Worker Co-operatives and Ownership
Bernard Marszalek

The popular slogan “People before Profit” adopted by worker co-operatives begs the question how people, in this case members of worker co-operatives, can trump profit in a profit-driven economy. The predictable response is that the democratic organization of co-operatives, where decisions are guided by the interests of the members and not exclusively by the imperatives of capital, amply validates the truth of the slogan. But is this so? If the members of a worker co-operative democratically vote to cut their wages during an economic downturn, are they demonstrating their supremacy over capital? How does this decision, albeit arrived at democratically, significantly differ from a boss telling his staff that he regretfully needs to cut their salaries due to a lack of sales? Does collective decision-making become farcical because it is unable to challenge the ultimate power of capital?

The market-based society limits our life-choices and we should find ways to subvert its power, for we don’t deserve its manacles. Contrary to the belief that the political arena is primary, I would say that collective projects to achieve egalitarian participation in the economic field are more relevant. Such struggles, which in reality are a defense of our humanity, need to be more like sustained and sophisticated guerrilla operations and not like the often employed, isolated and desperate, hit and run tactics we see, for example, in traditional (capitalist) workplace. The skilled industrial workers in the 19th Century used the knowledge that they acquired running production in capitalist enterprises to organize the work themselves and so gain a degree of workers’ control that threatened the bosses. David Montgomery documents this history in Workers’ Control in America, where he also analyzes employers’ assertion of their power through scientific management techniques, a ruthless division of labor and anti-union practices.

The worker co-operatives of today carry on that legacy of shop-floor control of work. For me therefore, to put people before profit in the everyday operations of the co-operative is more important than contending with capital on the macro-level where it holds all the cards. On the micro-level, people before profit means good communication, operational transparency and cross-training and skills-building, among other things. This daily life practice of the co-operative makes relevant the vision of another way of “doing business.” The intention then is not simply to develop “good team-building skills” like those promoted by corporations, but to develop individual capacity to take charge of the workplace. The deeper relationships with our fellow workers that may ensue, and which make work-life more tolerable, are a pleasant consequence of developing the skills needed to function in a democratic work place. Self-management demands this concentration on the minutia of daily practices, where we fine-tune the work we do together so that the collaboration we seek invites spontaneity.

I plan to return to this theme of collective process and the more elusive and subjective side of collective enterprise (where the retrieval of time pits us against capital) in a future installment, but first, the larger context that encompasses these micro-processes of cooperation and resistance in worker co-operatives needs clarification.

Another way to approach my topic – and let me be clear here that the topic is utopianism – would be to think of our popular slogan, people before profit, as vision before economic pragmatism. This returns us to the binary of the previous installment in this series, “Worker Co-operatives and Democracy,” where we discussed the complex meaning of workers’ control in a capitalist society, but this time we’ll explore it from another angle. The angle of language and meaning.

How we define our role in society and what “story” we tell others and ourselves depends on the shared meanings of the words we use. So too, in an endeavor as unusual as a worker co-operative, the story we tell defines our situation in opposition to the larger society. And to carry our analogy further, in telling our story, as we stray from the mainstream conception of “normal,” we become very sensitive in our choice of words. That is, like the feminists forty years ago who came up against the unbearable restrictions of social expectations, we become conscious of language as they did with their radical declaration that the personal is political. Our choice of words to describe our condition can be confrontational or compromising, or all stops in between – no matter – we need to use language meticulously.

In the same way, to recognize the distinctive characteristics of worker co-ops, as a business, requires an acute sense of the meanings of commercial jargon. Anyone who has had the unfortunate experience of trying to secure a commercial bank loan knows what I mean. The banker speaks one language and we speak another even when we use the same words! There are, of course, obvious similarities in the language that both traditional businesses and worker co-ops share – an accountant could quickly determine them, so too would a marketing person, however there are some unbridgeable differences. “What, you all vote?” – the befuddled question all co-operators have heard uttered by businessmen who can’t grok whether we are members of a cult or just insane.

When we attempt to describe worker co-operatives we of necessity begin with the vision, an ideal, that sets apart the co-op from other enterprises and only afterwards do we embellish that description with the more mundane business aspects of our venture. Again that distinction appears – the vision and the pragmatism of the so-called economic imperative. But this is not a binary in balance, one aspect finely tuned to the other, weighing equally in significance. The pragmatic always tries to seize ground from vision. There is a tension here.

Let’s return to the early feminist story. In opposition to the mainstream, the feminist story began with a predictable single form as a reaction to the dominant script, and then, after establishing their autonomy, the feminists’ various life-stories followed. The point is that the narrative begins as a statement of identity-in-opposition. For instance, to use a banal (but all too real) example: “My family wanted me to pursue a nursing career in hopes that I would marry a doctor, but I preferred art.” What is happening here is that the definition of who we are – in-opposition – is emphasized because it defines what follows. The mainstream, simply because it defines expectations, needs to be put in its place. It needs, in other words, to be actively opposed in the narrative.

Using this analogy I think it becomes clearer that when we talk about worker co-operatives, we conscientiously choose our words to describe an economic arrangement outside the traditional economic paradigm, because we understand, at least in part, that the “normal” has an arm lock on language. Commonplaces, clichés, the quotidian definitions employed unconsciously are, in fact, constraints on language since clarity must be confined within the parameters that power deems necessary. So when we discuss worker co-operatives as democratic enterprises we are subverting the sequestered language of capital by juxtaposing “democratic” and “enterprise.” In the same way, when we talk about workers’ control we are joining two words that have no combined meaning in the popular lexicon (unless it’s control over the workers!).

The above serves as a somewhat long introduction to a discussion of ownership and worker co-operatives. In the early 80’s the term “worker-owned co-operative” began circulating at the same time that Employee Stock Ownership Plans (ESOP) became federal law. Those advocating adoption of the ESOP scheme used the term “employee-owned” as a shorthand description of this new corporate entity. The intent of the ESOPs was to establish “peoples capitalism,” with employees as owners of stock in their companies. This isn’t the place to delve into the nature of ESOPs, but 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.

In any case, before the 80’s the term “worker-owned” didn’t appear in the literature on worker co-operatives. It was simply assumed that co-operatives were controlled democratically by their members, unlike corporations, where outsiders who control a majority of the stock can displace local control.

What we are saddled with today is a term, worker-owned co-operative, that seems both redundant and wrong. Redundant because we should assume that when someone refers to a worker co-operative it means that the workers run the co-op as opposed to say a consumer co-op, organized to benefit consumers (I haven’t heard the term consumer-owned co-op, yet). And wrong because ownership popularly means the right to sell ownership, or shares, and that is not possible given the vast majority of co-op statutes. So why is the term used? Those who defend its use say that it helps to clarify the nature of co-operatives and that it has “marketing appeal.” I don’t know about the latter, but the notion that it adds any content in the way of clarification about worker co-operatives is dubious given the usual definition of ownership. Of course there is a secondary way in which ownership expresses responsibility, as in “ I own my opinions.” I hardly see how this sense of the word has any applicability.

Ownership isn’t the main tenet of worker co-operatives. What is? I think we can define worker co-operatives this way: an economic institution founded on democratic control as an inherent and equal right of all members (membership based on qualifying a standard probationary period), despite job role, years of service or any other hindrance to full participation. This is our story. So then wouldn’t it be better, but still redundant, to say “worker-controlled co-operatives?”

It is true that if a worker co-operative dissolves the members may be treated as owners and the assets could be divided up between the workers, depending on how the bylaws stipulate dissolution. Still, for me, this is a weak argument for continued use of the term. This notion of ownership of the corpse of a co-op opens up another, more radical, layer to the vision behind the slogan people before profit.

In the US the 60’s and 70’s proliferation of communal enterprises displayed the characteristic generic to that period: an enthusiastic devotion to idealism. The infectious excitement of building new institutions, mediated by little experience in the practicalities of the endeavors undertaken, collapsed when the old society’s viral excrescences regained their presence, internally in the projects as recurrent psychological maladies, and externally as legal repression. The social/psychological resources for strengthening solidarity to maintain the highest ideals could not be mustered and most of the social experiments failed miserably. We had here a case of vision defeated, not so much by a lack of economic pragmatism, as by a lack of concern for the human relational skills needed to defend against the micro-level display of power.

When a resurgence of the US co-operative movement occurred in the 80’s, the legal parameters of traditional co-op structures were adapted by the newly forming worker co-operatives, providing thereby, at least, a legal structure in response to the failures of the hippies’ collectives. In the UK another path was chosen. There an upsurge of co-operatives took place in the 70’s, but unlike the US movement it gain significant political support. The British Labour Party endorsed the co-operatives with legal and financial support from Parliament. Across the UK dozens of co-operative development agencies were financed to support and facilitate the spreading movement with expertise and funds. And at that time a new conception of co-operative ownership took shape – common ownership.

With common ownership the assets of an enterprise are held by the entire enterprise as a trust, and not by individual shareowners. In practice this means that the assets are passed on in perpetuity to new members. If the enterprise fails, then the assets are sold to pay off liens and any remaining funds are transferred to another similar enterprise. Americans will recognize this formulation as the typical non-profit legal dissolution.

In the UK, the notion of common ownership has a long socialist pedigree and, in fact, was adopted by the Labour Party as Clause IV in its program. With Tony Blair’s right wing coup and rise of New Labour that clause got scuttled in a rush to abandon, for electoral purposes, the central tenants of democratic socialism for a woolly set of non-ideas that for all intents and purposes endorsed neo-liberalism. Blair’s government, following the policies of Thatcher’s Conservative reign, failed to re-fund the co-operative development agencies that she eviscerated.

Common ownership is significant because it puts a check on the influence of capital investments; it is the legal form that best puts people before profit and establishes the co-operative as clearly in service to the community. It is, in other words, the modern form of the traditional commons and as such it reinforces the ethic of a shared economy, not a proprietary one. In the light of this ethic stewardship emerges to supplant individual member ownership. For those who think that these ideas are too radical to promote and that they fly in the face of social conditioning about the financial rewards of ownership, I can only refer to the many research studies that record the sentiments of those who work for rewards other than the monetary ones. David Erdal, a British CEO who transformed his family’s business into a wholly employee-owned company, has written a superb book (Beyond the Corporation: Humanity Working,) about his experiences with his former company and many other worker controlled firms, and thoroughly documents studies that demonstrate salaries take a back seat in firms controlled by the employees. He writes that sometimes he thinks that the pleasures of work have been reserved for those who have an advanced science degree, or a craft skill, or those who have been able to scale-up a hobby into a small business, while the rest of us must toil away with only money as our reward. I believe he would agree with me that an impoverished life awaits those who have no other goal but to make a buck.

Of course, it goes without saying that no one should sacrifice basic necessities in order to squeeze a little bit of personal satisfaction from their work. With adequate reimbursements and a workplace where income differentials are modest, most people focus on the subjective aspects of their work environment, aspects that are absent from the calculations of the economics profession. Those who work at jobs that they like tend to rate highly the following attributes of the experience: trust, recognition, reciprocity, justice and equality; and it turns out that the more control workers have in their workplaces, the higher they score these qualities. Along with control, which leads to greater participation in the workplace, the mission of the firm, as it expresses the employees’ ideals, motivates and sustains productivity. This phenomenon has not been lost to corporations, which is why they have expanded their HR departments to create the illusion of a “mission-driven” firm to entice loyalty and reap profits for the bloated bottom-line.

Of course, members of co-operatives have the real thing, not a phony, condescending substitute, which is why they can’t imagine returning to a situation where they submit to the arbitrariness of a boss. Again, given a fair wage, the humane work environment becomes the main reason behind employment longevity in the co-operatives. To diminish the importance of these aspects of worker co-operatives by emphasizing proprietary rights with a focus on ownership tends to give value to a capitalist perspective, when the point of collective enterprise revolves around creating an alternative enterprise where people have control. Worker co-operatives practicing democracy in the workplace and responsibility in the community, another popular slogan of the co-ops, legitimately put people before profit.

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Capital can be viewed as a thing, but it is also a specific social relation. And too, we can look at worker co-operatives as embodying (humane) social relations. This will be the topic of the next installment on cooperation in the workplace.

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David Erdal Beyond the Corporation: Humanity Working (The Bodley Head: London, 2011)

March 15, 2012
WORKER CO-OPERATIVES AND DEMOCRACY
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INTRODUCTION to Co-operatives and Democracy

Three months into the UN year of the co-op, after over half a year of OWS and now beginning the fifth year the continuing economic crisis a vast expansion of interest in co-operatives has been generated. More specifically, this interest has focused on the most radical aspect of co-operative development – worker cooperatives. Those of us who are active in promoting a democratic economy, as an alternative to the economy of the oligarchy, can only be pleased with this interest and the inquiries that we have received. On the other hand, some of this new interest brings with it assumptions, misunderstandings and worse, an agenda. To help clarify the place of worker co-operatives in “the larger scheme of things,” from so to speak, the inside out, I am contributing some thoughts based on my experiences. I expect that these comments will elicit some controversy, so I need to say that they represent my opinions alone and do not reflect the views of Inkworks Press, NoBAWC or JASecon. –bernard

Worker Co-operatives and democracy

Part One in a series on worker co-operatives

Bernard Marszalek

March 15, 2012

Members of worker co-operatives necessarily live schizophrenic lives. On one hand, we must function as owners of small businesses and contend with all the insidious forces of capitalism – the anti-ethic of profits before people. At the same time we are members of an egalitarian corporate entity that most people can’t imagine existing, much less thriving. Here we are, a diverse group – some friends, some OK folks and some who we don’t socialize with after hours – working together day-in-and-day-out dealing with all the tensions arising from individual personality quirks, the aforementioned forces of the marketplace, unexpected emergencies, and, when everything else is under control, the boredom of daily tedium.

A collective life like this for those who have drunk the Kool-Aid of individualism – also called the Great Ape theory of human nature – think that it must be hell. Of course, when we face “challenges” in our co-operatives, especially during contentious meetings, the thought crosses our minds that, in fact, hell is other people. We all have doubts and wonder, at times, if we have taken the wrong fork on the path of life and have foolishly placed ourselves on a trajectory heading towards a nervous breakdown. Luckily for most of us, this fear passes and we realize that we wouldn’t want to trade our bizarre lives for confinement in a cubicle of some “friendly fascist” enterprise – even if it paid more.

To attempt to discuss our unorthodox life-choice with “civilians” can be distressing. Once we have assured our audience that we are not affiliated with a cult, we must then address the expression of incredulity on peoples’ faces when we tell them that we are part of an enterprise where all the workers have a voice – an equal voice – in management. In those situations, when we are trying to explain how it is possible that we make it work, that the incredible nature of what we are doing strikes us.

For me, those moments conjure up an imaginary episode in a utopian novel:

As a delegate from the morning production meeting, I am next to a half-million dollar machine calmly discussing with the operator how to organize the collective work schedule given the priorities of the day. We are doing this in a lighthearted, almost jovial, manner confident that other members of our collective will finish their preliminary tasks so that by the end of the day our work will easily move on to the next stage.

The ability to collectively manage an enterprise in a democratic manner isn’t utopian to us, but is usually perceived as such by those who readily accept the reality dished out at the cafeteria of capitalism. Yet, in a very real sense, to oppose the version of economic life that our fellow citizens accept situates us in a tradition of revolutionary transformation. We may not know much about the Luddites, the Communards of Paris, the sailors of Kronstadt, the Spanish anarchists or the Hungarian workers who seized their factories in ’56, but we know enough to know that they all struggled to take control of their lives. Theirs is a history of glorious defeat, and while we are not beautiful losers on that world scale, neither are we so removed from their vision, their dream of a better life, to be oblivious of how that same desire, more or less consciously, motivates us in our work. Upon entering our workplaces we don’t salute the altar to the Revolution, nonetheless, no fight by workers to enlarge the scope of their economic self-determination can be foreign to us.

To the world of our co-op suppliers, to the salespersons who call on us and to some of our customers and clients we appear as small business proprietors. To social scientists we are radical democrats who daily push against the confines of the economic system. Amongst ourselves we hesitate to characterize the task we have undertaken with labels, especially political ones, and instead concentrate our energies on problem-solving both economic and personnel issues. If any label comes close to fitting co-operative members it must be that anomaly that refers back to our schizophrenia: we are pragmatic utopians.

It strikes many of us as a little odd, these days, that our miniscule sector of the economy achieves mainstream recognition, as if it were a viable economic alternative. Co-operators are intimately aware of the difficulties of starting a co-operative, much less maintaining one, and realize that this is not a project that one takes down from a shelf to implement in a matter of weeks or months. From concept to full realization, we are talking years in most cases. However, the facts of co-operative development do not drive the popular interest in our co-ops; the vision of a people-based, community-serving economy juxtaposed to the crumbling order around us, piques journalistic inquiries, in almost a millenarian desire, to search for an alternative. And now that OWS (itself no stranger to a “cargo cult” mentality) gears up for resurgence in the spring, we can imagine that that interest will expand.

To adequately respond to future publicity with our meager resources (both financial and organizational) it seems appropriate that we define our limits, so as to contain, if not prevent, disappointments and dashed expectations by the public. And, at the same time, to participate in what appears to be a growing political upheaval (finally), we should clarify our position in relationship to the radical heritage of worker self-determination. The former makes obvious sense, but the latter raises some issues that the worker co-operative community has only sporadically dealt with. For example, today the largest institutional expression of worker self-determination is the unions and yet very few worker co-operatives are organized. This is unfortunate given the US history of worker co-operatives as defensive worker organizations during strikes, lockouts and cyclical economic collapses in the 19th Century. This is the history that John Curl’s exhaustive study of co-operatives, For All the People, covers. He details the first national organization of workers – The Knights of Labor – and their initiatives to establish dozens of worker co-operatives across the nation in the hopes of developing a Co-operative Commonwealth.

Co-op union membership, where it exists, makes public co-op support for a tangible baseline of benefits that the labor movement won for millions of workers; however, despite the desire to express solidarity with unions, many co-operatives cannot meet the wage and benefit requirements for membership. And even if wages are not an impediment, the undemocratic character of most unions clashes with the egalitarianism of co-ops.

Though the unions portray themselves as the embodiment of the labor interests, the largest unions have not distinguished themselves as tribunes of the working-class when, for example, they capitulate to the corporations as we have seen with the auto industry in the last few years. The more farsighted union organizers and supporters see a future union movement that allies with communities through expanding the presence of local Labor Councils and by encouraging union member participation in various grassroots struggles. And a few exceptional unions believe that with the emergence of OWS a discussion of class-based issues has been opened. Yet even with an expansion of non-traditional unionism, even with a rise of democracy within the labor movement, the worker co-operatives have a distinct economic, and political, agenda to promulgate and will never be subordinated to a labor union program.

If we return to the organizational binary of the worker co-ops – one facet directed towards the marketplace and the other towards utopia – co-operators realize that these facets are not of equal significance. Issues related to the marketplace might dominate the concerns of the collective, especially when the bottom line is endangered and the financial picture requires sacrifices on one level or another. Granted, that if this situation persists, the whole psychology of the membership may resemble an army in full retreat. It can be devastating. The utopian facet, on the other hand, determines how well the co-operative cooperates in extreme circumstances, how resilient it is in the face of distress. All co-op developers, for instance, stress communication skills – to formulate precise statements and to listen intently to others – so that neophyte co-operators can learn decision-making through a democratic meeting process. Smoothly run meetings, where all opinions are heard, establish trust amongst members. The command structure of traditional work places, on the contrary, generates a toxic response of revengeful and snide backbiting amongst the employees. No democratic workplace can tolerate that. Even the corporate world knows this and pretends to mollify the boot camp regimentation of a former era with all sorts of HR subterfuges.

Clear communication builds trust and just as importantly an individual’s ability to work collectively contributes to trust. The work ethic in a co-operative is defined by solidarity, not sacrifice. Co-operatives do not see the work ethic like a boss, who simply wants his workers to burn calories at a profitable rate for himself. The work ethic functions in co-operatives as an aspect of companionability. In co-operatives tasks get done with healthy collaboration. Working together is the concrete manifestation of the democratic control that co-operators endorse, and so each member’s contribution is individualized. Some may be faster at a task, but others add flair, grace and precision, while others contribute merriment that makes any task easier to manage. So long as the group accomplishes the task agreeably, these individual nuances are encouraged and not simply tolerated. No aspect of a worker co-operative better defines it character – its radical nature – than how it manages its work. The constraints of capitalism define the overall context, but the management of the enterprise, the expression of its radical democratic goals, creates a buffer against the imperatives of an oppressive economic system. What we have with these methods and practices of worker co-operatives can be considered tools for democracy. And like any tools, as they are used, they are refined to improve their effectiveness.

Though the worker co-operative sector, as was mentioned, amounts to an almost insignificant economic factor in the larger, hostile economy, as an exploration of pragmatic utopianism it resonates with a history of liberation that resolutely situates itself outside the boundaries of capitalism. And yet, liked a caged bird, worker co-ops contend with their confinement as best they can. This is not an enviable situation. The more that we try to develop our autonomy within our collective process, the more confining seems our cage. The joy of recognition that we experience with other co-operators at local meetings or national conferences seem to be the only times that we glimpse a world as we would like to see it – a world where our values are recognized by others outside our immediate collectivity. Speculations like this border on the cultish, as if we can build a democratic movement simply by hanging together. Worker co-ops precisely because they promote, from the political sphere, the human right of one person, one vote and apply it to the economic sphere, bring a unique contribution to an alliance with other partisans of freedom. And it is in political alliance with others, I believe, that the worker co-ops will have their greatest impact extending democracy throughout society. Democratic control is not a static concept; it must be practiced. And in our workplaces we can practice it daily.