Recap: Eastern Conference for Workplace Democracy
Building a cooperative alternative to wage slavery
The Eastern Conference for Workplace Democracy (ECWD) is part of a movement providing a credible alternative to wage slavery.
In a conventional (capital-serving) corporation, labour is subordinate to capital. Capital rents workers, wherein the worker subordinates his or her self to the interests of capital. The surplus value of labour accrues to capital. Capital votes and makes decisions for the worker, either directly or via capital appointed managers. Culture is driven by “maximising shareholder value”, where the shareholders are the capital ‘owners’ of the enterprise. While this is currently the predominant form of organisation in Western society, there is no natural law demanding worker oppression and subordination to the interests of capital. Given that land (natural resources), labor and capital are all factors of production, why should capital take precedence?
In the workplace democracy movement, the power relationship is inverted. Capital is subordinate to labour. The ECWD is about building organisations whose Profit, Voting and Culture (PVC) represent the interests of labour as opposed to capital. The most common form of organisation is the worker cooperative, but people and organisations that support the principles of empowering labour over capital would be welcome at the ECWD, and have loads to learn from the community.
Hope: Worker cooperatives provide an alternative to wage slavery
In chatting with member-owners from dozens of cooperatives, my impression is that smaller 3–10 member worker cooperatives are true to their PVC principles. That is, they are a force for democratising profit, voting and culture among their worker-owners.
Unfortunately, some of the larger coops don’t seem to practice what they preach. I saw instances of hierarchical management structures, entrenched managerial castes not representative of the workers, lack of compensation transparency, lack of financial transparency (open books), etc. How can a member-owner truly be empowered if they are denied access to information that a ‘shareholder’ in a closely-held capital-beholden corporation would receive as a matter of course, e.g. financial statements.
Challenge: Equity capital for coops
Because we currently exist within the matrix of a capitalist economy, worker cooperatives must operate with similar external constraints as conventional capital-owned firms. This includes the need for capital: start-up financing, worker capital, lines of credit, etc.
The cooperative community has made great strides in providing a debt financing ecosystem, including institutions, accredited investors and direct public offerings (DPO) to non-accredited community members.
Unfortunately, access to equity financing is severely limited, creating a high barrier to entry to the cooperative movement, particularly among those groups most marginalized by the prevailing capitalist economy: low-income, black/brown, women and immigrant communities.
In a capitalist economic system, coop or no, it is usually inadvisable to finance a venture only with debt. And yet, the cooperative community hamstringings many young cooperatives with excessive debt because debt financing is far more readily available than equity financing within the cooperative community.
Standardized agreements for preferred stock in worker cooperatives
The inversion of power in a worker cooperative, that capital is subordinate to labour, does not mean that the capital is unwelcome or unrepresented. Non-voting preferred stock offers a mechanism to provide equity financing to cooperatives, secure a reasonable capital return for investors and ensure that (most) profit, all voting and all culture accrue to labour.
I admire what Y-Combinator has done in proselyting and standardising on the SAFE (simple agreement for future equity) as an alternative to convertible notes in friends/family and seed-stage financing of VC-backed companies.
The cooperative movement should take a page from their playbook and develop standardized preferred stock agreements. A SAFE has two levers: cap and discount. Similarly, a standardised preferred stock agreement for worker cooperative equity financing could have few easy to understand levers on standard terms: profit sharing, coupon and maturity/callability.
For example, a worker cooperative could issue preferred stock with a 10% profit share (10% of profit accrues to capital, 90% to labour), no coupon, callable after 5 years at FMV (fair market value; par + compounded LIBOR+2% would be another option).
Capital receives a security likely uncorrelated with the conventional stocks in their portfolio and modest returns. The worker cooperative receives much needed equity financing, while preserving its core values. Win-win for both capital and labour.
Opportunity: Sharing the gains from the cooperative economy
Most worker-cooperatives are for organised as for profit entities. Profit accrues to and is controlled by the member-owners. While this structure empowers member-owners by democratising access to profit, voting and culture, it does not necessarily serve the interest of the larger cooperative ecosystem.
- Coop worker-owners (patronage dividends)
- Coop entity (indivisible reserves)
- Coop community (???)
- Workers at large, e.g. worker-owners at other coops (???)
Surplus value (profit) is channeled towards patronage dividends and indivisible reserves, which provide economic security for the coop’s worker-owners and the coop entity at-large.
What then provides economic security/opportunity for the coop community at large, and workers at large? For most coops, the answer is none. This must change. Coops and coop members should:
- Reinvest in the coop community, e.g. equity financing of other coops.
- Financially support broader income redistribution programmes to workers at large, e.g. a basic income to all workers.
By investing in the community and workers at large, a virtuous cycle of empowerment is possible, a direct counter to the exploitation inherent in the prevailing capitalist system.
Lessons for capital-owned firms
Land, labour and capital are all means of production: labour is not your enemy. Even in a ‘conventional’ firm where labour is subordinated to capital, the subordination need not be absolute. Measures that accrue Profit, Voting and Culture to labour are positive, even in the context of a capital-owned firm:
- Sharing ownership and profit with labour, to return a portion of expropriated surplus value.
- Voting representation on the board of directors, representing labour alongside capital and community interests. Elective management (management elected by the workers as opposed to appointed by capital). Non-hierarchical organisation.
- Values driven cultures that actually hold a double bottom line, social good co-equal to profit, i.e. “maximising shareholder value” isn’t the only aim. Preferably formally codified as B-corp or L3C (low-profit limited liability company), Ulysses pacts designed to bind the firm to more ethical behavior vis-à-vis its stated values.
The great irony is that in sharing power more equally with labour, capital can create a both-and proposition: a competitive advantage over more exploitative competitors, leading to increased profits and reducing the expropriation of value from labour.
Suggestions to conference organizers
Overall, the event was well run and organised; there is however, always room for improvement.
- Simultaneous translation services were lacking. As every panel was delivered in English, this meant that access was limited to Spanish speakers. I also noticed that bi-lingual presenters, who were asked audience questions in Spanish, responded in English. This seemed odd to me. If one has the ability to speak both languages, wouldn’t you respond in the tongue of the person who asked the question?
- No directory by service provided. It was difficult to find people of particular interest, e.g. software developers, bookkeepers, lawyers. The conference was small enough that you could usually get to the right person with some effort by “asking around”, but making it easier to get in contact with people of certain specializations would be nice.
I am very grateful to Agaric, a Drupal-focused software cooperative, for encouraging me to attend and offering transportation to/from NYC.