Why? Are there lessons we need to carry forward when creating new ones?
For example getting funding to turn a business into a coop, let's say it's a one man owned business who is going to retire and has no family, so he offeres to sell it to the employees so they can turn it into a coop. Financially almost no investors would take that bet, the banks wouldn't really give a loan to 10+ people who make salaries, really the main way this could happen is if the owner took a hit and did something like a persona loan and let them pay him back from the profits over the course of 10 years.
I've also heard that there isn't much information on how to start or run one, like looking for books in the library can often fall short or you will only find something outdated. I think the lack of information is part of it as well as it's been so disincentivized for so long that most we can find are either run in a hippie commune style, or created by a small town government to provide services a corporation wouldn't (Best internet I've had was due to them having set up a coop), on top of that I can only think of one college that even teaches coop structure and that's Mondragon in spain[1] but on searching deep enough I also found U of Wisconsin[2] has something too, that's still not a lot.
[1] https://www.mondragon.edu/en/international-mobility/mondrago... [2] https://uwcc.wisc.edu/
I'm hoping the trend goes in a different direction for tech companies and they see that there's an alternative - but the fundamentals of co-operatives won't (and shouldn't!) change.
I think Main reason is that coops so do not fit Well in our profit maximizing Economy. We do produce profits but due to the Nature of our organization there is no incentive for Investors that seek high margins. ( In fact we dont allow external Capital in to remain in Control of our decisions). So linear growth it is.
I think a lot more growth than you Like is Made by exploitation of the workforce. Without doing that you have a Harder time prooving yourself in the Market.
Coops sometimes mitigate this disadvantages by networking with each other.
Can you provide concrete examples?
Regulatory capture hurts all new startups and is unlikely to be aimed specifically at coops
They'd much rather extend loans to traditional businesses with owners who are willing make cutthroat, unpopular decisions and fire employees if it's necessary to defend and preserve their capital.
I think you’d have to find examples of companies that only do #1 or only do #2 and look at their outcomes versus companies that do both.
My guess is the root cause of what you’ve observed is the distributed decision making and the attendant latency and diffusion of responsibility it brings.
You can kinda see a hint of this in the spelling of Toronto as Tkaronto. I don't think this benefits the list. It's a kind of meta work, a convenient distraction from doing something of value.
If you're a builder you'll preoccupy yourself with the thing you're building. If you're driving by an ideology, you'll spend most of your time there, and legal frameworks will be of secondary concern, a means to an end.
If you're one person building a thing that one person can build, that might be true.
If you're building a thing that needs or merely benefits from having more people doing the building, you almost certainly need to think about how to structure and coordinate what people do. That's true even if your decision is "no structure and no coordination".
Sometimes, that process will be implicit (and likely a more or less direct reflection of the personality of the initial builder). But for the most, once you start involving other people (or they involve themselves), organizational structure and behavior starts to become a thing you have to start paying attention to. Getting it wrong can destroy whatever you're trying to build.
Most skilled people will go were the money is, so coops are usually filled with low to mediocre workers.
https://ownershipmatters.net/newsletter-item/tim-huet-arizme...
Another reason might be that if somebody is a co-owner with many others in an enterprise, he might not feel motivated to work.
In socialist countries the quality of most products and services was poor because no one cared and no one fel obligated to do a good job, since the enterprise was owned by all the people. Instead there were many small thefts from the workplace.
By comparison the decision-making in cooperatives is much better grounded in reality and has fewer disinterested and uninformed participants.
1. https://glineq.blogspot.com/2021/11/socialist-enterprise-pow...
I really like this passage:
> “Consider a law firm. Do the founding partners go out and hire a Lawyer Manager to order them around, and then do they hire a VP of Lawyering to order the manager around? Do they then hire a CEO to rule over everyone and a CFO to handle the finances and a COO to schedule court dates and such? Of course not. There’s no historical precedent for all that fluff. Rather, they handle facets of the business themselves. What they can’t or don’t want to handle, they delegate to subordinates that they hire. The partners don’t specialize in finance, sales, marketing, or operations. That would be silly. But they understand enough about it to act as the boss.”
...and this one:
> “It turns out that treating knowledge work pursuits like manufacturing operations doesn’t work particularly well. But it was the model inherited from the Industrial Revolution, and it’s been hard to shake. The thinking goes like this: if you break a complex operation down to its individual components and then have people specialize in those components, batching the work and letting people get good at tiny slices of it leads to greater efficiency. This works well for stations on an assembly line but not so much for writing software.”
One of the guild-like rules that often exists limitations in the types of organisation types lawyers can form. There are rules against listing law firms and cashing out. Lawyers are required to manage themselves.
This makes little sence - How would the limitation that you are talking about even work?
The person at the top is not required to be a lawyer in the first place. There are plenty of corporate layers that work for public or private shareholder-held companies.
OTOH I can't really imagine teams making large projects not specializing. A browser, a AAA game, or an OS for example. Some programmers know GPU techniques. Some know Database stuff. Some know Video compression/decompression. Others know USB driver level details. Others know networking issues. Another few know audio related stuff.
It’s seems fairly similar, though considering few companies operate this way it’s hard to judge if it’s more or less likely to succeed.
Perhaps an interesting extension of the machine shop analogy is that many organizations do not run their own internal machine shop. If they need a part, they find a shop that can make it. Software naturally tends need more ongoing maintenance and attention than machined metal parts, but I think there's an argument to be made that perhaps companies should be less eager to hire software engineers, and more eager to hire an agency.
Moreover, assembly line manufacturing is suited to a very particular scenario that software engineering is almost never in: high volume, high rate production of exactly identical things, which can be broken down into individual components.
Well, I think that's probably overall true of a lot of small businesses of that general type. The odds that I'm going to wake up some morning and decide to open a machine shop, electrical supply store, etc. and just hire people people who know what they're doing (not that I would necessarily know) are probably whole lot less than someone with some savings who has worked in the business their whole life.
It's not just the trades and adjacent though. I worked for a small IT industry analyst firm for a number of years and the founder/CEO had worked for a bigger such firm for a long time. And that's a very common pattern.
Law firms don’t operate like normal companies because the lawyer’s guild in every country I’m aware of has enough power to make comprehensive legal services companies illegal. If you wanted to use a partnership to argue it makes sense for technology companies to be partnerships better to use accounting firms, except they do have all those officers. Even with similar restrictions on non-guild members telling guild members what to do. And every big accounting firm grows and then throws off a professional services firm (Accenture, CapGemini, etc.)
Or look at other industries that used to be dominated by partnerships, like investment banking. As soon as the restrictions making it illegal go away normal corporations took over from partnerships.
Large law firms often/sometimes do have CEOs, COOs, and CFOs. However, often the CEO is one of the partners.
In-house corporate lawyers most certainly have a VP ordering them around.
For example in the games industry I think there's a quite a few smaller companies in particular that work like this. A lot of people being generalists and taking over business functions and social aspects of the job.
But I think a lot of engineers de facto do work like assembly line workers. Much of software development is not 'knowledge work'. If you're in a company toiling away at some gigantic Java codebase you're not going to have much in common with someone managing a law firm.
That's not really accurate. Larger law firms can have more specialized attorneys; they can offer clients a more comprehensive set of expertise - not only in areas of law, but geographically ('let me call an IP attorney in the Paris office'); they can have larger personal and business networks, which provide access to more resources, more business, enable them to broker more solutions for clients, and which give them more influence.
And don't law firms treat the average staff lawyer worse than software companies treat the average developer?
Say somebody comes along and wants to use Oracle suddenly, what sort of measures exist to prevent that from happening, how is arbitration, enforcements and distribution of profit calculated?
The only successful corp i can think that is similar to this is Valve but it isn't quite worker owned, it seems to distribute profits more fairly.
Actually, I think a co-op is better protected.
A co-op should have founding principles, and acting against them should raise red flags.
For distributing profits, etc, again, standard legal docs. Here in Quebec, there are orgs who can help with that (reseau.coop).
The biggest challenge is growing: I'm in a 5 person co-op. In a previous life, I was in a 25-person collective which became hell to manage, as everyone wanted to be heard, but few wanted the responsibilities.
So in our current co-op, two of us tend to enforce the bottom line, in our respective areas. I mean, legal structure and org structure, while there may be influenced, can be pretty orthogonal.
In some sense, then the two of you may extraordinary - a combination of ethics, IQ and integrity. Your biggest challenge will be handing over the reigns when you are ready to leave (usually only due to bad health or age, it's life long thing). More specifically the task has to begin decades before you leave. If it's not done (often the case) the enterprise's morals rot, even if it continues to be financially successful.
yeah but you see the problem here? without a central leadership, everybody will have equity and you can't really steer the ship anymore.
I don't know too much about reseau or how it functions but i have a lot of difficulty with say a SaaS being run like a coop. 25 developers divide equally the loot? But there will be disagreements and disproportionate equity right off the bat. How do you remove somebody who plays politics and is able to win consensus but you know its going to impact your business? How do you arbitrate disagreements over distribution or spending of resources or the manner in which they conduct operation?
I just have a hardtime believing this could work. Corporations reflect militant hierarchy for a reason because effective decisions often cannot be made through consensus or utilitarian drivers. Corporations thrive when they are lead by profit incentives of executives who are beholden to profit incentives of liquidity/capital lenders.
You simply do not see a "collective" trade publicly.
France (where we are based) is actually a very interesting market for coops. There is a very good legal framework around coops and a growing percentage of them. There's even an investment fund of tech coop as of recently! https://coopventure.fr/
I think coops are a great ownership model for the future and for a more responsible economy. It is too bad that there is still very little support and recognition around it.
Starting a coop is like starting any other kind of company so same rules apply. (You must be at least 2 people of course!)
- SCOP: adheres to the international definition of coops
- CAE: a coop of freelancers. You are an employee of the structure (with a work contract) but you have to bring in your own revenue to pay your salary. A percentage of your revenue goes towards the coop budget for shared services (accounting, hr, ...) and cash reserve
- SCIC: a multi-party coop. A good use case would be platforms where you could have multiple groups of stakeholders: employees of the platform, users and service providers. (eg. with a Uber like coop: employees, users and drivers could all be separate groups of owners). Each group has a voting percentage. No group can have more than 50% ownership.
I see great potential for the 2 other types of coops that France has in the context of tech. I do not know of any equivalent elsewhere (but would be happy to learn it exists!)
https://en.wikipedia.org/wiki/Huawei#Ownership
Edit: Found an ownership and governance explanation website from Huawei:
Who chooses the pre-selected candidates?
It seems that Huawei is a mix between a cooperative and a private company owned by its founder.
I believe that the central cause of wealth inequality isn't so much about taxation or regulatory capture etc, as it is about individuals going to great lengths to maintain control of their companies. So someone can be worth a billion dollars with a 51% share but not be able to convert any of those stocks to cash, for fear of losing their power.
That's why they resist even a modest property tax on their stock, while the rest of us must pay property tax on our homes. This is self-evidently unjust and one of the major loopholes which allows the accumulation of extreme wealth while countless millions of people spend the entirety of their lives working to make rent under a negative net worth.
A possible solution to that might be to limit individual ownership to something equitable, say less than 1/3, 1/5 or 1/7 (my preference) of the total.
So a worker-owned cooperative could be thought of as ownership not exceeding 1/N employees.
That would give us a spectrum of possible structures rather than having to choose between the extremes of public and private ownership. Apologies if this concept already exists or is commonplace.
I’m not really sure what you’re basing this on? Most of the richest people in the world don’t have controlling ownership of their businesses. Zuckerberg is the most notable exception here, and he took a lot of risks to get there. But companies knocking on trillion dollar valuations that aren’t public and don’t have diluted ownership structures are the exception rather than the rule as far as i can see.
* https://press.princeton.edu/books/hardcover/9780691177502/ra...
By default 1 share equals one vote. But quite a few jurisdictions allow companies to define a different voting scheme, allowing to f.e. limit a person's votes to at most 20% of the total amount of votes, regardless of their share ownership.
This of course depends on the jurisdictions in question.
Right now, however, I would be very wary of starting a company, especially if you're planning on starting a type company that limits your ability to seek investment.
With that said: if they're so much better than traditional firms, they why haven't they taken over the world? That is, if they were so good, greedy shareholders and investors all over the world would demand that their firms restructure into Cooperatives, and firms that weren't Cooperatives would tend to lose out in the marketplace (being beaten by the more efficient Cooperatives). But we don't see this happening.
This seems like strong evidence to me that they don't offer a superior arrangement (at the firm/system level) for producing goods & services more efficiently.
For diversified investors, it's more valuable to have some of your companies return higher gains even if others don't work out. For an employee though, their income is totally concentrated in their one job.
The employees can be rational in not wanting investors, and the investors are rational in not wanting to invest in those firms (at terms the co-op would accept).
There is no valuation other than amount of shares x value of share. Voting power is not dependent on share (1 person = 1 vote).
Making an exit is thus not a possibility. Investors have little interest to finance a traditional company that would only yield dividends (if it does, which is not mandatory).
The problem of speed is also often cited: democracy takes more time. While I think that's true, I haven't felt that was a limiting factor. Financing is a much bigger one.
The board is composed of workers, selected by workers on the basis of one person on vote, and we hold General Assemblies for workers to make and vote on proposals.
[1] https://charlesriverfood.coop
[2] Principle 6: Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.
https://windings.com/about-us/employee-owned/
> In 1998, as part of Ryberg’s retirement strategy, Windings Inc. formed an Employee Stock Ownership Plan (ESOP) for a planned purchase and transition of Company stock to the Windings employees. Ryberg retired in 2006, and by 2008 the company became 100-percent employee-owned.
https://windings.com/about-us/history/
They make "custom electric motors, generators, and related components".
Would they go on the list?
Coops interest me a lot because of the autonomy and I think codified autonomy is critical to longevity of health within an organization.
