Businesses like Frida,Inc. have found using a worker co-op as the best fit for business succession of their substantial social enterprise. Frida Inc. is owned by two partners who have built up a very successful business over 30 years, with hundreds of employees. They run a highly participative workplace known for high standards for quality, customer service, and community involvement. Like many other successful social entrepreneurs, these partners want to:
- get their investment out of the businesses, at least for their estates
- ensure that the businesses continue to operate in their hometown
- maintain their financial success, quality, customer and worker friendly atmosphere
- enable all interested workers to buy into the company, and
- maintain the company’s role as a model corporate citizen.
Read their full case study on the success of using a worker co-op.
Worker co-ops are just one example of the many types of co-ops. Here are a few that Deborah Groban Olson has worked with:
- Housing co-ops: To get more affordable or more congenial housing co-ops. (See: Mustard Tree Co-op)
- Worker co-ops: To buy an existing business or build a new one in which the workers have democratic control and equity interests commensurate with their work. (See: Frida Inc.)
- Worker co-op created within an ESOP employee stock ownership plan: A company that owns stock through an ESOP, enabling it to use the many tax ESOP tax savings and advantages for raising and borrowing money. However, it has one-vote-per-person voting on all shareholder issues and a highly participative decision making structure. Atty. Olson created co-op style ESOP companies at MBC Ventures and Republic Container.The key difference between ownership by an ESOP and co-op ownership is their ultimate ability to keep the company independent. In an ESOP, the workers are beneficiaries of a pension plan that is controlled by a trustee (who may be appointed or elected). The Trustee’s duty is to the beneficiaries as retirees, who may be legally forced to sell the business if s/he gets a good offer. Co-op members are actual equity owners of their co-op interests. They have the final decision on any possible sale which usually requires a super-majority vote.
- Childcare co-ops: To get high quality, affordable childcare in which the parents have a voice
- Farm and Purchasing co-ops: To give farmers more control over the prices paid for their goods, how their goods are marketed, and to get equipment, feed, etc. at discount prices.
- Consumer co-ops and buying clubs: To get natural, fresh, local foods or other consumer goods which are hard to get locally or to get them at a lower cost;
- Consumer and Worker co-ops: The consumers want a special or local product and want to include the workers in making decisions and sharing equity. (See: High Five Co-op Brewery)
Click here for more explanation on these co-op types:
- Consumer owned
- Producer owned
- Worker Owned
- Purchasing/ Shared Services
- Multi-stakeholder (a combination of some of the above)
7 Globally Agreed Upon Cooperative Principles (Click here for more detail.)
- Voluntary and Open Membership
- Democratic Member Control
- Members' Economic Participation
- Autonomy and Independence
- Education, Training and Information
- Cooperation among Cooperatives
- Concern for Community
5 Reasons to Consider an Eligible Worker Owned Co-op (EWOC)
An EWOC is an enterprise where the majority of co-op members are employees and a majority of voting stock is owned by co-op members. A majority of the board of directors is elected by members on a one-vote-per-person basis. Advantages include:
- Workers have more control over co-ops than ESOPs.
- The sellers can get a fair price for their stock with less regulation.
- The seller’s proceeds from a stock sale to a worker co-op may be tax-free.
- Co-ops are less expensive and less regulated than ESOPs.
- Sale to a co-op keeps the company independent and rewards the people who made it a success.
Click here for more detail on considering a worker co-op.
Support systems are important for start-up worker co-ops. To be sustainable, a start-up worker co-ops, (and especially those serving workers with limited education) need a supporting joint business resource or community support organization.That is why the Mondragon, Emilia Romagna, Evergreen Cooperatives in Cleveland, WAGES and the Arizmendi Co-ops in Berkeley, CA have all created mutual support organizations for back office and business development functions. The Community Economy Group (CEG) is building such a system in Metro Detroit. Through the CEG non-profit, Center for Community Based Enterprise, Olson connects start-up businesses with a co-op developer who can assist them with feasibility studies.The Southwest Detroit Construction Cooperative (SWDCC) example explains how a well-intentioned worker co-op ceased to survive when the back office support became unavailable.