Dangl, 'Occupy, Resist, Produce: Worker Cooperatives in Argentina'http://upsidedownworld.org/coops\_arg.htm
37. **Jump up^** http://ica.coop/en/media/news/argentinas-co-operative-sector-continues-grow. Retrieved 28 October 2013. Missing or empty |title= (help)
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39. **Jump up^** Patrick Clark. Sowing the Oil? The Chavez Government's Policy Framework for an Alternative Food System in Venezuela. Humboldt Journal of Social Relations 33:1/2. pg 135-165
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41. **Jump up^** Jeffry Harris. 2007. Bolivia and Venezuela: the democratic dialectic in new revolutionary movements. Race & Class, 49(1) pg 1-24.
42. **Jump up^** See T.M. Thomas Isaac, Richard W. Franke, and Pyaralal Raghavan, "Democracy at Work in an Indian Industrial Cooperative. The Story of Kerala Dinesh Beedi," Ithaca: Cornell University Press, 1998.

## Further reading

* *For All The People: Uncovering the Hidden History of Cooperation, Cooperative Movements, and Communalism in America*, PM Press, by John Curl, 2009, ISBN 978-1-60486-072-6
* Créer en Scop, le guide de l'entreprise participative, Ed Scop Edit 2005 (disponible gratuitement sur le site de la CG SCOP) (in French)
* Histoire des Scop et de la coopération, Jean Gautier, Ed Scop Edit, 2006 (DVD) (in French)

## External links

* Cicopa - International Cooperative Organization
* US Federation of Worker Cooperatives
* Network of Bay Area Worker Cooperatives - (NoBAWC, pronounced "No Boss")
* History of Work Cooperation in America
* Beyond Capitalism: Leland Stanford's Forgotten Vision
* Papers on political economy arguing in favor of worker cooperatives by David Ellerman
* Worker cooperative forum
* Collectives, Workers' Cooperatives, and the IWW
* Worker Cooperatives Mapped on Platial.
* Federation of Workplace Democracies-Minnesota
* The National Cooperative Business Association on Worker Co-ops
* Valley Alliance of Worker Cooperatives
* Green Worker Cooperatives
* A short history of co-operatives in the UK by Molly Scott Cato
* A Cooperative manifesto by Tim Huet
* News from Mondragon by Tim Huet
* UK Worker Co-operative Code of Governance
* International Association for the Economics of Participation Scholarly association with emphasis on research on worker cooperatives and related organizations
* American Worker Cooperative blog
* Democracy at Work A social movement for a new economy founded by economist Richard D. Wolff