A worker cooperative is a democratically managed business that is owned and controlled by the workers. The cooperative form of organization allows ordinary people to combine their energy, capital, and skills to gain steady employment and income, participate in the ownership and management of their business, and share the profits made from their investment and labor.
Historically, worker cooperatives date back to 1790 in the U.S. and the 1760’s in England. They are found all over the world. The cooperative form of organization can be applied to any industry, including agriculture, manufacturing, services, food production, retail storefront or on-line sales; restaurants, computer software, engineering, construction, shipbuilding, and even charitable endeavors.
As cooperative members, workers participate in decisions that affect the way their work is organized, performed, and managed, as well as those that determine the growth and success of the business. Typically, workers receive wages established by the cooperative and then share in the year-end profits (or losses) according to their participation in the business (for example hours worked or wages earned).
Worker cooperatives characteristically expect members to:
- Work together (as opposed to being independent contractors) in a commonly owned business;
- Govern and control the enterprise on the basis of one vote per member, by consensus decision making, or an alternative democratic structure;
- Take the full risks and benefits of working in, owning, and operating their cooperative business;
- Equitably contribute to and benefit from the capital of their cooperative;
- Decide how the net income, or net losses, will be allocated.
A worker collective is a form of worker cooperative that prioritizes the group and similarities among members. The collective utilizes consensus decision making processes, although some collectives do allow votes of two thirds or another super-majority under certain conditions. Similarity of members in pay and authority are additional characteristics of the worker collective.
An ESOP (Employee Stock Ownership Plan) is an employee benefit plan where employees are allocated company stock, usually according to wages or length of service. Voting rights, when they exist, are usually based on shares owned rather than the cooperative standard of one vote per member. Although “democratic ESOPs” may operate very similar to cooperatives, most ESOPs are distinctively different from worker cooperatives.