Worker-Owned Companies Begin to Take Off in the U.S.

Amid rising inequality, stagnating wages, and the increasingly inefficient (to workers) nature of traditional corporate hierarchies, more and more workers are experimenting with an alternative method of organizing businesses that has been around for some time, yet is only recently catching on (at least in the United States): worker-owned cooperatives.

The Atlantic explores this intriguing idea as it begins to gain both public attention and viable

Worker cooperatives are equally owned and governed by employees, who also earn money from the profits of their labor. There are no CEOs here making multi-million dollar salaries while workers receive minimum wage. Nor are there CEOs with decades of experience and education to successfully guide the company through the up and downs of the dog-eat-dog business world.

In worker cooperatives, decision-making is democratic, so each worker has one vote, and policies can’t be determined by an investor whose only priority is profit. (Most profit-minded investors probably wouldn’t touch a worker cooperative with a ten-foot pole anyway.)

In a typical workplace, “there’s a pretty clear hierarchy at work, where power and wealth are concentrated at the top and decisions tend to flow from the top down”, Carlos Perez de Alejo, the executive director of Cooperation Texas, an Austin-based resource for cooperatives, told me. “We end up with the results of those decisions without really knowing where they came from”.

In Austin alone, there are worker-owned green cleaning cooperatives and collectively-run thrift stores, worker-run brewpubs and worker-owned Internet hosting cooperatives. Taxi drivers, threatened by Uber and Lyft, are talking about starting a taxi cooperative.

Though a fairly progressive island within one of America’s most conservative states, it is still pretty interesting to see this “socialistic” concept become successfully incubated in a part of the country where big business, low wages, and lack of workers’ rights are all deeply entrenched. It goes to show that when push comes to shove, and governments fail to act, the people take matters into their own hands — albeit up to a point.

Nationally, there are 300 “democratic” workplaces, collectively employing more than 3,500 people, according to the U.S. Federation of Worker Cooperatives.

There are many different types of cooperatives. There are consumer cooperatives, which are owned and governed by customers (such as New York City’s Park Slope Food Coop); producer cooperatives, which are owned and controlled by independent producers (such as Florida’s Natural Growers); multi-stakeholder cooperatives, which are democratically governed by workers, consumers, and producers, or some combination thereof; and there are worker cooperatives like Red Rabbit, Austin’s donut co-op, which are equally owned and democratically governed by workers.

So while increasingly popular in a variety of forms, the concept is still pretty novel in practice, especially compared to other countries.

Worker-owned cooperatives are rare in the United States, but in Spain, where they are much more established, they’re often followed closely by a whole community. One study looked at the retail chain Eroski, which has both worker-run and traditional stores, and found that the worker-run Eroski stores grew “sales significantly faster” than those not run by workers.

The reason? “Compared to workers in other firms, cooperative members have opportunities for substantial employee involvement and training and also strong incentives because they have a large financial stake in the firm”, the researchers concluded.

Indeed, for all their obvious benefits — empowering workers and thus boosting morale, productivity, and prosperity for all — this patently and observably advantageous approach doesn’t seem to mesh with American notions of business; ours is a society that celebrates, if not fetishizes, competition, ruthlessness, and assertiveness both in and out of economic life. That requires, and ultimately perpetuates, a centralized and hierarchical approach to management.

It is hard to imagine that Apple would have made such an impressive comeback in the late 1990s and early 2000s without the strong and sometimes divisive leadership of Steve Jobs steering the launch of new devices such as the iMac and the iPod. Assertive leaders usually rise to the top at companies big and small—everyone else follows their lead. Following directions well is much easier than making up the directions and agreeing on them with your colleagues.

“Most of us have a punch-in-punch-out approach to work. We’re not used to being asked for our opinion”, Perez de Alejo of Cooperation Texas told a room full of budding cooperative founders. “The vast majority of people living in the U.S., despite living in a ‘democratic society’ don’t have the experience of participating in face-to-face democracy”.

That last statement is what is most salient to me. In a society where notions of individual liberty and democratic power are deeply rooted in the political, social, and cultural fabric, it is glaring to see businesses structured in such an authoritarian fashion. Sure, in theory people have the ability to pick and choose who they work for; but when the vast majority of those options more or less feature the same hierarchies and pyramidal structures, it hardly feels like we have much choice in the matter.

Though the extent of this authoritative governance structure varies by degree, more and more companies are increasingly opting for a model wherein very well paid executives and board members, beholden to wealthy investors and shareholders barely involved in the actual day-to-day operations of the business, dictate all matters of business — including the poor pay, benefits cuts, inflexible hours, and other staples of American economic life.

The efficiency of this method — never mind its negative ethical and social consequences — is highly suspect. The lack of any stake in the company means low productivity, high turnover, and in the long term less profit. Plenty of examples exist of companies paying and treating their workers well and getting a lot of profit out of it. Granted, these businesses are usually not co-operatives in any sense, but they demonstrate how even a modest boost to the prospect of workers yields palpable results.

Is taking workers’ empowerment and involvement to an even greater level thus the key to building even more successful companies — and in the aggregate, better societies? The Atlantic article goes on to note some caveats to the democratic business model, such as slow decision-making, and cautions that there is still much to learn about how to best implement this approach. But given the status quo, not to mention the latent creative and leadership potential of millions of untapped workers, I am encouraged that with time and experimentation, co-ops offer a viable alternative worth considering — no government fiat necessary.

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