The desire to be one’s own boss is very attractive and widespread but not everyone can be their own boss. Most economic activites require firms that employ many people and obviously there can only be one boss and most people are not the bosses of their firm. But what if there was a different way? A way of forming a firm where everyone is the boss, the entrepreneur and co-owner at the same time? Welcome to the fascinating world of worker cooperatives.
What are coops?#
Cooperatives (or simply coops) are enterprises which are owned jointly by their members for some purpose. There are many kinds. These members can be producers, customers, like with credit unions, or employees. The later is what is termed a worker cooperative.
Worker coops are quite unique, they are co-owned and co-managed by every employee, this way everyone is the boss at the same time and decisions are made democratically. Typically big decisions are made together while others are delegated to an elected council. They take the best of capitalism and socialism by being profit-oriented and efficient to sell in a market while the means of production lies in the hands of the actual workers.
Worker cooperatives represent a minority of firms and are more common in some places than others. The largest coop of this kind is Mondragon, it is a federation of many smaller worker coops focusing on manufacturing, industrial automation, consumer electronics, distributon and finance, having a revenue of 11 213 billion € in 2024 and a total of 70,085 employees. It is the most successful story. Motion Twin is a game development studio from France, Miraphone is a German musical instrument producer, Jointech a cloud-services provider, Swann-Morton in the UK produces surgical equipment and so on and so on. What they all however have in common is a relatively small size and I’ll come to that later.
Emilia Romagna is one of the wealthiest regions in Italy and it is the part of the world which has the highest share of cooperatives. They are so common there for a good reason. The region has a very supportative ecosystem. Coops have to reinvest parts of their profits (to gather capital for new coops), connect in federations, which improves their chances of survival and the share of profits they decide to save is untaxed. Additionally since coops are common, they have excellent access to capital to expand and to start new projects for example by issuing bonds. Interestingly cooperatives in Emilia Romagna show an anti-cyclical tendency, they expand more during crises, which is why the region has historically had lower unemployment than other Italian regions.
Why worker coops are awesome#
Worker coops are obviously much more egalitarian, since everyone is the owner at the same time. The thing about worker coops that appeals to me so much is the liberating aspect, one needn’t work for others or have others work for them, you work for yourself and help others to work for themselves as well. It’s a very individualistic concept. I have to stress that when we sign work contracts, it’s also a free choice, but it’s a choice to become a kind of a voluntary servant to someone else.
Since cooperatives are firms that need to get capital, they have to be competitive, innovative and efficient. They cannot afford the inefficiency sometimes prone to state enterprises. They are incredibly resilient and in the window of 2011-2016 had a 80% survival rate compared to only 44% for traditional startups in the UK and in France that number was even higher.
I believe there is a simple reason for this. In a coop the employees do not have the same worker-manager dynamic as in classical companies. In a classical company, the relationship between the employer and employee can be described as somewhat adversarial, as the employer will want to extract (and potentially exploit) as much value from the employee as possible, on the other hand the employee will push for better pay and less work. It’s only rational to act this way, because any unprotesting sacrifices will exclusively benefit the other side at the loss of your time, effort and money. Why work harder just because the boss wills so? This dynamic does not exist in a worker cooperative. There, all employees are involved in basic decisions and this emancipation brings real stakes and responsibility to everyone. Everyone has an interest in the long term success, so they are willing to go the extra mile. This can potentially result in better productivity as seen in the better survival rate.
The issues coops face and why they are so rare#
Worker coops have serious issues accessing capital, which is needed to start or expand operation. Loans are hard to get by, especially for new coops. Investors are also hard to get by, since they cannot buy any shares. IPOs are obviously out of the question and so on and so on. The hardship in raising capital explains the rarity and small size of these companies. But those which survive the first five years, will also be facing the issue that cooperatives may tend to focus on the benefits of their workers more than on their expansion. Coops also just are not for every person, most people in fact do not care about where and whom they work for and entrepreneurship is hard. Now good luck finding people who would be interested in forming such an enterprise. Entrepreneurship needs rewards. Imagine a company of 12 people that has got really successful and gets the opportunity to be bought out for 24 million € or do an IPO where half the stocks would be sold for 12 million € and every owner would have an equivalent of 1 million €. It’s the rational choice to sell the company, because you made it work. If you don’t sell it or go public, you will not be rewarded asides from your wage which while not small is no where near the capital gains you could get.
Dividend bonds as a possible solution?#
I have an idea for future worker coop entreprises.Dividend bonds could be given to founders and offered to investors to raise reward founders and raise capital. These would peg a certain fixed part of the profits for example 1% to holders of the dividend bonds for a given time period like 5-10 years. It’s not suitable for every worker coop, but it would be a mechanism to encourge growth and external investment while still allowing for democratic governance and one owner-share per employee.
A Path worth exploring#
Worker cooperatives offer a real alternative to classical companies. We can all in fact all be the boss at the same time.