What do co-ops & top-tier professional firms have in common? They’re both more resilient, flexible, & accountableâ€”but the firms still have a lot to learn from worker co-ops.
A recent article in U.S. News and World Report highlights why we need more employee-owned businesses in the United States. The author makes interesting comparisons between top-tier professional firms that are run by partnerships and co-opsâ€”how both are more accountable to their employees, more resilient in hard times, and more flexible when needed.
And the good news for proponents of democratic workplaces: the number of these businesses is on the rise. “The number of worker-owned business in the U.S. is growing robustly, around 6 percent per year, and these businesses now account for about 12 percent of the private sector workforce.”
The big difference between partnerships and co-ops is that traditional firms, with their hierarchical structures, have a higher class of employees who receive different benefits and have more say in running the business.
In worker-owned cooperatives, all of the workers, once they’ve passed their apprenticeship period and purchased a share of business, have an equal vote in running the business.
The author goes on to make a point about the temptation in both types of businesses to cash out: “A one-time conversion from a partnership to a corporation or from a worker-owned business to an investor-owned business offers a cash windfall that is big enough to be life-changing â€“ but it destroys the dream of employee ownership to all those who follow later on. The temptation to cash out can prove irresistible to senior management unless a cash-out is prohibited by statute, contract or charter.”
A harrowing and recent example of just such a situation is the U.K.’s Cooperative Bank, which is being threatened by U.S. hedge fund investors because the bank was trying to deal with a huge shortfall in cash reserves.
As the U.S. News writer states, “Good partnerships and employee-owned businesses are hard to create, but they are all too easy to destroy by a single generation of senior management that lacks a sense of stewardship.”
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