In the Workplace

Worker Cooperatives Correcting Wealth Distribution

Cooperative ownership doesn’t guarantee that a cooperative will be a worker cooperative, nor do they necessarily correct inequities in wealth distribution.

Shaila Dewan titled her New York Times Sunday Magazine article on worker co-operatives, “Who Needs a Boss?”, undoubtedly reflecting the publicity from Zappo’s recent decision to try Holacracy, a governance method developed from sociocracy. A flurry of articles that included some variation of “no more bosses” or “no titles” became very popular. The problem with “no bosses” is that most co-operatives, like sociocratic and holocratic organizations, do have bosses. In cooperatives they can still function quite autocratically.

All organizations need leadership. Better than eliminating leaders or pretending to, is organizing sociocratically as collaborative, self-owned, and self-governed.

Worker Co-operatives

At the Arizmendi Bakery in San Francisco, a co-operative business of 20 or so bakers, the $3.50 for a latte and the $2.75 for their sourdough croissant go to the workers. Each baker makes $24 an hour, more than double the national median, and receives health insurance and paid vacations. While most co-operatives are small, the largest co-operative in the United States, Co-operative Home Care Associates in the Bronx, has more than 2,000 employees. Mondragon Corporation, a Basque co-operative that has more than 60,000 employees and €14 billion in revenue. They have 189 centers in 97 countries, a university for their employees, and sells products in over 150.

In worker co-operatives, the workers own the business, as opposed to consumer co-ops that are typically owned by members who shop at a discount. Historically, the number of worker co-operatives has increased when labor is distressed as it is now.

Correcting the Economy

Dewan reports that internationally, leaders are recognizing that our extremely inequitable income distribution, with its plummeting wages and depletion of low- and middle-income jobs, has no solution in the current capitalist economy. They believe the co-operative business model can correct the economy without a long legislative process or large-scale regulatory reforms.

In his best-selling book on economics, Capital in the Twenty-First Century, Thomas Piketty argues that the rich will continue to receive the largest share of income, and nothing in our current system will stop it. In support of cooperative efforts, the author of Democracy at Work: A Cure for Capitalism, Richard Wolff, says, “Don’t distribute income unequally in the first place.”

In February of 2014, a commission in Wales announced that conventional approaches were insufficient for economic development; it needed co-operatives, and the New York City Council held a hearing called “Worker Co-operatives — Is This a Model That Can Lift Families Out of Poverty?”

If worker co-operatives can address the root cause of economic disparity, what will encourage growth in their number and success?

Sociocracy: Co-operative Governance

Diwan reports that research on employee-owned compared to investor-owned businesses have found that they are as good or better. Co-operatives are “more productive, less susceptible to failure, more attentive to quality, and less likely to lay off workers in a downturn.” The employee-owned British retailer John Lewis has almost outpaced its corporate rival, Marks & Spencer.

But these are large well-established co-operatives. Most co-operatives in the United States have about a dozen employees. Because there are few organizations that will loan co-operatives money, growth is often slow and limited to labor-intensive industries with low start-up costs. Banks doubt co-operatives viable business models.

The Working World Logo

An exception is the micro-finance company Working World  that loans money to co-operative organizations in Latin America and the United states. Founder Brendan Martin, instead of seeking quick returns, accepts no loan repayments until the borrowing co-operative is on its feet. “We create the real economy, which is slower but it has less risk,”

Often co-operatives struggle because they are unable to pay consultants for management and financial advice or are suspicious of such advice. This suspicion is often warranted because the consultant’s training and experience are likely to come from autocratic, top down, corporations in which investors and top-level management are more important than workers. This bias is often subtle and unrecognized by consultants but is embedded in their assumptions and advice.

The advantage of sociocracy for co-ops is that it provides a fully developed method of co-operative governance, excellent business practices, and a respect for the spirit of co-ops, which value workers as equals.

In sociocracy, each worker is self-organizing and works as a member of a semi-autonomous, self-organizing team. Leaders guide daily operations but work as equals to make the policies that guide them. The decision-making methods and structure of representation prevents an autocratic hierarchy from developing. Financial records are readily available. Transparency is the norm.

By adopting sociocracy, co-operatives can grow beyond a small number of workers and still avoid the autocratic devaluing of workers and the drop in effectiveness that too often increases with the size of the organization.

Data is from an article, “Who Needs a Boss?” by Shaila Dewan, economics reporter at the New York Times. It appeared on the New York Times website on 25 March 1914 and a version will appear on 30 March 2014 in the Sunday Magazine. Accessed 25 March 2014.