Coming up in our New Economy Programme series is the webinar Worker Co-ops: How to Get Started with Siôn Whellens.
27 January 2 - 4.30 pm - book here.
We live in a world of increasing inequality, exploitation, and a fixation on growth at all costs. We need new forms of business and there are a growing number of co-operatives that are owned and controlled primarily for the benefit of their workers.
This workshop will be a practical journey through the stages of setting up a worker co-op, exploring the different options and decisions you’ll make along the way.
Siôn Whellens co-designed and launched the Worker Cooperative Solidarity Fund, which has 525 contributing members, mainly worker co-operators. SolidFund backs worker co-op education, skills development, and organisation projects.
Siôn has also written for Stir Magazine. Read one of his articles from the archive here:
Commons or shares? The trouble with worker ownership
by Siôn Whellens
The sale of US craft brewery New Belgium Brewing to a division of the Kirin Holdings Company by its worker owners has provoked an outbreak of soul-searching among people who believe employee ownership is central to a new, more equitable economy. It has also reignited old debates about the difference between common ownership worker co-operatives and shares- based models in the US, UK and Canada, and has led to new calls for legislation on ‘indivisible reserves’ for worker-owned enterprises – a proxy for common ownership.
As a widely admired, national-reach business, New Belgium was a poster child for advocates of ‘inclusive capitalism’. The furore around its sale reveals confusion about the nature and meaning of worker ownership, even among people who think about it a lot. Among those who don’t, it may look like a religious argument about a minor difference of emphasis, concerning a small industrial sector – and who cares about workers anyway? For new economy and worker activists, it’s important because it means being careful about where they put their energy, as well as having implications for the real or perceived integrity of the co-operative system.
‘Ownership’, like ‘democracy’, is a word packed with conflicting interpretations, but often used as if it has a universally shared meaning. The economist Elinor Ostrom articulated a view of collective management of common resources as ‘stewardship’. In the 1970s and 80s, a similar concept underpinned a wave of worker co-operative formations, as well as new legislation – the Industrial Common Ownership Act of 1976. Co-ops like Suma, Calverts, Unicorn, and more recently emerging worker co-ops in technology and other sectors, are ‘owned’ by their worker members in this collective sense of stewardship. It describes the form of legal possession, but also extends to cultural assets such as the sense of ‘job ownership’, solidarity, and social mission.
Typically in this type of enterprise, a worker does not need to ‘buy in’ when they join, and they receive no payout when they leave. Although there is no UK legal provision for ‘indivisible reserves’, as there is in countries with codified legal systems like France, Spain, and Italy, on dissolution they must pass any residual assets to another common ownership co-op, or to a sympathetic collective body. Unlike a charity or a Community Interest Company, this ‘asset lock’ is voluntary, in the spirit of the first co-operative principle; it can be reversed by a decision of a supermajority of worker members. That happens rarely; I can’t think of a recent instance in the UK. On the whole, such co-ops have an ethos of honouring the social contract between previous and present generations of worker members, by passing collective ownership of the enterprise to the next – hopefully in better shape.
“The sale of US craft brewery New Belgium Brewing by its worker owners has provoked an outbreak of soul-searching among people who believe employee ownership is central to a new, more equitable economy.”
Employee ownership through direct allocation of shares to individuals, or the holding of shares in a trust for employee benefit, leans towards a different idea of ownership: one which is more transactional and individualised, implying the right of the present owner to dispose of the owned thing as they see fit, and to profit from the disposal. This is the ownership model of New Belgium, which used an Employee Share Ownership Plan (esop), a key feature of the US employee ownership system. Of course, as in any other actual example of ownership, the right of the owners of esop shares in New Belgium to dispose at will was hedged with internal and external regulation. In practice, as long as the firm was a profitable going concern, the esop built up a supercharged and ‘tax efficient’ retirement fund for employee members. Kirin’s offer to buy the independent brewery – for an undisclosed price – simply induced them to cash out early.
The hand wringing over the loss of New Belgium is in some ways strange, because it’s just the latest in a string of such sales in the US and Canada. The experience in the UK is similar. Famous firms like John Lewis Partnership – a supertanker in the UK’s small fleet of employee-owned businesses – have sailed a steady partnership course for decades. But in Wales, where Wales Co- operative Centre facilitated many worker buyouts through trusts and shares in the 80s and 90s, many of the converted firms ended up back in conventional private ownership within a few years. Why is this surprising?
At the surface level, worker co-ops and employee ownerships have a lot in common, as they give workers equity in the enterprise. According to sympathetic researchers, this correlates with higher levels of productivity and profitability, better wages and conditions, greater business durability, a more equitable and peaceful work culture, and a healthier relationship with the communities around them. If you could walk down a high street where 40% of the firms were worker co- ops, 40% employee owned, and 20% family businesses, what wouldn’t there be to like?
Yet on another level, they diverge sharply.
Generalising: worker co-ops come out of and align with the workers and social movements; contest capitalism; and ‘prefigure’ a classless and solidarity-based social system. Employee ownerships come out of the quest for legacy }by philanthropic owners; the narrative is usually about participation, stability, and business performance, rather than critical of wider social relations. For example Jennifer Briggs, VP Human Resources at New Belgium for more than ten years, says “it was the combination of the employee ownership mindset, broad-based business literacy, critical thinking, and attention to building a great culture, that catapulted us to the top.”
In reality, things are more blurred, but once again, who cares?
If you think workers are the only social class with both motive and latent power to overturn the present system, the answer may be clear. Yet even in the co-operative movement, there’s a strand of opinion that doesn’t regard worker co-ops as legitimate, since they ‘only’ benefit workers. On the other side, some advocates of share- based models say common ownership just keeps workers down, by promising them unending labour in exchange for a threadbare utopian fantasy. To paraphrase one business conversion expert with a foot in both camps: “I don’t lose too much sleep if the workers cash out, and the business goes back into private ownership. They got a wedge of money from the deal, which they wouldn’t normally.” Looked at this way, both models of ownership hold out the prospect of ‘jam tomorrow, not today’ for workers, but with share ownership models just getting there a bit quicker.
It gets even more interesting when we move from the question of ownership to that of control, both of the enterprise and in terms of accountability to the social movement. We’ve seen that share ownership appears to confer greater powers of disposal to the worker, and maybe it does when the question is whether to flog the business. In practice, however, employee-owned firms often keep significant ownership in the hands of the legacy shareholders, and they almost always preserve the mode of command- and-control, with layers of professional management directing workers at both the strategic and operational level.
This shouldn’t be surprising when we take into account the philanthropic origins of many employee-owned businesses. Former owners find it harder to give away the idea that they possess special skills, ethics and knowledge, than they do some or most of their shares. In the words of Bob Moore, former owner of Bob’s Red Mill Natural Foods in Oregon, a large and profitable esop: “Nothing about the new arrangement will change a thing. I may have given them the company, but the boss part is still mine”.
In general, the idea is that a financial stake in an employee-owned business in itself will spark the worker loyalty and extra productivity that gives the company its edge. Yet we know that in most jobs, money isn’t the only motivating factor for workers. Successful worker co-operatives embody lifelong learning and personal development, a culture of equality and decent work, and the opportunity for workers to collectively self-manage their working lives. When they achieve this, they also increase business efficiency by reducing the need for executive managers, whose principal function in any firm is to maintain discipline, and whose services are generally expensive.
Employee ownerships are usually keen to amplify what they see as their natural ownership advantage with a range of management initiatives aimed at getting buy-in from employees on a deeper level, using systems theory, business school ideas, and Maslovian notions of needs hierarchy to wring out the extra juice. All this management is, of course, costly. Worker co-operatives by contrast are more likely to be able to assume loyalty, and dispense with the hoodoo; their disadvantages mostly stem from problems around capital – a lack of which defined their members as workers in the first place.
"The hand wringing over the loss of New Belgium is in some ways strange, because it’s just the latest in a string of such sales in the US and Canada. "
The conclusion might be that both forms get a business advantage by being able to build their base of skills and expertise by retaining and upskilling workers – resulting in higher productivity – but that they do this in radically different ways. In worker co- ops, which have developed some of the most advanced practical applications of democracy anywhere, collective self-determination reaches into the everyday process of production, not just the traditional realm of ‘corporate governance’.
Employee ownerships and worker co-ops also have a different take on information and transparency. To work well, co-ops have to practice true ‘open book’ management, with almost all information available to members, on the basis that ‘if you don’t have the information – or can’t use it – you can’t be in control’. By contrast, information culture in many employee ownerships amounts to giving members an annual update of their financial ‘pot’, running quality circles – the old Suggestion Box, with bells on – or implementing ‘nudge’ measures to improve worker performance. At the launch of the ‘1 Million Owners’ campaign, Co-operatives UK’s joint initiative with the Employee Ownership Association, the boss of a London PR company spoke with pride about how her employee-owned business has become more transparent. “Everyone has access to all the information. Except of course sensitive things, such as how much each of us earns.”
None of this might matter much, except that mistaking worker co-operation for employee ownership, or conflating them, leads to wasted effort on the part of New Economy activists – boosting business narratives that have no real meaning for us, or exhausting with misguided policy initiatives. The future of worker co-operation lies in the hands of workers, to whom, wherever they are, the tools and experience of the present movement need to be made available. That’s a hard task, which can’t be achieved with top-down short cuts or new legal frameworks.
It’s observable that organisations rarely change in any important way. When preparing to write this, I asked publicly if anyone could give me an example of a worker co-op that converted to an employee ownership, or vice versa. There weren’t any. But in truth, there are probably quite a few enterprises that embody elements of both, and don’t worry about it – like Lembas, the wholefoods merchant in Sheffield that has equal pay, practices collective management, calls itself a co-op, does great community engagement – and hacked the employee ownership trust model four years ago.
Which is the more unlikely vision: a mixed social economy full of happy shoppers and cheerful workers, or the hegemony of a new social and economic order based on principles of equality and sustainability – the aim of the co-op pioneers, and of social movements around the world today? The revolutionary horizon is indistinct, but probably closer than we think. So the difference between a holistic, class-centred perspective and a reformist, bloodless one is relevant. Meanwhile, let’s keep getting more scratch for the workers. ∞