A worker cooperative is a cooperative owned and self-managed by its workers. This control varies by definition; it may mean a firm where every worker-owner participates in decision-making in a democratic fashion, or it may refer to one in which management is elected by every worker-owner, each of whom has one vote. Worker cooperatives may also be referred to as labor-managed firms. Worker cooperatives appeared as part of the labour movement in reaction to capitalism and the Industrial Revolution. Such organizations began in the 18th century and developed further throughout the 19th century with groups such as the Rochdale Society of Equitable Pioneers, who established the Rochdale Principles to guide cooperative management. Compared with traditional investor-owned firms, worker cooperatives tend to have greater longevity, trust, and job satisfaction. Cooperatives also tend to be less competitive and profitable. Productivity results are mixed and vary by location and sector. They tend to have more volatility in wages, but less wage inequality, and employment tends to be more stable.
Definition
Though there is no universally accepted definition of a workers' cooperative, they can be considered businesses that make a product or offer a service to sell for profit where the workers are members or worker-owners. Worker-owners work in the business, govern it and manage it. Unlike conventional firms, ownership and decision-making power of a worker cooperative should be vested solely with the worker-owners, and ultimate authority rests with the worker-owners as a whole. Worker-owners control the resources of the cooperative and the work process, such as wages or hours of work. CICOPA, the International Organisation of Industrial, Artisanal and Service Producers' Cooperatives, gives an eight-page definition in its World Declaration on Workers' Cooperatives, which was approved by the International Co-operative Alliance General Assembly in September 2005. Below is the section on the basic characteristics of workers' cooperatives:
They have the objective of creating and maintaining sustainable jobs and generating wealth, to improve the quality of life of the worker-members, dignify human work, allow workers' democratic self-management and promote community and local development. The free and voluntary membership of their members, in order to contribute with their personal work and economic resources, is conditioned by the existence of workplaces. As a general rule, work shall be carried out by the members. This implies that the majority of the workers in a given worker cooperative enterprise are members and vice versa. The worker-members' relation with their cooperative shall be considered as different from that of conventional wage-based labor and to that of autonomous individual work. Their internal regulation is formally defined by regimes that are democratically agreed upon and accepted by the worker-members. They shall be autonomous and independent, before the State and third parties, in their labor relations and management, and in the usage and management of the means of production. As mentioned above, the majority, if not all, of the workers in a given worker cooperative enterprise are worker-owners, although some casual or wage workers may be employed with whom profits and decision-making are not necessarily shared equally. Workers also often undergo a trial or screening period (such as three or six months) before being allowed to have full voting rights. Participation is based on one vote per worker-owner, regardless of the number of shares or equity owned by each worker-owner. Voting rights are not tied to investment or patronage in the workers' cooperative, and only worker-owners can vote on decisions that affect them. In practice, worker cooperatives have to accommodate a range of interests to survive and have experimented with different voice and voting arrangements to accommodate the interests of trade unions, local authorities, those who have invested proportionately more labor, or through attempts to mix individual and collective forms of worker-ownership and control. In short, workers' cooperatives are organized to serve the needs of worker-owners by generating benefits (which may or may not be profits) for the worker-owners rather than external investors. This worker-driven orientation makes them fundamentally different from other corporations. Additional cooperative structural characteristics and guiding principles further distinguish them from other business models. For example, worker-owners may not believe that profit maximization is the best or only goal for their cooperative or they may follow the Rochdale Principles. As another example, worker cooperatives' flattened management structure and more egalitarian ideology often give workers more options and greater freedom in resolving workplace problems. Profits (or losses) earned by the workers' cooperative are shared by worker-owners. Salaries generally have a low ratio difference, which ideally should be "guided by principles of proportionality, external solidarity and internal solidarity". Theorists and practitioners believe the importance of capital should be subordinated to labor in workers' cooperatives. As such, Adams et al. see workers' cooperatives as "labor-ist" rather than "capital-ist":
Labor is the hiring factor, therefore the voting and property rights are assigned to the people who do the work and not to capital, even though the worker-members supply capital through membership fees and retained earnings...Any profit or loss after normal operating expenses is assigned to members on the basis of their labor contribution. Nevertheless, recent developments in the cooperative movement have started to shift thinking toward multi-stakeholder perspectives. This has resulted in repeated attempts to develop model rules that differentiate control rights from investment and profit-sharing rights.
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