The Workers' Paradise A Discussion of Workers Cooperatives and Building the New Economy

October 24, 2011

Speaking of Laws: CA AB1161

Filed under: Movement — Tags: , , , , — John McNamara @ 2:09 pm

In my last year on the board of the US Federation of Worker Coops, I pushed for a 10 year plan that would, among other things, attempt to enact laws specific to worker cooperatives in at least 5  more states than currently have them (I believe that Vermont and Illinois are the only ones that specifically mention worker cooperatives). Naturally, I was very excited to see that the folks in California were on the same wave length.

California Assembly Bill 1161 aims to create a legal entity of the worker cooperative. Currently, worker coops in CA have to organize under the Consumer Cooperative Act which can be a bit cumbersome. I am a bit loathe to comment on the bill, since I live in Wisconsin. However, it does effect the worker cooperative movement and will have an impact as other states consider similar legislation. The good people at NoBAWC have posted a page on the topic and encourage discussion. They have a link to a pdf on a summary of the bill and a link to a pdf version of the actual bill.

Overall, I think that this is a great effort. However, I do wonder at a few things.

Instead of using the definition of worker cooperatives from the CICOPA World Declaration on Worker Cooperatives, it waters that definition down to mean any multi-staker holder cooperative that has a membership class. CICOPA requires that workers comprise more than 50% of the membership and that more than 50% of the workers are members. Under 1161, the non-worker members could outnumber the workers (for instance, if Rainbow opened up a consumer member category).

AB 1161 the statute does provide protections and requires that the worker members have a majority of seats on the board of directors and that the worker membership class has veto power on membership votes within the following five areas:

  1. the dissolution, sale or merger of the cooperative
  2. the disposition of all or a substantial part of the cooperative’s assets not in the ordinary course of business
  3. the filing of a petition in bankruptcy or the entering into an an arrangement among creditors
  4. conversion to a structure other than a cooperative
  5. acquisition of any asset or assets that constitute greater than 25% of the pre-acquisition assets on the cooperative’s balance sheet not in the ordinary course of business.

I understand that this provides protections for the worker members; however, it ignores some basic problems in that workers have a tendency to vote against their interests (see Reagan, Bush, Clinton, Bush, Obama) and the power of capital has a history of corrupting the leaders of workers (see Lane Kirkland, SEIU, and the Teamsters).

Another troubling aspect is that this bill would erase the already generous limit of 15% return on investment. The workers might still have political control of the business, but it is clear that they may not have economic control. What happens with the capitalists funding the worker cooperative decide to tell the workers to jump? Their choice will be to democratically ask how high or dissolve. It reminds me a bit of James Connolly’s excellent essay, “Let Us Free, Ireland!” which I discussed last November on this blog.

I am worried about what this law would allow coop leaders to give up for the investor’s money. This proposal really seems like asking the foxes to help build and manage the hen house. Yes, I realize that this might help get money into economically depressed areas, but if we are only talking about creating decent jobs, we don’t need the cooperative movement to do that. Worker cooperatives need to be about more than a decent paycheck. I would rather see greater incentives for employers to sell to their workers.

I’m not against an investor class, however, I think that this proposal opens the doors way to far. I like Equal Exchange’s model which limits the ROI to 5% and 400 investor members (I think that it is technically 399). What is being proposed in 1161 seems too much like the New Generation coops of Wisconsin and Minnesota, there needs to be more control on capital. It should follow the principle of Mondragon that Capital must subordinate to labor.

AB 1161 is still a work in progress and I imagine that it has a way to go before enactment. I don’t know enough about California politics to comment on its chances. Also, I recognize that California is not Wisconsin and that the number of worker cooperatives far exceeds what exists in Wisconsin. Most worker cooperatives would likely be unitary (essentially a collective) and I imagine that the number of new generation worker coops produced by this bill would not be substantial. However, I would hope that the folks out west find a way to incorporate the CICOPA Declaration and definitions into the language and seriously think about the effect of capital in an organization especially where the ROI is limited by only what the board wants to pay out.

Nevertheless, I am glad to see people starting to think about what we need in terms of legislation to help build the worker cooperative movement. I think that this is a great discussion that we need to start having across the country–what, exactly, is a worker cooperative and when does it quit being one?

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