On August 18, 2015, Dave Johnson writes on AlterNet:
Businesses are run for a profit that goes into the pockets of the business’ “investors.” To be an investor requires that you have money. This is a rigged system that by definition channels the returns and gains of our economy to the people who have money in the first place.
That system forces a terrible business model: investors try to squeeze money out of businesses as fast as they can. Then they move on. People who put the money in have even more money, but leave behind them a trail of squeezed-out ruin. This squeezing of the business involves squeezing the workers, squeezing the product, squeezing the customers and squeezing the government out of any taxes that might be owed.
This is bad for America’s long-term economy, people, environment and — since it brings about intense concentration of wealth — bad for our democracy, too. But hey, it’s great for a few already-wealthy people at the top.
What If The Workers Are The Investors?
What happens if a business is owned and run by the people who work there, and not by some distant investors interested only in profit?
Worker co-ops are businesses owned and operated by the people who work at the company. Instead of squeezing and draining the company, workers, customers and surrounding communities to provide an increasing return for investors, worker-owned companies have an incentive to be responsible, obviously to pay good wages, to respect surrounding communities and the environment (where the workers/owners live) and to make the business a viable long-term operation.
There are great outcomes for worker co-op workers who get decent pay, benefits and dignity on the job. Employee productivity goes up, and they want to come to work so sick days and other absenteeism goes down. This helps the company, and on a large scale would help the economy.
This idea sounds great, but what are conservatives going to say about any plan that boosts working people? Sarah Jaffe, writing at Al Jazeera, in “Can worker cooperatives alleviate income inequality?”, found a quote by Ronald Reagan praising the idea of workers owning the businesses where they work,
“…Gar Alperovitz in his book ‘What Then Must We Do?’ notes that it’s not only the historical left that has touted worker ownership. As proof, he offers this 1987 quote from Republican icon Ronald Reagan: ‘I can’t help but believe that in the future we will see in the United States and throughout the Western world an increasing trend toward the next logical step, employee ownership. It is a path that befits a free people.’”
Enter Bernie Sanders
In December, before he was a presidential candidate, Senator Sanders wrote in “An Economic Agenda for America: 12 Steps Forward”, “here are 12 initiatives that I will be fighting for which can restore America’s middle class.” One was his proposal for worker cooperatives,
“3. We need to develop new economic models to increase job creation and productivity. Instead of giving huge tax breaks to corporations which ship our jobs to China and other low-wage countries, we need to provide assistance to workers who want to purchase their own businesses by establishing worker-owned cooperatives. Study after study shows that when workers have an ownership stake in the businesses they work for, productivity goes up, absenteeism goes down and employees are much more satisfied with their jobs.”
Sanders is serious about this and had previously offered legislation to this effect in 2012, 2009 and previously. In June 2014 Sanders’ website described the plan for legislation he was introducing with Vermont’s Senator Patrick Leahy. He proposed to get the government involved in starting and maintaining worker cooperatives and creating a bank to fund worker ownership. From the post:
“Under one bill in Sanders’ package, the U.S. Department of Labor would provide funding to states to establish and expand employee ownership centers. These centers would provide training and technical support for programs promoting employee ownership and participation throughout the country. This legislation is modeled on the success of the Vermont Employee Ownership Center which has done an excellent job in educating workers, retiring business owners, and others about the benefits of worker ownership.
“A second bill would create a U.S. Employee Ownership Bank to provide loans to help workers purchase businesses through an employee stock ownership plan or a worker-owned cooperative.”
Conor Lynch explains at Salon in, “The radical Bernie Sanders idea that could reclaim America for the 99 percent,” that short of a badly-needed re-engineering of our system, worker co-ops might be a model for getting past the terrible working situation where companies squeeze everyone and unions are not succeeding in fixing things:
“This is where worker co-ops, which could be a major and crucial part of future worker movements, come in. After 40 years of crumbling unions, we can say quite honestly that the 20th century union movement, while it helped pave the way for basic worker rights within capitalism, was only a temporary solution. A capitalist must always look for ways to better exploit labor, or cease to be a capitalist — Marx called this the ‘coercive laws of competition.’ As long as we operate within this system (where the very few own capital), worker gains can only be temporary, before they are lost to technology or cheap labor overseas.
“Worker co-ops could provide a new platform for future workers movements. Last year, Sanders introduced a bill that would provide states with funding from the Department of Labor to ‘establish and expand employee ownership centers,’ which would ‘provide training and technical support for programs promoting employee ownership and participation throughout the country.’ Another bill would create a U.S. Employee Ownership Bank to ‘provide loans to help workers purchase businesses through an employee stock ownership plan or a worker-owned cooperative.’”
At AlterNet, Zaid Jilani also writes about Sanders’ plan, in “Bernie Sanders’ Campaign Issues Truly Extraordinary Campaign Plank”:
“Today, there are 11,000 worker-owned companies in America, and there are up to 120 million Americans who are involved in some form of co-op if you include credit unions in the tally. By endorsing their expansion, Sanders is proving that his differences with his opponents are not just in style but in substance – providing an alternative to the top-down corporations that run our economy.”
Jilani provides the example of about Spain’s Mondragon corporation, which describes itself as “one of the leading Spanish business groups, integrated by autonomous and independent cooperatives with production subsidiaries and corporate offices in 41 countries and sales in more than 150.” Mondragon has 74,000 employees and almost 12 billion Euros in total revenue. Jilani writes:
“Within the various units of the corporation, workers decide on the direction of production for the company as well as what to do with the profits. While CEO-to-worker pay ratios in the United States have reached over 300-to-1, in Mondragon the cooperative model ensures that in most of its operations, ‘the ratio of compensation between top executives and the lowest-paid members is between three to one and six to one.’”
Why should our system be designed to work only for the already wealthy and encourage business models that squeeze workers, customers, communities, the environment and our country? It is time to take a serious look at the ways our government could work for We the People by helping us to start and buy out companies and otherwise invest in worker-owned businesses.
A far better invisible incorporation structure for worker-owned corporations is the Employee Stock Ownership Plan (ESOP), which Bernie Sanders advocates. In fact, the reference to 11,000 corporations owned by workers should inform the reader that they are ESOP-structured S-corporations whose owners elect to pass corporate income, losses, deductions, and credit through to their shareholders for federal tax purposes. But there is a limitation to worker-owned corporations, that is: ONE MUST BE AN EMPLOYEE/WORKER. That means that millions and millions of Americans are by definition left out and even those Americans working now may not be working in the near future as tectonic shifts in the technologies of production and the globalization of production at the lowest cost destroy jobs and devalue the worth of labor.
A cooperative is member-owned and -controlled, rather than controlled by investors as in a corporation. But this is not to say that a corporation cannot be broadly owned by its workers and other citizens (as mentioned, there are presently over 11,000 employee-owned corporations structured under an Employee Stock Ownership Plan), all with voting rights and entitlement to their share of full earnings dividend income. Unlike a cooperative in which all members and shareholders have to be active in the co-operative, in a corporation the shareholders elect a board who in turn hires a CEO to oversee the day-to-day operation of the corporation. As cooperatives are formed to provide a service to their members rather than a return on investment, it is difficult to attract potential members/shareholders whose primary interest is a financial return. The idea to broaden personal/individual ownership of corporations, is to create new owners and empower each to benefit fully from a return on investment. While cooperatives are not obligated to seek profit for investors, but are created to meet members’ needs, there is still the requirement, as with corporations, that the investment to create them will generate a profit. Otherwise, there would be no income to sustain the business. So both cooperatives and corporations must operate using the logic of corporate finance that investments must pay for themselves.
Both cooperatives and business corporations are legally corporations under state charters. Both structures can be broadly OWNED (cooperatives: member/shareholder/investors; corporations: shareholder/investors) with operations overseen by vote of the members or owners. The problem today with respect to corporations is that they are NARROWLY OWNED and thus a say in decisions is restricted to those who OWN the most shares. The idea behind the proposed Capital Homestead Act is to use financial mechanisms that broaden the ownership of corporations, broaden decision making and operational oversight, and return fully the profit earnings to the owners, rather than retain those earnings or debt finance for reinvestment, neither of which creates ANY new capital owners.
As for financing business growth, the corporation would issue and sell new stock, which would be acquired broadly by children, women, and men using insured, interest-free capital credit, repayable out of the future earnings of the growth investment. Thus, by re-invisioning the corporation, we can achieve the full benefits of the corporate structure, controlled by the people, for the people. Broadly owned corporations would empower all current and future generations to take priority over profits (for shareholders and executives) by operating in the best interests of the well-being of people, communities, and the planet.
For a comparative structure tutorial see http://www.uwcc.wisc.edu/whatisacoop/BusinessStructureComparison/
Bernie Sanders, while a long-time advocate for and supporter of employee-owned business corporations, now needs to take this concept to its fullest outcome and introduce legislation for the proposed Capital Homestead Act. See http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.
The Capital Homestead Act is the fulfillment of the promise to broaden FUTURE wealth-creating, income-producing capital assets by creating millions and millions of NEW capital owners. Using financial mechanisms that provide insured, interest-free capital credit, repayable out of the FUTURE earnings of investments in the corporations growing America would empower EVERY child, woman, and man, whether employed or not, to acquire personal OWNERSHIP stakes in America’s viable and successful corporations simultaneously with their growth, without the requirement of past savings or ANY reduction in wages or benefits, if employed.
The Capital Homestead Act would facilitate the transformation of America’s corporations, now OWNED by a tiny minority wealthy ownership class, into a nation of universal capital owners, who would earn income through profit sharing and the full-earnings dividend payout of corporations, and enable America to finance its future economic prosperity while simultaneously creating new capital owners.
Norman Kurland, President of the Center for Economic and Social Justice (www.cesj.org) argues, “The haves represent a tiny fraction of humanity. Our ideas will split them between those who see our point and understand that they would benefit everyone without taking anything away from them during their lives, and those who want to keep ownership in an exclusive club. The latter cannot publicly attack the institution of private property without threatening the legal foundation that gives them their monopoly over the money system and the ownership system.”
Bernie Sanders is the ONLY candidate for president that will provide leadership to awaken all American citizens to force the politicians to follow the people and lift all legal barriers to universal capital ownership access by every child, woman, and man as a fundamental right of citizenship and the basis of personal liberty and empowerment. The goal should be to enable every child, woman, and man to become an owner of ever-advancing labor-displacing technologies, new and sustainable energy systems, new rentable space, new enterprises, new infrastructure assets, and productive land and natural resources as a growing and independent source of their future incomes.
