Democracy at Work Institute - Original Research

The recent upsurge in worker cooperatives in the taxi industry presents a contrast between big opportunities and big risks. Hundreds of new worker owners have come together in just a handful of companies over the last 10 years, which outpaces the growth of worker cooperative ownership in many other industries. The coordinated marketing among what are already legally independent, entrepreneurially minded contractors lends itself to larger entities.

This resource uses diagrams to depict how the different forms of employee ownership are structured. It focuses on the two primary vehicles for broad-based employee ownership in the United States: worker cooperatives and employee stock ownership plans.

For financial institutions looking to create deep and lasting impact, worker cooperatives are a powerful tool for economic and community development. They reduce inequality by allowing a greater segment of the population to build assets through business ownership. They combat poverty by providing access to employment for marginalized populations. And they strengthen local economies by rooting businesses in their communities.

The idea of selling a business to its employees and converting it to a worker owned cooperative is gaining traction as a viable succession strategy. It is a strategy that saves jobs, builds community wealth, and empowers workers to own and manage their own business. Worker cooperatives differ from other business entity types in that they are owned and democratically controlled by their workers, and workers share in the risk and reward of operating the business.

This resource is intended to give small business support organizations a background on how the worker cooperative model can help entrepreneurs reach their dreams.

Worker cooperatives have increasingly drawn attention from the media, policy makers and academics in recent years. Individual cooperatives across the country have been highlighted, and substantive studies have been conducted of the worker cooperative experience in other countries, including Spain, Italy, France, Canada and Argentina. But what do we know about worker cooperatives in the US as a whole?

After working with professionals to determine which entity type is right for your worker cooperative, the next step is to work with professionals to develop your governing documents. Bylaws and operating agreements should include high-level information about the governance of the organization. They clarify and codify the democratic governance and ownership of your cooperative, help provide a structure through which the cooperative can grow, and provide a last resort for conflict resolution if relationships break down.

This research paper summarizes an examination of the National Establishment Time Series (NETS) dataset for North Carolina and Iowa to gauge the potential for conversions of existing businesses to worker cooperatives. The data demonstrate that the potential is quite large, and that even if only a fraction of these successfully converted to worker ownership and continued to operate at their last year levels, there would be meaningful economic impacts. 

Becoming Employee-Owned is a guide for business owners interested in employee ownership. It provides an overview of the three primary transition approaches for employee ownership: worker cooperatives, ESOPs, and management buy-outs. Regardless of what stage the business is in--from expansion to succession planning-- this resource can help business owners understand their options for becoming an employee-owned company.