Cooperatives
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wm
Jun 21, 2009, 8:08:30 PM6/21/09
to OpenCompany
Here are a few useful links and some discussion about cooperatives:
The NorthWest Cooperative Development Center (NWCDC) in Olympia is
online at http://www.nwcdc.coop/
They have a lot of information on cooperatives, including a good
introduction at http://www.nwcdc.coop/coopinfo.htm
The upcoming Western Worker Cooperative Conference (at Breitenbush Hot
Springs, Sept 7-10) is online at http://west.usworker.coop/ This
conference is all about worker cooperatives (an "open" company would
probably look more like a producer cooperative, but this is still a
useful conference). I attended the last one.
As I mentioned at the meeting, there are two definitions of
cooperatives:
One is simply the legal definition by your state as to what qualifies
to be run as a cooperative (each state is different). One big
advantage of cooperative law is that it is much more flexible than
corporate law (in particular, the relaxation of fiduciary
responsibility, which allows cooperatives to have goals other than
simply to make as much money as possible for their shareholders).
Organizations like NWCDC give a broader definition, that includes a
number of social goals. For example, on the NWCDC info page, they
define a coop using a set of seven principles, including things like
democratic governance ("one member one vote" as opposed to
corporations that are "one share one vote") and community involvement.
While these are laudable goals, they are not required, and there are
many cooperatives that do not follow all of them.
This is an important point when you are attempting to use cooperative
law in order to build an open or sustainable company. The huge benefit
of cooperatives is that it allows a business to have goals other than
just making as much money as possible.
Because cooperatives allow social goals, they often have a reputation
of being "socialist" in nature. I actually think this is unfortunate,
as it has scared some people away from them. Many cooperatives
(including most of the large successful ones) do not openly advertise
that they are cooperatives, probably for this reason (the exception to
this is consumer cooperatives, like REI, where the members of the
cooperative are the consumers that you are trying to attract).
What I really care about is creating a more balanced business -- one
that still pays attention to making money, but also includes other
goals: the needs of its employees, its customers, and the world, open
software goals, "do no evil", environmental goals, etc.
Incidentally, NWCDC lists six types of cooperatives:
Consumer cooperatives (REI, Food Front)
Worker cooperatives (Winco, Citybikes)
Financial cooperatives (Credit Unions, insurance cooperatives)
Producer cooperatives (Ocean Spray, Tillamook Cheese)
Service cooperatives (child care coops, cooperative health clinics)
Housing cooperatives (cooperatively owned housing)
However, some of these categories overlap. They mainly differ in how
you measure membership in the cooperative in order to apportion
benefits. For example, REI gives benefits in proportion to how much
you buy from the coop; Tillamook gives benefits in proportion to how
much milk each dairy farmer supplies to the coop; Credit Unions give
benefits in proportion to how much money you have invested in the
credit union. Some cooperatives are not run for profit. For example, a
child-care cooperative allows parents to exchange child care services,
possibly without any exchange of money at all.
The NorthWest Cooperative Development Center (NWCDC) in Olympia is
online at http://www.nwcdc.coop/
They have a lot of information on cooperatives, including a good
introduction at http://www.nwcdc.coop/coopinfo.htm
The upcoming Western Worker Cooperative Conference (at Breitenbush Hot
Springs, Sept 7-10) is online at http://west.usworker.coop/ This
conference is all about worker cooperatives (an "open" company would
probably look more like a producer cooperative, but this is still a
useful conference). I attended the last one.
As I mentioned at the meeting, there are two definitions of
cooperatives:
One is simply the legal definition by your state as to what qualifies
to be run as a cooperative (each state is different). One big
advantage of cooperative law is that it is much more flexible than
corporate law (in particular, the relaxation of fiduciary
responsibility, which allows cooperatives to have goals other than
simply to make as much money as possible for their shareholders).
Organizations like NWCDC give a broader definition, that includes a
number of social goals. For example, on the NWCDC info page, they
define a coop using a set of seven principles, including things like
democratic governance ("one member one vote" as opposed to
corporations that are "one share one vote") and community involvement.
While these are laudable goals, they are not required, and there are
many cooperatives that do not follow all of them.
This is an important point when you are attempting to use cooperative
law in order to build an open or sustainable company. The huge benefit
of cooperatives is that it allows a business to have goals other than
just making as much money as possible.
Because cooperatives allow social goals, they often have a reputation
of being "socialist" in nature. I actually think this is unfortunate,
as it has scared some people away from them. Many cooperatives
(including most of the large successful ones) do not openly advertise
that they are cooperatives, probably for this reason (the exception to
this is consumer cooperatives, like REI, where the members of the
cooperative are the consumers that you are trying to attract).
What I really care about is creating a more balanced business -- one
that still pays attention to making money, but also includes other
goals: the needs of its employees, its customers, and the world, open
software goals, "do no evil", environmental goals, etc.
Incidentally, NWCDC lists six types of cooperatives:
Consumer cooperatives (REI, Food Front)
Worker cooperatives (Winco, Citybikes)
Financial cooperatives (Credit Unions, insurance cooperatives)
Producer cooperatives (Ocean Spray, Tillamook Cheese)
Service cooperatives (child care coops, cooperative health clinics)
Housing cooperatives (cooperatively owned housing)
However, some of these categories overlap. They mainly differ in how
you measure membership in the cooperative in order to apportion
benefits. For example, REI gives benefits in proportion to how much
you buy from the coop; Tillamook gives benefits in proportion to how
much milk each dairy farmer supplies to the coop; Credit Unions give
benefits in proportion to how much money you have invested in the
credit union. Some cooperatives are not run for profit. For example, a
child-care cooperative allows parents to exchange child care services,
possibly without any exchange of money at all.
wm
Jun 21, 2009, 8:34:44 PM6/21/09
to OpenCompany
I found the definition of the types of cooperatives that has four
categories. This is the taxonomy I was trying to remember at the
meeting (the fourth type of cooperative, which I couldn't remember,
was Purchasing cooperatives).
* Producer (Ocean Spray, Tillamook Cheese)
* Worker (employee owned businesses like Winco and Citybikes)
* Consumer (REI, People's Food coop -- incidentally, People's Food
coop is both a consumer and a worker cooperative)
* Purchasing (True Value Hardware, Best Western motels) -- where
independent businesses band together to increase their purchasing
power.
In Best Western, each hotel is independently owned and operated, but
they purchase things like advertising as a group to save money.
Pretty much all of these can apply to technology businesses. For
example, a group of software consultants could form a purchasing
cooperative in order to rent space in which to work. Or they could
form a worker cooperative where the employees own the business and
share work. Or they can form a producer cooperative to do group
marketing of shared projects, and distribute profits based on the
contributions of each programmer. Or they could form a consumer coop
that buys software, legal services, accounting services, or other
services in bulk, and passes the savings on to each member in
proportion to how much of these services they use (and pay for).
As with People's Food Coop, you can be more than one kind of
cooperative -- People's rewards members, who purchase food from the
coop, and also rewards employees, who jointly own and govern the coop.
Hope this helps.
categories. This is the taxonomy I was trying to remember at the
meeting (the fourth type of cooperative, which I couldn't remember,
was Purchasing cooperatives).
* Producer (Ocean Spray, Tillamook Cheese)
* Worker (employee owned businesses like Winco and Citybikes)
* Consumer (REI, People's Food coop -- incidentally, People's Food
coop is both a consumer and a worker cooperative)
* Purchasing (True Value Hardware, Best Western motels) -- where
independent businesses band together to increase their purchasing
power.
In Best Western, each hotel is independently owned and operated, but
they purchase things like advertising as a group to save money.
Pretty much all of these can apply to technology businesses. For
example, a group of software consultants could form a purchasing
cooperative in order to rent space in which to work. Or they could
form a worker cooperative where the employees own the business and
share work. Or they can form a producer cooperative to do group
marketing of shared projects, and distribute profits based on the
contributions of each programmer. Or they could form a consumer coop
that buys software, legal services, accounting services, or other
services in bulk, and passes the savings on to each member in
proportion to how much of these services they use (and pay for).
As with People's Food Coop, you can be more than one kind of
cooperative -- People's rewards members, who purchase food from the
coop, and also rewards employees, who jointly own and govern the coop.
Hope this helps.
wm
Jun 21, 2009, 8:51:58 PM6/21/09
to OpenCompany
More links:
U of Wisconsin Center for Cooperatives http://www.uwcc.wisc.edu
National Cooperative Business Association http://www.ncba.coop
National Cooperative Bank http://www.ncb.coop
National Center for Employee Ownership http://www.nceo.org
US Federation of Worker Cooperatives http://www.usworker.coop
Network of Bay Area Worker Cooperatives http://www.nobawc.org
I also dug up some of my information on Oregon law regarding
cooperatives:
In Oregon, you can incorporate explicitly as a cooperative. But you
can also incorporate as a standard corporation, and just write your
bylaws to follow cooperative law. Another possibility that is fairly
new, but is gaining in popularity is to form as an LLC (Limited
Liability Company). This is much easier to do (and is very cheap), and
is especially popular for small cooperatives. An LLC can be changed
into a normal corporation with a little effort. One last possibility
is ESOPs (Employee Stock Ownership Plans) which are sometimes used to
enable worker buyouts of companies. So you could form a normal
corporation that has an ESOP, which would allow the company to
transform into a Worker cooperative over time.
As in most states, cooperatives have tax benefits over normal
corporations in Oregon. This can be very significant.
A coop is not a "non-profit". A coop can be operated on a not-for-
profit basis, but in order to survive it must at least break even.
U of Wisconsin Center for Cooperatives http://www.uwcc.wisc.edu
National Cooperative Business Association http://www.ncba.coop
National Cooperative Bank http://www.ncb.coop
National Center for Employee Ownership http://www.nceo.org
US Federation of Worker Cooperatives http://www.usworker.coop
Network of Bay Area Worker Cooperatives http://www.nobawc.org
I also dug up some of my information on Oregon law regarding
cooperatives:
In Oregon, you can incorporate explicitly as a cooperative. But you
can also incorporate as a standard corporation, and just write your
bylaws to follow cooperative law. Another possibility that is fairly
new, but is gaining in popularity is to form as an LLC (Limited
Liability Company). This is much easier to do (and is very cheap), and
is especially popular for small cooperatives. An LLC can be changed
into a normal corporation with a little effort. One last possibility
is ESOPs (Employee Stock Ownership Plans) which are sometimes used to
enable worker buyouts of companies. So you could form a normal
corporation that has an ESOP, which would allow the company to
transform into a Worker cooperative over time.
As in most states, cooperatives have tax benefits over normal
corporations in Oregon. This can be very significant.
A coop is not a "non-profit". A coop can be operated on a not-for-
profit basis, but in order to survive it must at least break even.
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