We the People: Cooperative Ownership for the 21st Century
Money is the fuel that’s running our country, but for many low-wage workers, it’s simply running them into the ground. Big business often exploits the people who build the very profits that sustain it, so as our nation’s wealth concentrates more and more at the top, leaders seeking to reform capitalism are looking at cooperative ownership as a way to empower employees, improve business resiliency, and invest in long-term success. In this panel, five experts discuss their experiences with co-ops, and how their initiatives are helping kickstart the transition to a worker-owned economy.
Featuring Theresa Marquez, a longtime food and farming activist; Camille Canon, a partner at the organization Purpose, which helps businesses transition toward steward ownership; Hilary Abell, co-founder of Project Equity, which amplifies the impact of worker-owned cooperatives for low- and middle-wage workers in the US; Frank Mason, a founding member of Arizmendi Bakery in San Rafael, a bakery business that has expanded as a co-op building program; and Keith Taylor, a professor at UC Davis who specializes in community economic development and cooperatives.
THERESA MARQUEZ: I’ve been a 40-year activist in food and farming and also a marketing sales executive for what’s now a billion-dollar company, and at one point I had an “Aha!” moment. I realized that until we change capitalism, all my decades of activism are not really getting anywhere. I feel like I’ve made five, 10 steps forward, but then the last election took us 15 steps back, so until we can change the deep nature of capitalism, we can’t succeed.
The food activist Raj Patel explains in his book, The History of the World’s Seven Cheap Things that capitalism values cheapness above all else, and that it’s very resilient. He also says it can’t last forever, and I have to believe that and hope that he’s right.
In 2009, the World Social Forum in Brazil produced a manifesto called Reclaim the Commons, which stated: “Humankind is suffering from an unprecedented campaign of privatization and commodification of the most basic elements of life. A compulsive quest for short-term financial gain is sacrificing the prosperity of all and of the Earth itself.”
In 2014 two Harvard professors administered an international survey in 40 countries to over 55,000 people, asking what the respondents thought the pay gap was between the lowest paid and highest paid in an enterprise. Mondragon, the most successful worker cooperative complex in the world, in Spain’s Basque region, actually held a vote on this topic, and I think their members came up with an 8:1 ratio as the desired ratio. In just about every country there was a discrepancy between what the average person thought it was and what the reality is on the ground, but the U.S. took the cake. Americans on average thought that in 2012 the ratio of a CEO’s pay compared to a line worker’s was around 30 to 1, when in fact it was 354 to 1. More than in any other country, Americans drastically underestimated the gap in actual incomes between CEOs and unskilled workers.
Our panelists today represent various forms of cooperatives and we also have a representative of a new kind of a “trust” ownership model. My big hope is that we can have a renaissance of cooperative ownership in this country and that’s what we’re here to discuss today. Marjorie Kelly in her book, Owning Our Future, says that it’s in fact already happening quietly. I hope she’s right. Let’s see what our four speakers have to say about it. Let’s start with Camille Canon.
CAMILLE CANON: I’m with an organization called Purpose based in Western Europe, Latin America, and the U.S. Our mission is to help businesses transition to what we call “steward ownership.” Steward ownership is a term we coined that we came up with it after a year of research looking into models around the world of businesses that had managed to stay independent and committed to their purpose for the long term through economic recessions and political upheavals. Why were some businesses able to survive? What made them resilient? We came up with two core principles that these companies had. First, they were self-governing, i.e. control over the business was held by people inside the organization or closely related to its mission. That might be employees and stakeholders, consumers, people in the community, or people connected to the mission, but not absentee shareholders sitting on the other side of the country completely disconnected from the day-to-day operations. The second principle was that profits served the enterprise’s core purpose, so that after paying back people who invested in the business and sharing profits with stakeholders, the majority of the profits were reinvested in the business to make sure the company stayed financially resilient and could pursue its mission.
These structures de-commodify businesses so they are no longer for sale, and what we found, and there’s a fair amount of research on this, is that that enables businesses to take the long-term perspective: they invest more in technology, they pay their employees better, they provide better benefits. There’s a lot of documentation that these structures, whether it be trusts or cooperative or foundation-owned businesses, are more sociable organizations.
There are lots of these sorts of companies in Europe. Bosch, the German appliance company, is structured in this way. Zeiss, the optical lens company, is structured this way. Half of the Danish stock market is structured this way. These are very, very common structures that haven’t been widely adopted in the U.S. mostly because we have weird nonprofit laws that prevent foundations from owning more than a certain percent of a for-profit business.
What’s unique about these structures is that they redefine the fiduciary obligation of the business. So when we talk about throwing away capitalism, I think it’s important to unpack which elements of capitalism we want to push off the cliff. One of the core problems in our current business models is that in the United States companies are mandated to maximize profit for the benefit of their shareholders. Unless we redefine that, it’s very hard to make businesses more sociable. In fact the mandate to maximize profit results in a bunch of sociopathic corporations running around. We need to change the underlying system and redefine fiduciary obligation from being profit maximization to being purpose maximization. The purpose can be to change food systems, to benefit employees and workers. Purpose can be defined in a lot of different ways.
At Purpose, we help businesses transition to these structures, and we do it in a couple of different ways. We’re part nonprofit, and so in that capacity we do a lot of research and awareness building about this stewardship trust model. We also work one-on-one with businesses to help them transition into these structures, and we are also investors in some of those companies making the transition.
HILARY ABELL: I’m the co-founder of an organization called Project Equity. I am kind of a co-op geek. I got turned onto cooperatives about 30 years ago when I was a young organizer fighting human rights abuses in Central America and bad things that the US government was doing in the region. We’re in fact seeing the ramifications of some of those U.S. policies today with the migrant crisis, which has roots in the civil wars the US government did a lot to fuel back in the 1980s. But I went from doing that work to happening to become a worker-owner of a cooperative business called Equal Exchange. I had the privilege of being I think the eighth person hired there, and then leaving when there were maybe 12 or 15. Today they have about 200 employees. They were the leader in bringing fair trade coffee into the United States, and really having from the beginning a business ownership model that reflected the values that they were promoting in the world, and their business ownership model was a worker cooperative.
My experience there as a young 20-something gave me an opportunity to learn about how business can change the world, which I had no idea about and had had no interest in before that, but working at Equal Exchange, I discovered that business can be a powerful force for good. My job was to run around New York City with a box of coffee paraphernalia on the subway to try to get people to care about gourmet coffee first, and then also to be interested in Fair Trade, and this was before either one of those things was very well known.
I also got elected to the board of directors of a cutting-edge, rapidly growing company, Stonyfield Farm that was an independent, socially responsible company. One of their senior executives was on the board of Equal Exchange, and I learned a lot from him as well as a Dominican nun, who was one of the first impact investors. Long before the term “impact investing” existed, a lot of nuns were investing their retirement funds, the only thing they had to retire on, in progressive initiatives like Equal Exchange. That was a great learning experience for me.
During that time I got to know farmer cooperatives in several countries in Latin America, where very, very small farmers banded together in pretty substantially sized cooperatives. Through that cooperative structure, they could export directly, for example, to a fair trade buyer in the U.S. or Europe and earn a lot more money, which was really important for their families, but also for the schools and the neighborhoods and the health clinics, and also for the businesses that they co-owned so they could build infrastructure like coffee-processing plants and get more control over the profitable parts of their industry. Seeing that really turned me on to fair trade and to cooperatives.
A number of years later, I became the executive director of an organization that was starting up cooperative businesses here in the San Francisco Bay Area. I was there for eight years and learned to help businesses start and grow, as well as how to develop cooperative businesses to have a really viable democracy governance and how to pair that with management and member participation, but what was most powerful to me during that time was getting to know some women who were mostly monolingual Spanish speakers who had had some pretty crappy jobs in their past and were learning to be professional “green” cleaners a little bit before eco-conscious, non-toxic cleaning became a real thing in the economy. They were trying to protect their health and co-own these new types of businesses, and it was working. They had health insurance for the first time and their incomes were doubling and tripling. They were working full time but also having a little bit more control over their schedule, not needing second jobs and having more time to be with their kids.
When I left that job, I was very interested in finding ways that that kind of impact could be made possible for more low- and middle-wage workers throughout the United States, and that’s what I’ve been working on since, and that’s what we do at Project Equity. My definition of cooperatives is that they are businesses that are owned and controlled by the people who benefit from them, and who come together for a common purpose. I’ve mostly personally been involved with worker-owned cooperatives, and to some degree also with ESOPS, Employee Stock Ownership Plan Companies, which can be also made democratic and have some of the elements that cooperatives have. At Project Equity, we work with both, as well as with trusts. Co-ops are common throughout our economy actually, but they’re still not widely understood by the mainstream business world in this country.
There’s a demographic trend called the silver tsunami—many baby boomers are retiring or turning 65, roughly 10,000 a day. There’s a lot of talk about the impact that will have on our healthcare system and on the solvency of Social Security, but an impact that people aren’t talking about is that baby boomers own a lot of businesses. They own 2.34 million businesses across the country, and those businesses employ 25 million people, 1 in 6 workers in this economy. And 80% of business owners do not have a succession plan for the future of their business, and it’s estimated that only between 10 and 30% of small businesses that are listed for sale actually sell. So what’s happening all around us is that a lot of really good small and medium sized businesses are actually closing, and it’s a huge loss.
So what Project Equity is doing about that, and there are others across the country focused on this as well, is educating business owners, the general public and folks who provide professional services to business owners about the importance of business succession planning and specifically the fact that employee ownership, including worker cooperatives, is a great option for a lot of businesses. It’s one that most business owners don’t think about. Their lawyer or their CPA or the small businesses development center they stop into pretty definitely won’t mention it, and if they were to ask a question about it, they’ll probably get told: “No, I don’t think that’ll work; that’s kind of weird; it’s for hippies; go sell your business.”
But, around the world, there are many cooperative businesses of all sizes that are really good businesses. When you engage people and give them opportunities to influence strategy, policy, and management, they step up more, and when they actually have ownership, they step up even more. There’s a lot of talk in the corporate world about employee engagement these days, and it is really important. There’s a lot of evidence that it improves business performance, not to mention employee satisfaction, but imagine when you add actual ownership to the feeling of ownership!
So what we do at Project Equity is educate business owners, and if they want to know more, we do free consultations with them and walk them through the process of assessing and figuring out whether it’s a good fit for them. Then, if they want to proceed, it’s about a nine to 12-month process we walk them through. We’re converting five companies this year, four in the Bay Area and one in the Twin Cities to become worker cooperatives. And then we help them thrive as employee owned enterprises and learn democratic governance and integrate financial education and community building into their businesses as well.
We also partner with city governments and with different types of business connectors to spread the word. In the past 40 years productivity has increased dramatically in U.S. businesses, but wages have stayed stagnant. So the amount of the value and profits that businesses generate is going to shareholders and to senior management, but it’s not going to the rest of everyone else who busts their butt to make those businesses work. But this demographic shift presents an opportunity in which a lot of wealth is changing hands and will continue to for the next 10 to 15 years. It’s an opportunity to democratize wealth, and if we don’t, it’s going to get consolidated at the top, because in addition to closing, many of these businesses are being gobbled up or merged or acquired by bigger companies, and not going the direction that our economy needs to go.
FRANK MASON: I’m one of the founding members of the Arizmendi Bakery in San Rafael. I’d always been in high tech or finance, and just as I was closing down one of the financial companies, my 14-year-old son said, “Why don’t you do something you actually enjoy, Father?”
And he’s a smart kid, so I started looking for a new line of work and a new way of life, and I found Arizmendi. The cooperative structure felt amazing. I didn’t have to be the only one worrying about a problem. I was one of the many owners. I go to work, and I’m one of the owners there that day, but when I leave, there are other owners there, and they don’t call me. They own the business. That makes such a difference in life, in terms of free time and peace of mind.
And Arizmendi is far more than a bakery business with five shops; it’s a co-op building program. It has spun out a CPA group, a landscaping group, and house building and low-income housing initiatives. It has really changed the way I look at the world. In the corporate world, I was giving up on hope because I was really unsure if what we were doing was right.
Now I want to be clear: it isn’t easy in the beginning. When I started at Arizmendi in San Rafael, we weren’t profitable. We were just starting out, so not being profitable right away is a natural thing in a small business, but in the co-op world you don’t fire workers to cut costs; you find ways to invest in yourselves because you’re all in it together, and that really boosts your energy and your commitment. My love is sourdough. I work the 4 AM to noon shift. My favorite thing is to roll all the sourdough for the day. When people come into our system, they’re just in awe, because they get paid the same as every other individual right off the bat. We have a simple rule: one vote, one wage. There’s only one wage. There’s only one vote. When people have ownership of something, they grow.
But the co-op model can pose special problems: it can take longer to make decisions. In San Rafael, we were having a tough time, and we ultimately decided we had to be more of a café and to offer sandwiches and do different things that none of the other Arizmendi bakeries do, so we wouldn’t lose customers. In most businesses, the owner or manager, one person, would make such a decision, but it took us almost a year and a half to get a full consensus, and some people will say “wow, that’s a little slow,” but when we finally did it, everybody was on board and put all their energy into it, and it’s made us profitable beyond our wildest dreams and made it possible to increase our wages by a high percentage.
So I’m here to preach the benefits of the co-op model. It’s really a gorgeous thing when people actually care about each other and work together with joy. When you’re becoming a member, a candidate, we train you in how to be a co-op person. We teach you history, we teach you finance, we teach you what you’re getting into, because when you have, say 12 members, it’s a marriage of 12. And given how complex a marriage with one person is, a marriage of 12 teaches you things that you cannot imagine, including how to be caring of others and to be there for them. And when it’s done right, it’s a solid body, and it’s an amazing thing to see. So I just love co-ops, and I hope you all can figure out a way to make the world all a co-op, because I was in the corporate world for a long time prior to this, and I can honestly say it had completely disillusioned me to where I thought there was no hope, but there is hope. Thank you.
KEITH TAYLOR: I’m a professor at UC Davis where I study community economic development and cooperatives. I recently wrote a book on electric cooperatives, Governing the Wind Energy Commons. One thing about large-scale cooperatives, such as utilities in the energy sector, is that they’re not small businesses with a handful of co-owners working together. Even though they’re cooperatives, they’re big enterprises, and if you’re not serving on their boards, you don’t really have any influence on their policies. Obviously we need to fix democracy, and co-ops are political economic systems, and we have to treat them as electoral systems and run for offices within them to actually change things.
Many people get turned off from running for higher office, and I don’t blame them, but you can run for office in your local electric co-op, your local credit union, your local food co-op, and you can work through the system and achieve sufficient scale that your local enterprise can have a national voice. Large-scale co-ops can be a force multiplier for democratic governance and economic empowerment, and they can provide a corrective to “disaster capitalism.”
Globally there are over a billion people who are members of co-ops in 150 countries, and co-ops account for 100 million jobs. That’s a lot of economic activity. I’m trying to get policymakers to pay attention to cooperatives, but they often assume co-ops are small-time fringe phenomena. They’re not. In the United States there are 65,000 cooperatives, and a lot of our agriculture comes through this system. In fact the CEO of Land O’Lakes, one of the big ag co-ops has been making the news lately. She’s one of the first female CEOs in an ag co-op, doing some really interesting things. But it’s not just in agriculture: 42 million Americans own their electric co-op utility, and there are over 5500 credit unions in the U.S., more than 10% of the consumer finance market. But we need to find ways to leverage these larger co-ops for broader economic development so they start coordinating more and help develop more support systems such as municipal economic developments for the larger society. That needs to happen for this system to become a viable alternative model of ownership and management.
I’m from the rural Midwest, from Mattoon, Illinois. It’s a community in decline. For as long as I can remember, everyone was saying, if you just work hard, you can get a union job, you can work for the government, or you can go in the military, but the union jobs have gone away, and we’ve had decades of government austerity, so we have to find ways to do things differently. One of the big economic development projects under discussion in my region was FutureGen, a carbon capture project that was going to be in my hometown. A lot of economic development dollars went into trying to attract it, and it never happened. Imagine if we would have put all that money into building local energy co-ops.
I worked for a member of Congress for a couple of years and then got involved in politics back in Illinois, but I got pretty disillusioned. For one thing our governors tend to go to jail a lot, but I worked at Walmart right out of high school, and that politicized me for life. After four years, I went to the manager and said, “Hey, I’m currently making $6.15, can I get 7 bucks an hour?” After three months, he raised it to $6.97. And I could see all these Walmarts destroying the small downtown areas of the Midwest, and now we’re incentivizing the next wave of devastation with Amazon. In fact these days Walmart accuses Amazon of killing small businesses…
I ended up going to the University of Illinois to get a Ph.D. in human and community development. I was interested in finding ways to do community development that didn’t just involve the government or big businesses, and fortunately I met a chairman of an electric co-op who got me interested in studying that whole world. I was really surprised by what I found. The National Rural Electric Co-op Association represents 56% of the American landmass, and the users themselves own all those utilities. There are 850 electric co-ops that 42 million Americans own, and $42 billion a year goes through this system. If we want to boost solar and wind, one of the best ways is to get rural America to see solar and wind energy development as community economic development, and these electric co-ops are the ideal vehicles to accomplish that.
I did my post-doctoral studies at Indiana University under Elinor Ostrom, the first woman to win the Nobel Prize in economics. What Elinor talked about was that to make desirable change we have to look at the diversity of institutions that’s available to us. What’s in our toolbox? And right now you see here in California when it comes to housing and energy, we’re not reaching into that toolbox to use co-ops or alternative institutions. That’s what inspired me to write my book, Governing the Wind Energy Commons. Here in California there’s been a lot of talk during the recent droughts about water justice, but you have 800 Municipal Water Districts under local control, so why aren’t we using them?
And when it comes to broadband, there’s no discussion of broadband cooperatives. I’ll go to these meetings and there’s a Verizon person, a Comcast person, an AT&T person, and all they’re in there to do is to shut down the people who are complaining they’re not doing enough for their communities. But we should demand municipal broadband deployment and ownership, and there is an association of broadband cooperatives, but we haven’t been maximizing or coordinating these institutions to maximize our leverage.
And California has three electric cooperatives and what are called consumer choice aggregators that we can tap into. Right now, PG&E is in a weakened state, so this is a good time to push for more electric cooperatives. I’m affiliated with the Energy and Efficiency Institute at UC Davis, and we’re trying to make people aware about the benefits of electric co-ops for rural communities. They provide some of the highest paying jobs in rural communities. They have full pensions. They are very well run systems. Unlike PG&E, Plumas-Sierra Electric Co-op and Anza Electric Co-op did not have wildfire issues. Electric cooperatives are an amazingly successful example of public entrepreneurship.
In a recent study, we looked at the South Carolina Rural Electric Co-op Association and how they dealt with a recent hurricane. All the state’s electric co-ops got together a week in advance and planned a course of action. They have within their system a supply chain co-op that warehouses all the repair material they might need. As soon as a hurricane passes, the supply co-op goes out, delivers all the material to get the electricity back up in their networks within three days, while Duke Energy takes about three weeks.
To conclude, we all know we need a vision of where we could take this economy to a much more sustainable and fairer place, and I’m here to tell you that co-ops could be a major force multiplier to advancing such a vision.