Final crowdfunding coops and unions Ji Robinson, ILO

Crowdfunding the Future of Union-Coop Collaboration
Minsun Ji
Josef Korbel School of International Studies, University of Denver
Tony Robinson
Department of Political Science, University of Colorado Denver
February 2, 2013
In 2012, United States union leaders and the worker cooperative community split ways over
President Obama’s “Jumpstart Our Business Startups (JOBS) Act,” which significantly
liberalized regulations on small business equity financing, including “crowdfunding” practices.
Both the AFL-CIO and SEIU took vigorous stands against the JOBS Act, claiming that by
diminishing government oversight over small business crowdfunding, the JOBS Act promoted
corruption and destabilizing investment bubbles. Major American labor leaders condemned the
bill, claiming that the “cynically named JOBS Act” would weaken government SEC regulations
and expose workers and small investors to fraud and financial disaster (Elk, 2012).
president Trumka said he was “personally outraged,” with the bill. “This is a vote against
investors in the real economy and for Wall Street speculators. When the next bubble bursts,
Americans will know who to blame” (Kapur, 2012).
Even as U.S. labor leaders criticized the JOBS act and its crowdfunding centerpiece, other
progressive leaders—and in particular leaders within the workers’ cooperative movement-celebrated the act as ushering in a new era of democratic, decentralized capital investment (Fink,
2012; Mann, 2011). Progressive champion of economic localism, Michael Shuman (2009), has
long lauded crowdfunding for taking investment decisions out of the hands of an elite circle of
SEC accredited investors and giving them to millions of small-scale, local investors. The 2012
Conference of the Federation of Worker Owned Cooperatives hailed crowdfunding as ushering
in a “new era of innovation” ( Kassan and Long (2012)
summarized the enthusiasm for crowdfunding among many supporters of an alternative
economy: “While crowd funding alone isn't a silver bullet, it does play an important role in
revitalizing the entrepreneurial small business sector of the economy. Its simplicity and ingenuity
is American capitalism in its finest form.”
This paper explores the crowdfunding revolution celebrated by the JOBS Act, and examines
reasons for the striking disagreement between labor unions and the coop community regarding
the JOBS Act. We argue that instead of resisting crowdfunding, labor unions should embrace it
as a democratic financing tool that can support union-friendly worker owned cooperatives in
growing a progressive economy. We also explore how the owners of worker coops should
consider union membership, for both pragmatic and political reasons, as union connections can
help finance and strength worker cooperatives, even as they can help keep the worker owned
cooperative movement grounded in political transformation, rather than just pursuing economic
The Crowdfunding Revolution and the JOBS Act
In 2008, the ailing Pabst Blue Ribbon brewing company—a union shop--put itself up for
sale for $300 million. Betting on the transformational power of social media, entrepreneur Mike
Migliozzi organized a business experiment and launched a website to recruit thousands of
internet users to buy Pabst Blue Ribbon with from the social crowd (Best, Nice and Jones, 2012).
Within a year, Migliozzi’s crowdfunding experiment had raised $282 million in commitments
from small funders and Pabst’s hundreds of union jobs nearly became the purview of thousands
of back-yard investors across America, until the Securities Exchange Commission (SEC) stepped
in and stopped it all. Average Americans were not allowed under securities law at the time to
purchase equity in a company like Pabst, the SEC reasoned--only officially accredited investors
(about 2% of all Americans) had this privilege.
As Shuman (2009) states:
Existing laws place huge restrictions on the investment choices of small,
'unaccredited' investors -- a category in SEC vernacular that includes all but the
richest 2 percent of Americans. The regulations prohibit the average American
from investing in any small business, unless the firm is willing to spend $50,000
to $100,000 on lawyers to prepare a private placement memorandum or public
offering …
But the crowdfunding movement behind the Pabst story was not isolated.
advantage of the democratization of information and connectivity afforded by social media,
crowdfunding appeals in the last decade have raised millions of dollars in donations to support
thousands of small-scale initiatives. Crowdfunding—the mobilization of small scale donations
or investments from a crowd of individuals—has funded activities ranging from indie band tours
across America ($60,000 raised by the UK rock band Marillion), the production of independent
movies (The Age of Stupid film project raised £1.5 million British Pounds), and social purpose
ventures (the Tesla Museum project raised $1.4 million). In 2011, there were over 500,000
crowdfunding appeals made over the internet through crowdfunding portals like Kiva,
Kickstarter and IndieGoGo, which ultimately attracted millions of small donors who gave over a
billion dollars to small businesses nationwide (Best, Nice and Jones, 2012: 25; Drake, 2012).
The new JOBS act promises to dramatically grow these numbers. Until the JOBS Act, all
crowdfunding transactions were required to be donations to small businesses, rather than equity
investments. Under U.S. Securities law, it was illegal for average people to give their support to
a small or local business with the expectation of economic return. This is because prior to the
crowdfunding law, all companies (even the smallest) were prohibited from offering equity to the
general public without full registration with the SEC and adherence to all SEC rules, which is
costly and complicated. Furthermore, only SEC accredited investors (less than 2% of the
population [Shuman, 2009]) were allowed to directly purchase those equity securities,
substantially limiting the kinds of companies allowed to offer their stock publicly and the pool
of people who were allowed to invest in those companies. The consequence of such rules,
dating back to the U.S. Securities Act of 1933, was to centralize capital formation in a small
circle of accredited investors, who were predisposed (and restricted by law) to direct their
investment attention to established, SEC registered companies—companies that had the financial
wherewithal to pay lawyers handsomely to prepare their public offerings.
But rules changed after the JOBS ACT. The 2012 JOBS Act amended federal securities
law to benefit small and emerging businesses by easing rules on public offerings by small
businesses and by broadening the base of people allowed to buy equity in those companies. In
signing the law, President Obama was responding to a groundswell of pressure from innovative
venture capitalists, small businesses locked out of traditional venture capital circles, and
progressive economic thinkers who all supported crowdfunding liberalization as a way to
decentralize capital formation, foster innovative businesses and social enterprises, and encourage
small business florescence (Best, Nice and Jones, 2012; Bradford, 2012; Sustainable Economy
Law Center, 2012). The idea united liberal economists with free-market conservatives, and the
JOBS Act sailed through Congress with historic speed, passing in mere months with solid bipartisan support.
Perhaps the most dramatic reform was Title III of the JOBS Act, which created a new
exemption from federal securities law for “crowdfunded” securities offerings. This exemption is
meant to substantially democratize investment into small businesses, by making it possible for
small businesses to raise money through small investments from a large number of people, even
without filing an array of financial and registration documents with the SEC under traditional
securities law. Furthermore, small-scale investors in the company do not need to be SEC
accredited (Bradford, 2012; Vidra, 2012). Anyone in the public who is attracted to a small
entrepreneur’s internet crowdfunding appeal can invest in the company, joining with a crowd of
other small donors in mobilizing what can be huge cash infusions into the business. In 2012, for
example, Pebble Watches raised more than $10 million dollars in less than 30 days from 69,000
small web donors (Heesan, 2013).
The JOBS act dramatically democratized the capital financing landscape. Small companies
with unique business models now have an alternative source of “venture capital,” which has
historically been controlled by a small circle of traditional profit-seeking investors. These small
companies can now turn to “community finance” circles—crowds of small scale donors
contacted across the internet and who are more likely than accredited Wall Street investors to
support small, local businesses with a “social purpose” (Lehner, 2013). In this way,
crowdfunding “stands to revolutionize small businesses and entrepreneurial capital raising by
permitting any individual to invest in private companies over the internet with limited regulatory
hurdles” (Fink, 2012: 4). By decentralizing processes of capital formation, crowdfunding
undermines the power of traditional capital investors, transfers the social web’s model of
informal cooperation to the world of investment, “and leads to democratization and transparency
in finance” (Rothler, 2011: 5; see also Best, Nice and Jones, 2012: 3).
There are, of course, restrictions meant to direct crowdfunding to small businesses and to
balance the desire for freely flowing, decentralized capital investment with the need to minimize
investor risk and the dangers of financial chicanery or ineptitude by either businesses or
investors. For example:
A business can sell no more than $1 million of securities in the aggregate to all investors;
No single crowdfund investor can purchase more than $2,000 of securities, or 5% of the
investor’s annual income or net worth (10% for investors with annual income or net
worth exceeding $100,000);
The transactions must be conducted through a registered funding portal or broker who
must adhere to rules meant to insure investor knowledge of the risks involved.
With these basic regulations, supporters hail the Act as ushering in an era where average
people will have the ability to support local business or social purpose business ventures, and
where businesses can turn to sources of capital beyond the Wall Street moguls who prioritize
high profit rates over such concerns as local embeddedness, social purpose, or fair labor practices
(Elk, 2012). In so doing, the JOBS Act represents a democratization of capital formation—a
radical “disruption of the finance supply chain and distribution mechanism” that has been
previously controlled by a tiny percentage of accredited institutional investors (Drake, 2012).
Scott Purcell, President of the Crowdfunding platform Arctic Island, argues that the
Crowdfunding allowances of the JOBS act “will completely transform capital formation for
small businesses, [enabling] small businesses to get the capital they need.” (cited in Drake, 2012)
The scale of democratic capital that could be unleashed through crowdfunding is immense.
Even before the JOBS act, when crowdfunding could only be through donations without any
equity return, $750 million was given through 532,000 American crowdfunding campaigns
(Best, Nice and Jones, 2012: 25). Industry consultants are now predicting equity crowdfunding
to grow to somewhere between $4 and $6 billion by 2015 (Price 2012; Best, Nice and Jones,
2012; Fink , 2012). Analysts predict a global trillion dollar crowdfunding market in the years to
come, and the Word Bank is partnering with groups like Crowdfund Capital Advisors to explore
crowdfunding’s potential benefits in developing countries (Lawton and Marom, 2012).
As Kassan and Long (2012) describe the future of the United States:
“The vast majority
of the American public, the 99 percent of us who are ‘unaccredited’ investors, will soon have the
opportunity to keep their money local. The half of our economy made up of small, independent
businesses will now have access to capital that previously could only go to giant public
companies. Americans have $30 trillion dollars invested in securities -- imagine if even 10
percent of that went from Wall Street to Main Street. What could $3 trillion dollars do in our
Labor and the JOBS Act
Why did labor leaders resist the 2012 JOBS Act? It comes down to labor’s enduring
concern with the dangers of de-regulated capital.
In the wake of the 2008 financial crisis, labor
leaders and a many economists found it dangerous that the government was once again on a bipartisan path to financial deregulation. Simon Johnson, the former chief IMF economist, called
the bill "a colossal mistake of historic proportions," that "would gut investor protection in the
United States" under the cloak of creating jobs (Johnson, 2012). William Galvin, Secretary of
the Commonwealth for Massachusetts, expressed similar concerns.
As regulators we must be vigilant that the exemption will not become a tool
for financial fraud and abuse…Unscrupulous penny stock promoters have
used misrepresentations to market obscure and low-value stocks to
individuals, often through pump and dump schemes. These kinds of fraud
operators have not gone away…In this segment of the market, company
information may be limited or simply false, and investors typically lack
investment sophistication and are often insufficiently cautious (Sullivan and
Ma, 2012).
In the AFL-CIO’s statement opposing the Act, labor leaders argued that the Act deregulated
Wall Street, weakened the regulatory ability of the SEC, and allowed companies to sell stock
“without complying with key corporate governance reforms in the recently passed Dodd-Frank
Act” (Elk, 2012). Small, untested companies would now be allowed to circulate all sorts of
promotional claims, without producing the audited financial documents now required by the SEC
(Moberg, 2012). AFL-CIO president Richard Trumka said he was outraged by the act, which
would do nothing but “re-inflate a stock market bubble” (Kapur, 4). Critics found particular
animus for the “crowdfunding” exemption in the bill, with the IMF former chief economist
Johnson calling it “perhaps the worst part of the bill,” allowing companies to solicit small
investors with little government oversight (Johnson, 2012). Moberg (2012) explained specific
labor union concerns as follows.
For at least two reasons, unions have a stake in how the financial markets
work. They are interested in protecting investments that provide retirement
security for their members and other workers. And they have seen how
deregulated financial markets have disastrous effects on workers. They
encourage financial speculation and engineering that worsens inequality and
often destroys jobs (witness the merger and takeover craze), exploits the
vulnerable (witness the predatory lending during the last decade), and creates
bubbles….all at the expense of the real economy and the majority of working
Though such concerns are understandable, there is substantial evidence that fears of a
crowdfunded “stock market bubble” destroying the wealth of millions of small investors are
overstated. First, the reality is that the JOBS Act maintains a healthy set of regulations on both
the issuers of crowdfunding appeals and those who invest in them. Issuers must file disclosure
documents with the SEC detailing the names and addresses of business owners, providing prior
year’s tax returns, outlining the business plan and governance structure, describing the intended
use of crowdfunding proceeds, and setting targets for the offering (with regular progress
updates). Offerings can only occur through registered brokers or funding portals, which must
show due diligence to insure that companies listing on the portal are legitimate and that investors
are aware of the risks of investing. In fact, some economists find that the regulations remain too
excessive for the kind of small-scale investment contemplated under the Act (Bradford, 2012).
Second, the Act limits funding appeals to no more than $1 million in a 12 month period, and
restricts any individual donor from giving the greater of $2,000 or 5% of their annual income/net
worth (10% of income or net worth if the individual is worth more than $100,000). These
restrictions substantially limit the damage that can occur from bad investments and financial
fraud, and hardly suggest that a massively inflated stock market bubble such as the pre-2008
market would be likely.
Third, the crowdfunding marketplace has been remarkably fraud free for years. Though
billions of dollars have been donated through crowdfunding portals over the last decade, there
has not been a single case of prosecuted fraud involving crowdfunding (Fink, 2012). The
absence of fraud and investor disaster is due to several factors, including the small scale of
crowd-funded investments (most people invest less than they do in lottery tickets during the year
[Forbes]). Additionally, the “transparency and social networking dynamics of crowdfunding
have been excellent at keeping fraud near zero” (Lawton and Marom, 2012) as crowdfunding
typically involves thousands of small investors tracking the businesses they are investing in and
sharing information across the web. Furthermore, the kinds of social ventures that take the
crowdfunding route are inherently less likely to engage in the kind of profit-seeking fraud that
characterized the moguls of finance preceding the 2008 meltdown. “The trustworthiness of
social entrepreneurs is regarded to be much higher due to the primacy of the social aim, and the
thus the costs of fraudulent risk should be reduced in theory,” Lehner (2013) explains. “We see
early empirical claims for this based on the traditional non-profit literature” (see, for example,
Haugh, 2006 and Laratta, 2010).
The upshot is that labor’s concerns over financial deregulation in this case may reflect
labor’s reflexive distrust for the world of business finance more than an accurate assessment of
the risks. Labor unions have long had concerns that employee business ownership inevitably
tends to co-opt labor militancy as worker-owners became petite-managers, to undermine pay
and workplace conditions as workers accepted lower pay in exchange for workplace ownership,
and to devalue the role of the union in the workplace in general (Bell, 2006; Hochner, et. al.
1988; Birchall, 1999). In light of these kinds of concerns, it is little surprise that, over the years,
“worker cooperatives became disassociated from the labor movement” (Hochner, et. al. 1988:
16). But there are timely reasons to overcome this legacy of tension—reasons tied to changes
in the underlying nature of the economy.
Unions and Cooperatives Face the Informal Economy
It is well established that the rise of an increasingly informal and flexible global economy,
populated by non-standard and casual workers, has resulted in shrinking union density in the
United States and elsewhere. Temporary work is a rapidly growing sector of the U.S. economy,
and the explosion of non-standard and casual workers across the globe has led to the new
concept of a global “precariat” (precarious/informal workers, who are unlinked from dependable
job prospects), which is increasingly replacing the large factory based “proletariat”-- once the
backbone of union organizing campaigns (Standing, 2011; Davis, 2006).
A related development is the decline of manufacturing and the rise of service-sector
employment: 85% of today’s U.S. economy is service-sector work (Curl, 2010), which is
typically more informal and precarious than the manufacturing employment of old. These trends
of an increasingly informal service economy help account for dramatically shrinking private
sector union density in America (falling from 24.6% in 1973 to 6.9% in 2010), simply because
informal workers are much more difficult to organize and because employers can flee unionized
sites for non-unionized locales of more exploitable workers (Schmacher 2000, 2).
While formal unions have found their strength eroding in the new global order,
decentralized workers cooperatives have grown rapidly, as their organizational model matches
the decentralized and fluid dynamics of today’s global world. “Today, increased technology,
globalization of labor markets and the mobility of capital has ended the reign of large centralized
factories. The new casual and decentralized labor force has decimated the major strength of
trade unions’ power—a large, unified labor force. Unions have been forced to look at the
creation of unionized worker-coops, not just as a fall back during depressions, but as the new
order of the day” (Geminijen 2012).
As union strength declines globally, worker cooperatives are growing. In 2010, the
International Cooperative Alliance represented co-operatives with over one billion members, in
180 countries (including cooperatives of all sorts, not just worker coops). In some countries,
like Spain and Italy, workers cooperatives have grown to constitute a sizable share of the
national economy. Some studies have found that worker coops have proved more resilient than
mainstream businesses after the 2008 crisis, creating more post-recession jobs in many countries
than has the traditional business sector (CICOPA, 2012) .
In the United States as well, the trend of economic informalization has been coupled with
expanding worker owned cooperatives, especially within the service sector (i.e., cleaning, food
catering, moving assistance, landscaping, child care), and with an especially notable growth of
immigrant worker own cooperatives (Ji and Robinson, 2012). In New York City and the Bay
Area, worker cooperative networks are rapidly growing. In Cleveland, city, university and
business leaders have united behind the innovative "Evergreen Initiative,” a well-funded plan to
build an expanding network of worker cooperatives across the city (Alperovitz, et. al.2010;
Johnsen, 2010).
Still, the economic scale and impact of worker cooperatives remains very small overall—
especially in the United States. Even as workers cooperatives blossom across the globe, with a
model of decentralized, small-scale employee ownership that responds well to the growth of the
precariat in the increasingly informal global economy, these small businesses still lack mass
numbers, organizational power, and—most importantly—adequate access to capital resources
(California Financial Opportunity Roundtable, 2012).
Non-traditional small enterprises like a local worker cooperative face tremendous
difficulties raising adequate capital (Bauer-Leeb and Lundquist. 2012; Lehner, 2013;
Schwienbacher and Larralde, 2010). For one, the typical “social purpose” goals of worker
coopeives are often seen by investors as undermining financial returns. Furthermore, the
unfamiliar corporate governance and legal structures of workers cooperatives can dissuade
traditional investors (Artz and Kim, 2011: 47). There is also a deep cultural distance between the
social entrepreneur and the traditional wall street investor, who speak fundamentally different
languages (“social purpose investing” versus business/managerial excellence) (Lehner, 2013: 24; Ridley-Duff and Bull, 2011). These obstacles help explain why a 2003 bank of England
study found that “social enterpreneurs indeed have a hard time accessing traditional debt
finance,” and why the business plans of small social entrepreneurs are rejected 98% of the time
by traditional venture capitalists (Lehner, 2013: 4).
With their decentralized and flexible business model, worker owned cooperatives are a good
match for today’s globalizing informal economy—yet they lack adequate capital to fully exploit
their potential. Unions have deep wells of intellectual capital, financial resources and
organizational might, and yet their membership and power is shrinking as they face new
economic realities. Both coops and unions, therefore, can benefit greatly from partnership and
collaboration. But in a country like the United States, with little history of deep union-coop
collaboration, the question remains: how to do it? The JOBS Act offers one answer to that
question, because the “relatively new form of informal financing” (Hemer, 2011) that it has set
free—crowdfunding—presents unique opportunities to bring labor and coops together around a
flexible and decentralizing funding strategy that well matches today’s underlying economic
Union-Coop Collaboration: A Crowdfunding Solution
The SEC has not yet fully written the new investment regulations that will guide the
implementation of the JOBS Act’s crowdfunding regime. But as those rules are announced,
workers cooperatives will be able to directly market the social vision of their business through
internet platforms, attracting crowds of small investors. In preparation of the new rules,
Websites like “The Crowdfunding Cooperative” are emerging with a goal to “massively scale”
cooperatives, “making it easy to manage community share issues and find coops to invest in”
( . For these reasons, the 2012
National Worker Cooperative Conference called crowdfunding a revolutionary “new era of
innovation” for worker coop financing . Reflecting on the favorably changing landscape of
worker cooperative financing, Melissa Hoover (Director of the U.S. Federation of Worker
Cooperatives) concluded that “there are some substantive things happening in the past year that
feel different. There was the International Year of the Cooperative, more media attention, more
academic inquiries, enough lawyers to start a [workers coop] legal professionals group, interest
from sustainable business and socially responsible business people, crowdfunding tools starting
to be used for worker cooperatives, and first calls from outside investors wanting to develop
funding vehicles for worker cooperatives.”
Unions can be part of this crowdfunding revolution. There is already a history of financing
collaboration between unions and coops, as unions have sometimes helped finance worker
buyout of companies. But most union-facilitated worker buyouts in the last several decades have
resulted in only nominal worker ownership and governance of a company—as in the case of
most Employee Stock Ownership Plans (ESOP) that do not give workers democratic control of
management and which do not always result in workers have majority ownership of all the stock
(Bell 2006; Olsen, 1982; Hochner et., al. 1988) .
Through the creative embrace of crowdfunding, unions can go beyond ESOPS and help
finance actual worker-owned and worker-managed cooperatives. We are seeing movement in
this direction already. For example, in 2012 the United Electrical, Radio and Machine Workers
of America (UE) successfully executed a buyout campaign to turn one of their unionized
workplaces into worker owned cooperative.
This coop campaign had been pursued since 2008,
when 250 workers from the Republic Windows manufacturing company in Chicago occupied the
factory to demand unpaid wages, and then occupied again in 2012 in order to prevent a second
owner from shutting down the factory (Kunichoff, 2012).
The largest obstacle to the success of the worker buyout of Republic Windows, and the
same obstacle that has undermined so many other worker cooperatives, was inadequate access to
startup finance capital. The Bank of America, which owned most of the debt at Republic
Windows, refused to consider financing a worker cooperative buyout. In the absence of
traditional capital to finance the worker owned cooperative—known as New Era Windows-- the
Electrical Union Local 1111 played a critical role in solidifying community support, developing
worker leadership and negotiating with a bank for financing (Flanders, 2012). But additional
funding was needed. In the end, to fully fund their vision of a worker coop, Republic Windows
workers turned to a grassroots microcredit organization, Working World, which helped finance
the worker buyout with no-interest loan money. This loan money came from a small scale
capital loan fund for locally based worker cooperatives, that was seeded by community
crowdfunded donations (Gonzales, 2012; see also .
Though such examples are promising, the fact is that these kinds of union-facilitated
cooperative startups have been quite rare, and typically involve very limited capital. Part of the
reason is that before the JOBS act, U.S. securities law meant that community supporters wishing
to crowdfund such businesses as New Era Windows had to donate their money without hope of
financial return. But after the JOBS act, community supporters can now choose to actually buy
an equity investment in social purpose companies. It is predictable that even more community
crowdfunding dollars will flow into businesses like New Era Windows , since there is now a
possibility of receiving a return on one’s social investment.
In this new environment, labor unions could choose to embrace crowdfunding, and deepen
their connection to the workers cooperative movement by developing strategies to catalyze the
investment dollars of individual union members into community-sensitive, socially responsible
worker cooperatives, as now allowed by law. For their part, workers cooperatives could selfconsciously “earn” union support by building business models in accordance with union friendly
practices, becoming community members of local unions, and involving their worker-owners in
broader political causes than the economic success of their cooperative.
To be clear, unions would not be allowed under the JOBS act to channel their pension fund
investment dollars or any other institutional investment fund into crowdfunded worker
cooperatives—simply because the JOBS Act targets individual donors and frees them to make
small investments in non-SEC registered businesses. Nor would union leadership be able to
offer specific investment advice to their members, urging them to invest in any specific
crowdfunded business, as such formal investment advice remains illegal under the JOBS act,
except when done by accredited brokers, promoting SEC registered companies. But, there are
several ways that unions might use the new Crowdfunding law to build on the latent support that
their members might have for worker cooperatives, and to bring the efforts of unions and coops
closer together. We lay out some possibilities below.
Educate Workers About Crowdfunding. Labor unions could provide effective education
for their members regarding crowdfunding dynamics, and with a broader goal to move their
members towards broad-minded “social unionism” (Waterman, 1993; DeMartino, 2004). While
union education campaigns have often been confined to specific union issues, such as employeremployee relations and workplace safety, recent approaches in union education have embraced
more diverse subjects, helping union members connect their own struggles with surrounding
community issues, ranging from sustainability issues (AFT, 2008) to disability and immigrant
rights (Read, 2007; Luce and Nelson, 2008) and even to gay rights (Ceronsky, 2012)
Union education campaigns that reach into social issues beyond the union itself are one
step to building “workers’ collective identities” as social change agents, which are constructed
through engaging members into broader social and political education (Levesque and Murray
2006). Considering crowdfunding education campaigns, unions could partner with community
organizations to help members understand the benefits of crowdfunding in supporting local
cooperatives and building a sustainable economy. Through union education campaigns, members
can be made aware of what crowdfunding is, what kinds of businesses can now be invested in,
and how to invest. Union members can be taught how crowdfunding can channel individual
investment dollars into businesses that share union values, even while earning an equity return for
the investor.
Such education campaigns could be modeled on practices like the Labor Letters of
Endorsement Program, which the United Way websited describes as follows: “the AFL-CIO
president asks presidents of AFL-CIO affiliated unions, state federations and central labor
councils to send letters endorsing United Way campaigns to their memberships. The Labor
Letters of Endorsement Program encourages individual union members to volunteer their time
and contribute their resources to United Way campaign.”
Along those same lines, a Labor
Letters of Endorsement or other education campaign could highlight crowdfunding opportunities
and demonstrate how individual members can now dedicate their money to gaining an equity
stake in innovative social ventures (without advising union members to invest in any identified,
specific business, which would be illegal under crowdfunding law).
Scholarship has shown that union education campaigns are very effective at catalyzing
charitable giving among union members (Zullo, 2011; Ranghelli, 2011). For example, the Labor
Letter of Endorsement Campaign results in millions of dollars every year in charitable
contributions to the United Way by union members (accounting for two-thirds of all funds raised
by the United Way each year) . Labor unions can make their educational efforts especially
effective by building on labor’s growing success with new information technology and social
media mobilization. For instance, the Minesota Nurses Association in 2010 used an extensive
social media campaign to rack up its contact numbers, including “495,000 Facebook page views
and 11, 285 new fans in a 90 day period,” which set a new standard and possibility for labor
organizations to learn from (Nemo, 2012)
Certify Unionized Crowd Fund Advisors. The National Crowdfunding Association has
launched a Certified Crowdfund Advisor (Best, Nice and Jones, 2012) certification program. As
described on the CCA website, The CCA certificate “identifies the holder as being an expert in
crowdfunding and thus professionally able to help everyone from small business owners to
investors regarding how to participate in crowdfunding” ( Dedicating union
dollars to helping members of union locals and state labor federations achieve such certificate
would facilitate the educational strategy discussed above, while providing authoritative and
specialized investment education to union members interested in building up worker
Establish a Union-Sponsored Crowdfund Portal. Unions have been successful at
mobilizing social purpose spending by their members when they have self-consciously created
the “environmental conditions” to catalyze such actions (Zhullo, 208).
In the field of
crowdfunding, one of those environmental conditions could be to establish a union-sponsored
crowdfund portal that facilitates investment in worker cooperatives that share union values of
worker empowerment and broader social justice.
Such crowdfunding investment portals are
necessary because under the JOBS act, crowdfund investors and businesses cannot connect
directly. Rather, to better insure the validity of businesses seeking crowdfunds and the
knowledge level of potential investors, these two parties must connect through an independent
“middleman” portal—a web-based platform that must insure that the businesses on their site
meet minimum standards outlined in the law and that small investors using the portal are
educated into the risks and opportunities of investing. Many of these crowdfunding platforms
already exist, such as IndieGoGo, Kiva, and Kickstarter. Furthermore, many of these extant
portals have a specific angle—such as portals that focus on green businesses (Green Unite), arts
related businesses (New Jelly), local agricultural initiatives (Three Revolutions), innovative
product designers (Christie Street) or on projects friendly to lesbian, gay, bisexual and
transgendered individuals (FundPride). There are also several emerging portals already
dedicated to cooperative financing, such as and the crowdfunding co-operative.
Along those lines, a union collaborative could come together to launch a crowdfund portal
that features only worker-owned cooperatives that share union-friendly business practices and
values. In providing information about businesses featured on the union crowdfunding portal,
the portal could publish metrics to rate businesses on a “social purpose” scale, using such tools
as the Social Return on Investment (SROI) method, as standardized by the SROI network
(; see also Lehner, 2013). Union members (who arguably are more
willing to accept lower rates of return in favor of “social investment” goals [Quarter, et. al.,
2001]) could be directed to this portal to facilitate their investments into union-friendly worker
Such a portal would have important legal restrictions on its communications with users.
Under the law, crowdfunding portals cannot offer investment advice or recommendations, but it
as of yet unclear how the SEC will interpret this principle in terms of what kinds of information
portals can and cannot share with their visitors. Clearly portals cannot advise investment in any
specific company, but it seems likely the SEC will allow them to act as a kind of educational
clearinghouse, focusing all their offerings only on one kind of business (worker cooperatives)
and sharing information such as which businesses are union organized and where businesses
might be rated on the SROI scale.
Provide Technical Assistance to Worker Cooperatives. Many worker cooperatives lack
the technical skills to take most effective advantage of the new investing environment. Unions
could develop training academies and outreach efforts targeted at socially responsible worker
cooperatives and assist coops in navigating a crowdfund offering. Developing a union cadre of
CCA certified crowdfunding advisors would facilitate this goal. Such a strategy would build on
unions’ long history in facilitating worker-buyouts of companies in America (Hochner, et. al.,
Extend Union Membership to Coop Members. The worker-owners of cooperatives can also
be union members.
Though many smaller worker-owned cooperatives may not feel they need a
formal union to represent workers to management (for example, in the case of a small business
owned by just a few worker owners), worker owners may still be interested in becoming
“community members” of local unions, as an expression of the shared values of unions and
worker cooperatives. Unions can reach out to network and build good will among local
cooperatives, and can develop mechanisms for allowing coop owners to become community
members of the union itself. As AFSCME organizer Lisabeth Ryder (2008) argues,
“incorporating worker cooperatives into union membership would broaden our political power
and dues base, as well as expand our organizing potential.”
Such efforts by the unions to extend membership to coop owners would match DeMartino’s
(2004) vision of “stakeholder unionism,” in which unions no longer restrict themselves to waged
workers at specific worksites. Instead, unions might conceive of themselves as a broader
alliance of people committed to similar economic and social goals, including even circles of
coop owners. “This kind of unionism would welcome as full union members diverse
constituencies who share the labor movement’s commitment to justice for the marginalized, but
who are now excluded from the movement by restrictive notions of just who can be a union
member” (DeMartino 2004: 240).
Mobilizing coop owners as full union members can have important benefits to coop
members. Unions can provide business planning assistance, leadership development services
and legal advice to coop members, and can help “structure and provide healthcare coverage and
pension plans” (Gemininjen 2012; Ryder 2008).
Through their union association, coop
members might also find their political horizons broadened, because “unions can help alleviate
the inherent tendency of individual cooperative businesses by increasing cross-company worker
solidarity…and provide perspectives on industry-wide trends” (Gemininjen 2012; see also
Haller, 2011). New York’s Cooperative Home Care Associates—a cooperative that is
unionized by SEIU—provides a good example of how a unionized cooperative can strengthen its
own mission to “raise the floor” for all industry workers, by taking advantage of SEIU’s political
clout in shaping New York’s allocation of health care contracts, and of SEIU’s benefits and
education programs for workers (Witherell, Cooper, Peck, 2012: 17).
Social Movement Unionism and Unionized Cooperativism
The reality of inadequate capital for the worker cooperative sector, and of declining union
density due to growing service sector and informal economy, suggest reasons for both
institutions to strengthen their mutual ties. As a strategic response to these kinds of challenges,
Curl (2010) notes that “the twenty first century’s cooperative movement is re-forging a close
alliance with the labor movement” (see also Artz and Kim, 2011: 7) If unions and worker coops
can indeed deepen their relationship by taking advantage of the crowdfunding revolution, “it is
possible that the combination of the worker-owned and managed model with such unions will
infuse a renewed energy in the membership to democratize and take control of their workplace”
(Geminijen, 2012).
Such union-coop synergy would go beyond the traditional concept of workplace unionism,
and advance unionism as a broader social movement—a collectively of individuals sharing
common values across a range of issues beyond the specific workplace (Waterman 1993;
Johnston 1994; Clawson 2003; ). This kind of social movement unionism is “the belief that
unions should act in concert with other progressive social forces and particularly the new social
movement, grounded in the politics of social identity, the environment, and globalization”
(Frege, et. el. 2004: 137; see also Robinson 2002).
There is room for union members and worker coop owners to strengthen each other in a
shared pursuit of a more democratic and dignified economic order, especially if coop owners
consider membership in a broader notion of “stakeholder unionism,” while union members
demonstrate their “credible commitment” to local economic empowerment by channeling their
dollars and technical expertise into the growing workers cooperative movement (Levi, 1999:
249; Levinson, 2012).
A powerful example of just this kind of broad-based union-coop synergy is the recent
collaboration between America’s United Steel Workers and Spain’s Mondragon network of
worker cooperatives. In 2009, the United Steel Workers signed an agreement with Mondragon
to collaborate in developing worker-owned steel producing cooperatives in the United States.
The vision was to develop a series of worker-owned manufacturing facilities with a commitment
to economic democracy shared by both unions and the Mondragon coops. Under the agreement,
the new worker coops would feature unions as a social council in the coops, insuring that worker
concerns were always brought to the front-line, even if worker owned cooperative grew to
demand increasingly formalized management structures (see the online description of the
partnership here:
In 2011, two years into their union-coop experiment, and as new worker owned steel
factories were set to open in Pennsylvania and Ohio, the USW released a resolution supporting
the “prudent investment of workers’ capital” in worker ownership business models.
Union will pursue every responsible avenue to ensure that the investments of the USW and of
USW members collectively are used in a way that not only provides a reasonable monetary
return, but also provides job security, job creation and invests in our communities,” the
resolution noted. The USW-Mondragon press release noted that this union co-op model had
already fostered new union-coop startup projects in Pittsburgh and Cincinnati, with additional
projects based on the union co-op concept beginning across the nation. In this way, advocates
The USW/Mondragon partnership intends to re-enfranchise local working
populations and restore capital flows back towards town centers. It intends to
keep corporate boardroom interests aligned with the local community
stakeholders and neighbors. The new cooperatives will integrate the
cooperative model with a collective bargaining committee using the social
council in the Mondragon organizational model. …. [This is] the right
moment to bring the cooperative and labor movements back together (Clamp,
Though the Steelworkers-Mondragon collaboration is the most celebrated, other unioncoop partnerships are emerging across America. For instance, The United Food & Commercial
Workers union has actively supported the Detroit cooperative Grocery Store Coalition, AFSCME
is building deeper connections between their unions and local cooperatives, and the executive
board of the Maine AFL-CIO issued a resolution of support for worker cooperatives in 2009. On
the coop side, the U.S. Federation of Worker Owned Cooperatives has created a union/co-ops
council, “to explore opportunities for collaborations with several unions for mutual benefit”
What such union-coop partnerships suggest is an expanded notion of what it means to be
union member, of how unions can use their resources to build the alternative kind of economy
many worker coops support, and of how coop owners can think politically and in solidarity with
union workers in a struggle to humanize the broader economic system. Unions and worker
owned cooperatives are complementary in pursuing shared goals of worker empowerment and
economic justice. While worker owned cooperatives are well suited to addressing the growing
challenges of an informal economy by organizing precariat workers into small scale
cooperatives, labor unions are well suited to pursing broad-based political power through
collective bargaining, mobilization and political advocacy. Though they have different strengths,
deep philosophical commitments ultimately unite coop owners and union members.
As Hazel
Corcoran, the Executive Director of the Canadian Worker Co-operative Federation (CWCF),
stated at a union-coop solidarity conference, both groups believe in “economic democracy,
wealth sharing and putting people before profits.” It is these shared values that could serve “to
move them from indifference to common ground” (cited in Davidson, 2011). One immediate
and practical way towards building that common ground is to embrace the potentials of the
crowdfunding moment, funneling union resources into worker cooperatives, and building union
density within the growing cooperative sector. Crowdfunding is a newly empowered
mechanism that can help secure union-coop collaboration in practical and meaningful ways,
allowing unions and coops to jointly celebrate the coming democratization of capital and the
crowdfunded cooperative workplace.
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