Cornell paper on worker co-op conversions

[Joe Marraffino]

Hi all, I just wanted to lift up this paper published last fall out of the Cornell Cooperative Enterprise Program, which has some good (anonymized) case studies of worker co-op conversions.

Worker Cooperatives:A Solution to Small Business Ownership Succession - The Owner’s Decision to Sell & The Employee’s Decision to Buy
Roberta M. Severson, Extension Associate
Owen Guston Dunn-Hindle, MPS graduate student
Todd M. Schmit, Professor

From the summary: 

Small business is big business in New York State with nearly 90 percent of firms employing less than 20 persons. Headlines draw attention to the number of small business owners who are reaching or have reached retirement age with concerns raised over succession planning and the state of future ownership. Three-quarters of business owners are interested in selling their businesses in the next 10 years. These businesses are important in the local jobs, goods, and services they provide within the communities in which they are located. It is estimated that only one-fifth of the commercial businesses offered for sale are purchased. Owners, especially those
connected with multi-generational, family-owned enterprises are hopeful that a family member will continue the business and its legacy within the community.

Short of ceasing operations, transitioning ownership to employees is an important option and worthy of consideration by an owner when a buyer or family member does not emerge. Trusts including Employee Stock Ownership Programs (ESOP), and Employee Ownership Trust (EOT) are one means to transfer ownership. Trusts tend to be expensive form and manage. ESOPs tend to be for firms with 100 or more employees. Ownership can transition through a manager buy-out when one or more managers purchase the business. Another option is to work with employees to form a
worker cooperative. Worker cooperatives tend to be less expensive than trusts to form. A worker cooperative is owned and controlled by its members and operates for their benefit. Workers participate in the financial success of the business based on their labor contribution. Worker cooperatives are democratically controlled. They have representation on and vote for a board of directors adhering to the principle of one worker, one vote. All businesses need to be financially viable, and many are profit focused. Worker cooperatives prioritize meeting the needs of worker owners and subscribe to the triple bottom line, people, planet, and profit. 

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