Workers Cooperatives
Phil Kenkel
Bill Fitzwater Cooperative Chair
Workers cooperatives or employee-owned cooperatives are relatively rare in the United States,
making up around 1% of all cooperatives. This form of cooperative is more common in Europe and
Canada. In the U.S. most workers cooperatives are located in urban areas and operate in retail
operations. To become a member the employee/owner must make an initial investment which is
sometime financed through payroll deduction. In some cases the investment is substantial. Isthmus
Engineering, a worker cooperative in Madison, Wisconsin, requires a $10,000 investment which
must be financed by the member. Profits are allocated on the basis of patronage which may be
calculated as hours worked, earnings or a combination. Governance is usually on a one-member
one vote basis. Small workers cooperatives typically operate with all of the employee-members
serving as a board of directors. Larger firms have a board and management structure similar to that
of agricultural cooperatives. Some workers cooperatives do not allow the CEO to be a member
because they perceive that the management is a separate role.
Workers cooperatives are formed as start up businesses, and as conversion of existing firms. Some
firms have converted to a workers cooperatives when they were unable to acquire traditional
financing. Another common rationale for conversion is when a long time owner/manager decides to
retire and transition away from the business. Data on employee well being at workers cooperatives
relative to other comparable firms is scarce. The evidence seems to suggest that employeemembers enjoy higher job satisfaction and job security and perceive more access to training and
development. On the other hand they face additional risks because their earnings are linked to the
cooperative’s profitability.
Employee owned cooperatives are another interesting example of the cooperative model and could
be a vehicle for business development in rural areas. If the employee owners of a workers
cooperative wanted to strike I wonder who could represent the other side?
6-2-2011