Cooperatives are a sustainable, equitable business model that should be present in more communities in America. While there are several throughout California in L.A., Ventura and the bay area, there is a need for more. Co-ops have the power to diminish financial inequality and improve the lives of members and the surrounding community through supporting affordable homeownership, fresh local food or electricity to rural areas.
Wages for the middle class have been stagnant for the past 30 to 40 years, but that hasn’t stopped the wealth from benefitting the top 10 percent of earners, according to the Pew Research Center. So, what can the American worker do?
Well, for starters, they can join a co-op. A co-op is an entity that is democratically owned and controlled by its members. Membership in each co-op is rooted in equality, where one person’s vote is equal to everyone else’s, regardless of position.
Co-ops function like every other business. They sell products, perform research and development, monitor the marketplace and make decisions accordingly.
“One of the distinctions between a cooperative and a conventional business is that a conventional business is run for the sole purpose of maximizing profits for their shareholders. It’s the legal obligation that all businesses have. In a cooperative, you’re trying to maximize the benefit of all the members,” said Ricardo Nunez, director for economic democracy at the Sustainable Economies Law Center.
Worker cooperatives are not unique to one industry. Co-ops exist in every form of business, from white collar consulting businesses to blue collar manufacturing businesses. One of the prominent co-op formats is as a food market, like Ventura Food Co-Op or Isla Vista Food Co-Op. We need to continue to expand these businesses because employees and the community around them are much better off with co-ops than they are with corporations.
Compensation for members of co-ops is determined by the amount of money that the business makes at the end of the year.
“Every year the profit distribution to the members is based not on your investment in the cooperative, but on actually how much value you’ve added to the cooperative. Typically, it’s measured in how many hours you’ve worked over that year,” Nunez said.
This means there is no need to pay executives or CEOs huge amounts of money because each member of a co-op is both the worker and the boss.
Decisions like entering a new market or introducing a new product are all voted on by members. The structure of each co-op is different, but some co-ops vote on every single business decision, while others implement a system similar to voting for a representative.
According to the Democracy at Work Institute, there are just over 300 co-ops in the United States. There are a few reasons this number is low. One of the biggest is the outdated financial model. Co-ops have a hard time acquiring capital from financial institutions because they typically only deal with one business owner. Under a co-op, there are several proprietary business owners, which complicates the situation.
Nunez said another big reason why co-ops are not more popular is simply because people aren’t aware of the business model.
“I think one of the largest barriers that we have is that people just don’t know that it exists… and part of that is because cooperatives aren’t taught in business school, they’re not taught in law school, they’re not taught in accounting or bookkeeping,” Nunez said. “So, all of these pieces that create the ecosystem for conventional businesses to exist, don’t exist for cooperatives.”
Virginie Perotin, a professor of economics at Leeds University, argued in an article for the The Nation that co-ops are more productive than conventional businesses because staff work “better and smarter” under a more efficient organization of production.
This is because members of a co-op are financially tied to the business, meaning they have higher motivation to see the company succeed.
Co-ops are far superior to the traditional American corporation because of their commitment to equality and a decent wage for its members. They represent the all-American notions of democracy, upward mobility and opportunity.