The Beauty of Workers Cooperatives: They’re Voluntary

Equal Exchange workers cooperative in Bridgewater, Mass.

by James A. Bacon

The Virginia Public Access Project has published a nifty list of bills that were killed in committee when Republicans controlled the General Assembly but have broken out to the House or Senate floor now that Democrats run the show. Most are dreadful, some are tolerable, and a few are even beneficial. One bill, HB 55, introduced by the General Assembly’s self-declared socialist Lee Carter, D-Manassas, is downright intriguing.

The bill would establish “worker cooperatives” as a category of cooperative associations. A worker cooperative is a stock corporation that conducts business for the mutual benefit of its employees. At least two-thirds of employees would be required to own membership shares, and members are entitled to one vote only. Profit would be allocated in proportion to the amount of work each member performed.

The House of Delegates passed the bill in a 62 to 36 vote. Yeah, it’s kind of socialist. No, it’s not my cup of tea. But if people voluntarily enter into such an association, what’s wrong with it?

That’s the beauty of a free society. People shouldn’t be forced to participate in the corporate, capitalist economy. I’m perfectly comfortable participating in such a society, but I can understand why other people wouldn’t be. And I think it’s great if we can create mechanisms —  be they hippie communes in the woods or worker cooperatives — that allow people to organize themselves to practice of business as they choose.

The great strength of the free market system is that it fosters experimentation and innovation. Corporations emerged in the early-modern era, first in Holland and then in England, as a way for investors to pool resources and limit risk. As an organizational form, the corporation represented a huge step forward from the Medieval economy dominated by merchant houses. Corporations were so dynamic that they evolved into the economic system we now call capitalism. But who’s to say that the evolution of  economic organization stops there?

Personally, I don’t think workers cooperatives are up to the big challenges of the 21st-century economy. They’ll work for small, niche enterprises that don’t require managerial hierarchy. But that’s just my supposition. I don’t know that.  Maybe cooperative somewhere will come up with innovative approaches to handle bigger, more complex challenges. We won’t know unless we give people the freedom to try.

Even if workers cooperatives remain a niche, what’s wrong with that? If the egalitarian form of business organization meets the emotional needs of the employee/owners, that’s a virtue in itself.

Bottom line: I’m in favor of freedom, and I’m in favor of allowing people to enter into voluntary associations of their own choosing.

Too bad the word “voluntary” is otherwise so alien to the current General Assembly’s way of thinking. There’s nothing voluntary about imposing a minimum wage (SB 7). There’s nothing voluntary about forcing employees to pay even partial dues to a union they don’t wish to join (HB 153). There’s nothing voluntary about compelling businesses to pay family and medical leave benefits (HB 825). There’s nothing voluntary about requiring government contractors to pay “prevailing” wages (HB 833).

Unfortunately, we now live in a commonwealth in which if the majority feels an economic issue is important, it feels no compunction about imposing its values and priorities on everyone. I’m glad to see that the sphere of economic freedom is enlarging every-so-slightly for workers cooperatives, but it appears to be shrinking everywhere else.

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10 responses to “The Beauty of Workers Cooperatives: They’re Voluntary

  1. Workers cooperatives sound like such a blast from my Soviet past. When I was there in the first in the mid to late 1980s, Gorbachev had to do something because the old centrally planned, top down, authoritarian state-owned economy just wasn’t working (It does fine for emergencies, like wars). But he couldn’t go too far. The solution was, you guessed it, workers cooperatives which were like a baby step towards capitalism.

  2. We and our employees rejected this idea when we elected to become a BCorps.: “…conducting its business primarily for the mutual benefit of its members”.

    When they get a formula for determining “amount of work” which survives all the “protected classes” legislation and a group of 30 or more “workers” in a multi-skilled enterprise endorse, we will want to adapt that to our gain sharing plan: “requiring that net earnings be paid or credited to members in accordance with the ratio that each member’s amount of work performed during a period bears to the total amount of work performed by all members during that period.”

  3. There are lots of great reasons that businesses choose to be owned by their workers (Worker Co-ops or ESOPS).

    Studies show these businesses stay in the community, and are very competitive within their chosen industries, and the workers gain greater pieces of the profit pie.

    Many cities in the US and in Europe have gotten behind this idea as a way to build greater community based wealth. They are not new, they have been around for quite a while. It is an excellent strategy for retiring boomer business owners to sell their businesses to their employees.

    https://hbr.org/2018/08/why-the-u-s-needs-more-worker-owned-companies
    https://www.fastcompany.com/40572926/more-u-s-businesses-are-becoming-worker-co-ops-heres-why
    https://thenextsystem.org/learn/stories/policy-approach-mainstream-worker-ownership
    https://consciouscompanymedia.com/sustainable-business/esop-vs-worker-cooperative-whats-the-difference/
    https://nonprofitquarterly.org/a-new-path-to-worker-ownership-turning-private-equity-from-enemy-to-friend/

  4. How does this differ from employee-owned companies?

    And why did we need a new law for this to become legal?

  5. It sounds wonderful on the surface but the devils are in the details.

    As someone who has researched ESOPs, I concluded that being better for their employees in them is far from a given. It seems to me that it all depends on the Trustee(s). And the fees for establishing and maintaining them are quite a “tax” on the “company “. I think you would find the same general satisfaction levels in these companies that you would find in a non-ESOP control group but am unaware of any such study.

    I certainly haven’t seen that they result is a more “employee-friendly” environment and have employees from ESOPS who were only too happy to get out.

    Their main benefit so far as I have seen are very generous tax breaks for the owners who set them up.

  6. With respect to “Right to Work” (RTW), I believe you have the issues of individual freedom and voluntary association backwards.

    Nobody is ever “forced” to join a union shop; they are perfectly free to apply for work elsewhere.

    Rather, RTW is a big-government restriction on the freedoms of labor and management to voluntarily execute a labor agreement and on the rights and freedoms of workers to organize and negotiate for decent, livable wages and working conditions.

  7. Not forced to join? On the contrary…
    it takes only 30% of employees to force an election.
    It takes only 50.1% to force a union into a company.

    While this is going on the tactics of most of the unions to intimidate workers into supporting the union both before and after elections is legion. They use every kind of force — legal and illegal, physical and psychological– imaginable.

    If you are a worker in one of these companies, you are forced to join if you lose the election.

    Once the company is unionized employees are no longer allowed to work with company management — their supervisors — on a wide range of issues such as whether they must accept overtime requests. Everything must go through the shop steward.

    If the union does not perform, the laws assure that decertifying is almost impossible .

    • Nice exchange.

      Your follow on comment works in tandem with earlier pro-union commenters so that their comments end up proving your point.

    • I didn’t say that unions have never abused their members or that they should be exempt from all governmental regulation.

      My point is simply that RTW is big-government overreach designed to handicap workers and unions and exploit labor and also a severe restriction of rights and freedoms.

      There are plenty of ways to eliminate or limit union abuses short of RTW restrictions.

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