A thing that is kind of glossed over is: what is "ownership" when we talk about worker-owners at cooperatives?
> The profits generated by each cooperative are put to work for the benefit of the greater whole. Each cooperative gives 14-40% of their gross profits to their division (depending on the division), and another 14% to their parent company. The rest are invested back in the cooperative (60% of net profits), distributed among their employees (30% of net profits), and donated to social organizations in their communities (10% of net profits).
> Workers buy into their cooperative when they become employees, investing up to €16,000 into a personal equity account. They pay 30% of that investment upfront, with the remainder taken out of their paychecks over following 2 to 7 years. After two years with the organization, workers become “members” and start earning interest on their investment at a rate of at least 7.5% annually. If the cooperative does well, they might earn much more than that. Workers can pull this money out of their accounts when they leave the cooperative or retire.
... so it's not ownership, right? It's profit-sharing while you're an employee (the "interest" the worker gets is out of that 30% of net profits discussed previously), but you don't own shares in the company that you can then sell, like an employee who receives an RSU or receives and exercises an option.
In some sense, corporate employees that get some form of equity as part of their compensation are more literally worker-owners. I think the problem with American companies that have an employee stock plan is that the employee stock pool is a small slice of the total ownership, and employees don't participate in any real democratic governance. Despite being shareholders, they get far less information about the financial health or strategic position of the company than investors with board seats. Real partial ownership doesn't lead to real power or access to information. And the aim of the company is still to serve the larger investors, not the workers.
> In some sense, corporate employees that get some form of equity as part of their compensation are more literally worker-owners.
As soon as a worker leaves or sells their shares, these shares aren't worker-owned anymore and the interests of their owner can quickly diverge from the ones of a worker. That's roughly what a coop fixes I think.
I can kinda see how one can argue that this is a feature rather than a bug, but I still think this points to the more distinctive feature in these coops being democratic governance of workers rather than ownership.
I own shares of past companies I've worked at, but I don't have any representation in how the company is run. It doesn't matter if my interests have diverged from current workers, because I have no influence.
If a company compensates its employees partially with RSUs, and those employees own and can eventually transfer those shares freely, and the company was also democratically governed by its workers ... could you not have "real" ownership (by current and past workers) and still protect current workers' democratic governance?
yes and no, i’d call the distinction collective ownership. you can sell your shares (by quitting), or you can stay and participate democratically. but you can’t do both, and that protects your say in the company, preventing investors from overruling worker-owners.
> i have no influence
neither do the current workers. the issue isn’t retail investors, but the ones with board seats. if boards only had one seat for an investor, that’d be one thing, but usually workers only get a single seat, if any.
> protect current workers’ democratic governance
you could do this with preferred shares, voting shares, etc. investor shares are non voting, voting shares can only be owned by workers, etc. you still have to counter their concentration though.
Any organization that arranges for its workers to govern it has some organizing document that describes this structure. Any organization that arranges for its workers to become owners must pick mechanism for this to happen. My view is that these can be basically independent choices:
- A firm can pursue a profit-sharing-for-current-workers approach as described for Mondragon, or can issue RSUs or options ("real" and transferable ownership)
- And regardless of what "ownership" vehicle they pick, they can still be organized to be democratically governed by its workers (establishment of which need not be dependent on any stipulated "ownership"). I.e. your organizing docs can describe a board composed of current employees, elected by employees, etc.
I am skeptical of the claim that profit-sharing while you're an employee is "ownership" in part because you are incentivized to prefer that the firm take profits while you work there. By comparison, if as a worker your vested stake persists even after you leave or retire, you might be much more inclined to vote for large reinvestments this year (and for the next several) which may not yield a profit until after you've left. Temporary "ownership" may not encourage the same long-term view as ordinary literal ownership.
Cooperatives guarantee that only people working in the company benefit from the profit of their own work. If one can stop working and still take a share from the profits, everyone else would have to not just work for themselves and lose part of their profit to an increasing amount of people, who are not taking part in creating that profit. Cooperative guarantee that profit is owned by the people who create it.
I think you may be too committed to dogmatic stances to constructively discuss other possibilities. I think this is no better when it's from the collectivist side than when it's from the capitalist fundamentalists.
> Cooperative guarantee that profit is owned by the people who create it.
I don't think all the value created by workers is realized as profit immediately. Workers can create value which only shows up in contributions to revenue much later. If you and your coworkers figured out the design and manufacturing process for a new product and the product only goes to market after you retired, you helped create the profits even if they arrive after you left the firm.
If the coop structure as you narrowly define it doesn't allow workers to receive the profits of their labor in industries that have a long time to market or R&D cycle, then isn't that a recipe for those high value industries to be inaccessible to coops?
Try to imagine an alternate history where Nvidia was a coop. A lot of the value behind its current high revenue was done many years ago. Cuda was released in 2007. I don't know how much of the hardware has inherited from older designs. If only current workers benefit from the current high sales, has the organization really ensured that "profit is owned by the people who create it"? That seems implausible.
> I don't think all the value created by workers is realized as profit immediately.
And as the worker creating that future profit you are very well aware of that, plus everyone else working on the design and manufacturing is in the same situation as yourself. The good news is: all of you are also owners of the company. So together you can decide how an exit package should look like for people deciding to leave before the design reaches the market and generates profit.
The same situation in a non-cooperative is a lot worse, because you have no stake in the company. The owner might be willing to negotiate an exit package before you even start working there, but they also might not. Plus before working at the company, you have no idea what the profit margins look like and what you might be working on. It’s the worst time for you to agree on an exit pacakge. Also during employment you are in a worse position, because the owner(s) can just let you go, if you are the only one asking for your fair share of future profits. You don’t have a say in the company. Most often they see your current salary as your share of the profit, no matter how much profit your design might create in the future.
I understood from the article that workers remain working for the coop (possibly in different companies) until they retire, and then, the coop provides them with pensions; so they continue to receive value after retirement.
What if they pass away? I assume their shares are sold immediately and the money paid out to their estate.
Now suppose that all the work they did was in the R&D phase (and fundamental to the project) but the final product had not been released at the time of death of the contributor — so the profits had not been realized — thus the payout on those shares would be a small fraction of their true valuation.
Imagine if a novelist died just after submitting their final draft to their editor but prior to the book’s publication. Forcing the estate to sell off the book before it had a chance to hit the shelves — and become a bestseller — would be an outrage, yet the rigid nature of worker co-ops (cessation of work forces the sale of shares) guarantees this.
Where’s the cooperative in your example? Either you are a freelance author who has a contract with a publishing cooperative. In this case you have a contract with that cooperative and during the negotation process both sides decide together what happens in case of death before publication. Or you are an author inside a publishing cooperative, so you own part of that cooperative and decide together with the other authors, publishers etc. what will happen, if somebody dies before the publication of their book. In both cases the author is part of the decision of what should happen in case of an early death.
The example way above was NVIDIA. Suppose the person who passed away was one of the founding researchers at the NVIDIA worker coop. They developed most of the key technologies that go into a graphics card, but they died during the later stages of production ramp up, before the first GPUs are able to hit the market.
The issue is that the deceased researcher's contribution to the project may be so central and foundational that they may be entitled to a large plurality (or even majority) stake, but forcing the other worker-owners to buy out that stake to pay the estate would bankrupt the coop at this critical pre-production stage. Since only active workers are allowed to maintain ownership, allowing the estate to retain those shares and later receive dividends on future profits is off the table. This issue seems to tie everyone's hands and sound the death knell for the coop.
The novelist case was meant to show an extreme non-coop situation. I don't see any compelling reason for writers of books to join coops, since the writing of the book is the only hard part these days (and countless ways to self-publish exist).
I recommend reading more about existing cooperatives. They offer way better packages to their employees than manager-owned companies. This can also include life insurances, health insurances, child care etc. And since everyone working and owning a company, where the profits might come in at a later stage, you can be sure, that these people working towards that goal, will make sure that they have the security they require. Why wouldn’t they? It’s their job and their company. They have everything required to set up the necessary legal work.
The case with the novelist is also easy to answer. Publishers do more than just printing books. They also do marketing, host events, send authors to interviews etc. All of that work becomes smaller if you share it with others. Plus being new to the industry, you can get the help from experienced writers. Cooperating with other people has loads of advantages. I could go on for hours. Also nobody is forced to join cooperatives. Every novelist can decide to remain a freelancer. It’s basically a cooperative with a single worker. A lot of cooperatives are founded by groups of freelancers by the way, because already having a business mindset, having experienced the freedom of owning your own business and wanting to stay in control when collaborating with others, makes cooperatives the obvious choice.
You are always more free, have more options and are treated better when you own the result of your work.
Not all that different from shares in a private company, or an interest in a partnership or multi-member LLC. Many corporate shareholders cannot freely sell; the idea of being able to sell stock for cash whenever you want to is unique to public companies.
And yes, the real problem is information asymmetry. This is always the real problem. Arguably the secretary who knows everything that's going on with the company via watercooler talk has more power than the CEO whose underlings tell him only what he wants to hear. A lot of corporate owners, even powerful shareholders like the Crown Prince of Saudi Arabia, have been bilked by unscrupulous but savvy management who knows how to control information flow.
A workers cooperative is owned by its current workers. Are you going to argue that consultancies and law firms are not really owned by their current partners, either?
Profits belong to the people who create them, not to people who used to work at the same company in the past. Expecting future employees of a company to work for ex-employees in the future is unfair. Having worked for a company, doesn’t entitle anyone to remain on the paycheck until death, despite not working there anymore.
Living in a country with strong workers rights, this is not how pensions work. The pensions people receive every month are literally paid by the taxes which are collected from everybody and every company during that month. Pensions are not saved money from companies you worked for, but money coming from the economy at the time of your retirement. It’s a common misconception that the state has a big pile of pension money sitting somewhere that you then get your pension from. That’s just not how it works in reality. Another difference from pensions to receiving money from a company just by owning parts of it, is also that you don’t continue to be on a company’s paycheck when you quit. You need to reach a certain age to receive money and you get that money from the state, not the companies you worked for. That’s how pensions work.
> The pensions people receive every month are literally paid by the taxes which are collected from everybody and every company during that month.
That might be how your pension works.
Other pension schemes; eg Singapores and some other former and current commonwealth countries pay pension from the returns from 60 odd years of compulsary investment and additional supplementary investment.
That doesn’t change the fact that every month there are people putting money into that fund and people getting money out of that fund. The money you put in, is not the same money you get out of it. It’s still money that people working at that time, put into that fund. Nobody has their own personal savings account inside that fund. You only have a legal claim to a share of that fund once you retire, but that’s not the money from your paychecks and it’s not saved somewhere for you. A pension fund is not a collection of private pensions and it’s better that way. Because with inflation, your pension can increase, even though you didn’t "put in" that amount of money when you were still working. The government is able to increase pensions by shifting money from other parts of its balance sheet or by increasing debts or taxes to meet the pension demand. I’m sorry for Singapore if their state system works more like a private pension, because you don’t know how long you’ll live past retirement age, so you either take too much or too little out of that fund once you have retired and there is no adjustment for inflation. Yes, there are bad private pension systems. That doesn’t change the fact that you benefit more working in a worker-owned compay than in a solely-owned company.
I think that more important than ownership is the purpose of the company. Most companies have the purpose of making money. Few have a purpose which includes contributing to quality of life, unless that’s something which can be sold for a profit.
Not just making money, but making more money than they did last year, forever.
Like a company can't just be cool with the fact that they serve a profitable market niche and gainfully employ people. Investors need capital gains and won't just be satisfied with getting reliable dividends!
What different effects do stock buybacks have on corporate governance compared to dividends?
My understanding is both return $X/share of capital to shareholders, buybacks are just more tax efficient, flexible, and a little more difficult to see the direct effect of.
Dividends get taxed immediately, so there is more pressure to reinvest profits in the company to find organic growth which is captured as capital gains instead. That reinvestment can take a lot of different forms like R&D, training, hiring, etc.
> The profits generated by each cooperative are put to work for the benefit of the greater whole. Each cooperative gives 14-40% of their gross profits to their division (depending on the division), and another 14% to their parent company. The rest are invested back in the cooperative (60% of net profits), distributed among their employees (30% of net profits), and donated to social organizations in their communities (10% of net profits).
> Workers buy into their cooperative when they become employees, investing up to €16,000 into a personal equity account. They pay 30% of that investment upfront, with the remainder taken out of their paychecks over following 2 to 7 years. After two years with the organization, workers become “members” and start earning interest on their investment at a rate of at least 7.5% annually. If the cooperative does well, they might earn much more than that. Workers can pull this money out of their accounts when they leave the cooperative or retire.
... so it's not ownership, right? It's profit-sharing while you're an employee (the "interest" the worker gets is out of that 30% of net profits discussed previously), but you don't own shares in the company that you can then sell, like an employee who receives an RSU or receives and exercises an option.
In some sense, corporate employees that get some form of equity as part of their compensation are more literally worker-owners. I think the problem with American companies that have an employee stock plan is that the employee stock pool is a small slice of the total ownership, and employees don't participate in any real democratic governance. Despite being shareholders, they get far less information about the financial health or strategic position of the company than investors with board seats. Real partial ownership doesn't lead to real power or access to information. And the aim of the company is still to serve the larger investors, not the workers.