Think Outside the Boss Manual

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What Are Worker Cooperatives?

A sample from this guide.

Worker cooperatives are business entities that are (1) owned by their workers,
(2) governed by their workers, and (3) operated for the benefit of their workers. Because worker cooperatives are owned and controlled by and for the people who work there, they operate differently from traditional businesses in some key ways.

(1) Joint Ownership: In traditional for-profit businesses, the owners are sole proprietors or shareholders whose main interest is in generating a profit. Worker cooperatives are interested in making money too, but they are also invested in making sure that the business meets the needs of its members, such as paying fair wages, providing a sustainable livelihood, investing in the local community, and promoting a healthy environment.

(2) Democratic Control: In typical business enterprises, elections are held and major decisions are made by investors who cast votes based on the number of shares they own. In worker cooperatives, directors are elected and major decisions are made by the workers, on a one-member, one-vote basis. Therefore, control is vested with each member, not each share of stock. No member has a larger or more influential vote because she invested more money in the business.

(3) Cooperative Distribution of Earnings: In investor-owned businesses profits are distributed based on how many shares each person owns. Worker cooperatives instead distribute surplus earnings based on a patronage system. This means profit is distributed equitably based on factors such as hours worked or value of work provided. Profit distribution is thus based on labor input, not on capital contribution. Workers generally do not receive a greater profit share by contributing more money directly to the business or by purchasing shares.