Participation in Worker Cooperatives

Abstract

This chapter discusses different models of worker cooperatives ranging from those that are predominantly economic associations, or a form of employee ownership, to those that are more collectivist and emphasize workplace democracy, community commitment, and cooperative ideals. Worker cooperatives that focus upon employee ownership are primarily a variation of a business corporation; worker cooperatives with a more collectivist orientation are primarily a form of cooperative, but with members who are employees rather than consumers of a service or primary producers such as farmers. More recently, hybrid arrangements have been created that integrate a worker cooperative within a business corporation and a cooperative, a multi-stakeholder cooperative or social cooperative. Takeovers of abandoned investor-owned businesses resulting in worker cooperatives are a growing phenomenon in South America.

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20
Participation in Worker Cooperatives
Marcelo Vieta (Argentina), Jack Quarter (Canada), Roger Spear (UK),
and Alexandra Moskovskaya (Russia)
A. Introduction
This chapter discusses different models of worker cooperatives ranging from
those that are predominantly economic associations, or a form of employee
ownership, to those that are more collectivist and emphasize workplace democ-
racy, community commitment, and cooperative ideals. Worker cooperatives
that focus upon employee ownership are primarily a variation of a business
corporation; worker cooperatives with a more collectivist orientation are pri-
marily a form of cooperative, but with members who are employees rather than
consumers of a service or primary producers such as farmers. More recently,
hybrid arrangements have been created that integrate a worker cooperative
within a business corporation and a cooperative, a multi-stakeholder cooper-
ative or social cooperative. Takeovers of abandoned investor-owned businesses
resulting in worker cooperatives are a growing phenomenon in South America.
At first glance, it may seem odd to include a chapter about worker coopera-
tives within a Handbook on Volunteering, Civic Participation, and Nonprofit
Associations, but there are commonalities. Worker cooperatives are member
associations, and generally involve high levels of member participation in
decision-making, probably more than the norms for nonprofit membership
associations. Worker cooperatives are close to the subset of nonprofits that
earn their revenues from selling their services in the marketplace. In addition,
worker cooperatives must adhere to the first cooperative principle of the Inter-
national Cooperative Alliance (ICA) – voluntary and open membership – and
must be open to workers willing to accept, voluntarily, the responsibilities of
membership.
As will be seen in the discussion of the worker cooperative models under Key
Issues, there are differing worker cooperative models ranging from those with-
out share capital, which have the character of a nonprofit, to those with share
capital, that are analogous to a business partnership. Most worker cooperatives
fall between these extremes, with some characteristics of a nonprofit, particu-
larly democratic decision-making, and some characteristics of a business.
436

Marcelo Vieta et al. 437
B. Definitions
In addition to the definitions in the Handbook Appendix, which are suit-
able for this chapter, we add the key concept of worker cooperative. A worker
cooperative, also referred to as a labor-managed firm (Vanek 1977), is a voluntary
association of employees who own the cooperative and operate it democratically.The
employees who belong to the cooperative are its members with one vote each,
like citizens in a political democracy (Ellerman 1990). A worker cooperative is
an anomaly that differs from the predominant arrangements for cooperatives
based either upon consumers of a service (see Chapter 21) or upon producers,
typically farmers. In both consumer cooperatives and producer cooperatives,
the employees normally have a conventional employment relationship with
the cooperative and usually are not members. In a worker cooperative, in con-
trast, the employees are members and responsible for the firm’s governance
(Hansmann 1996).
Consumer cooperatives (see Handbook Chapter 21) have had greater appeal
because they demand much less from members than a worker cooperative. In a
consumer cooperative, members typically pay a nominal fee to join, norms for
participation are minimal, and members can choose to purchase the service
elsewhere. Worker cooperative members experience a form of double jeopardy:
their job is tied to the firm’s success, and they may have a financial stake that
is at risk. Therefore, exiting may be difficult (Dow 2003). In addition, members
of a worker cooperative are expected to make time commitments that are in
excess of the normal job requirements through participating in committees, the
annual general meeting, and possibly serving on the board of directors; these
can thus be additional voluntary activities linked to membership in a worker
cooperative.
A worker cooperative also differs from the predominant business arrange-
ment based upon the sovereignty of private property, often in the form of
shares, and which seldom engages employees in strategic management. When
a business practices democracy, it is usually limited to decisions specific to
the employees’ workspace and is referred to as participatory management or
workers’ participation (Bayat 1991). These arrangements differ from a worker
cooperative, which typically engages the employee-members in the strategic
direction of the firm, including decisions about expansion, asset sales, closure,
and election of the board of directors from among their group.
C. Historical background
Informal worker cooperatives have existed from the early 1800s in the United
Kingdom and France, but the Rochdale Co-operative Manufacturing Society, a
cotton mill started in Rochdale, England, in 1854, is believed to be the first

438 Major Activity Areas of Volunteering and Associations
formal worker cooperative. Since then, the need for private capital has proven
to be a major challenge in developing worker cooperatives, particularly in more
capital-intensive sectors. This issue was noted by the early 20th-century cooper-
ative theorist, Beatrice Potter (2004). This problem influenced the international
cooperative movement to emphasize consumer cooperatives rather than worker
cooperatives.
Worker cooperatives were also formed in North America in the latter part
of the 19th century. The Knights of Labor, an influential labor confederation,
was active in organizing worker cooperatives for their members in the 1880s
(Kealey and Palmer 1987). In the United States, Leland Stanford, who made a
fortune in the railroad business and served as the governor of California and as a
US senator, unsuccessfully put forward a bill in 1886 to create a legal framework
for incorporating worker cooperatives and later endowed Stanford University to
promote cooperatives and worker ownership (Altenberg 1990).
The worker cooperative also had an early history in France, inspired by the
Paris Commune of 1871, which led to worker takeovers of abandoned firms, a
practice which has recurred periodically, especially during times of economic
downturns or political instability (Bayat 1991; Vieta 2013, 2014).
In Russia, the abolition of serfdom in 1861 and some civil reforms by the
tsarist government directly stimulated peasant credit cooperatives and had
an important influence on the creation of worker cooperatives, other forms
of cooperatives and voluntary associations. In the period following the failed
attempt to overthrow the tsar (1905), enthusiasm for developing cooperatives
spread. By 1917, just prior to the Russian Revolution, there were an esti-
mated 63,000 cooperatives in Russia with 24 million members (Fain 1998).
About 780 of these were worker cooperatives. The first worker cooperatives
appeared even before the abolition of serfdom, but their greatest development
was early in the 20th century in the processing of agricultural products (e.g.,
butter-making, cheese and potato processing, and flax milling). Worker coop-
eratives continued to grow, and by 1932, there were estimated to be 18,600
with about 1.6 million members including forest products and fishing (Fain,
1998).
The late 19th and early 20th centuries represented the first wave of worker
cooperatives. A second wave emerged, more international in scope, start-
ing in the 1970s, eventually including countries in Europe (especially in the
south), Argentina, Brazil, Venezuela, Uruguay, United States, Canada, and India
(Shaffer 1999). Many factors have given rise to the second wave, including the
idealism of the 1960s and 1970s in Western democracies, Perestroika in the
former Soviet Union, deteriorating economic conditions in countries such as
Argentina, and the publicity received by the striking success of the Mondragón
Cooperative Corporation in the Basque Region of Spain (discussed in the next
section).

Marcelo Vieta et al. 439
D. Key issues
In this section, we discuss five models of worker cooperatives, followed by the
circumstances through which they originate and then other key issues that flow
from the discussion.
1. Five worker cooperative models
(a) Model 1: Share-capital worker coop
This is the oldest arrangement for worker cooperatives and it requires that the
members purchase shares, though there is only one vote per member. In share-
capital cooperatives, outgoing members normally sell their shares to incoming
members at a price determined by the market. In a successful company, the
purchase price for incoming members can become very high. Therefore, these
co-ops can have difficulty recruiting new members and often either become
either dependent on hired labor or are sold to private owners (Ben-Ner 1984;
Ellerman 1990). Therefore, this model is vulnerable to the market forces that
imperil a business and also vulnerable to the consequences of success. The
degeneration of a firm into a dependence upon hired labor or its sale is most
likely if a group of the members coming to retirement are going to have diffi-
culty realizing the proper value for their shares through a sale to new members.
Forestry and plywood cooperatives in the United States have encountered these
challenges (Greenberg 1986) as have worker cooperatives in Israel and Western
Europe (Russell 1995). The use of this structure may be one reason why so few
worker cooperatives are found in the United States (Artz and Kim 2011). How-
ever, if worker cooperatives are treated simply as an economic association of
employee owners, there may be more advantageous models such as Employee
Stock Option Plans (ESOPs). An ESOP is a trust fund analogous to a defined con-
tribution pension plan to which retiring owners gain tax advantages for selling
their company (Kruse, Freeman, and Blasi, 2010) and currently embraces about
10% of the US workforce (ESOP Association 2011). However, only a small subset
of these ESOPs has a structure that approximates a worker cooperative.
(b) Model 2: Share-capital worker cooperatives with indivisible reserves
Within Europe and Latin America, adaptations to the share-capital worker
cooperative have attempted to overcome the long-term weaknesses of the
individual share-ownership model and have developed a model more aligned
with cooperative values and less with employee ownership (Dow 2003) – a
more socially and economically collective model preferred by the ICA. One
solution requires that a portion of the asset value of the cooperative be col-
lectively owned as an indivisible reserve. A certain percentage is mandatory
in many European countries. In Italy, the law requires that at least 30% of
annual profits be allocated to an indivisible reserve (Corcoran and Wilson

440 Major Activity Areas of Volunteering and Associations
2010; Fici 2013). This arrangement allows the cooperative to keep member-
ship entry fees at affordable levels and to have a stable core of finance that can
serve as security for bank loans. Moreover, it creates the basis for employee-
members’ democratic control (Zevi 1990). The maintenance of an indivisible
reserve has allowed Italy’s cooperatives to gain tax breaks through providing a
public good of jobs for future generations – a form of intergenerational solidar-
ity. This more collective orientation can also be seen in the limited distribution
constraint on dividends in Italy’s worker cooperatives (an attribute recognized
in the ICA principles), and the asset lock where upon dissolution the assets
pass to another cooperative rather than to the members. Italian cooperatives
with an indivisible reserve (called “prevalently mutualistic” cooperatives) also
commit 3% of their profits into cooperative development funds and are mem-
bers of local consorzi (consortia) that strengthen management and marketing
capabilities (Fici 2013).
(c) Model 3: The Mondragón model
The Mondragón model was started in 1956 amidst desperate conditions in
post-war Europe as a small firm manufacturing paraffin heaters. This is the
major example of a group of worker cooperatives, which has evolved into a
mid-level transnational corporation, the Mondragón Cooperative Corporation.
This Corporation had USD 19.4 billion of revenue (EUR 14.1 billion) and a
workforce of more than 80,000 in 2012 (http://www.mondragon-corporation
.com/eng/). Mondragón is a bifurcated arrangement: Within the Basque coun-
try, it has a cooperative structure; elsewhere, where more than two-thirds of
the employees are situated, Mondragón’s subsidiaries, often partnerships with
other businesses, have a conventional employment arrangement without the
rights of membership. Mondragón has recently introduced associate member-
ship within its foreign subsidiaries and has introduced some of its cooperative
practices, such as open information on finance, worker committees, and profit
sharing.
Within the Basque country, Mondragón’s structure has adapted the share-
capital model to conform more to the ICA model with its collective features
(Irízar and McLeod 2010; Whyte and Whyte 1988). Within the Mondragón
system, the investment by new members is independent of the market value
of the firm, the usual measure for share value in a share-capital cooperative,
and is fixed at the equivalent of one year’s salary or EUR 15,200 in 2012.
This arrangement makes entry more affordable to new members. Members of
the cooperative each have an account that is retained in the firm until they
leave, at which point it is paid to them (or converted into an annuity). The
account includes their initial investment and their accumulated share of the
firm’s annual net income or profits plus interest, which is usually 6%. They also
receive a pension.

Marcelo Vieta et al. 441
Normally, 70% of the annual net profit is paid to the members of the cooper-
ative, but it is divided equally between the individual’s account and a collective
indivisible reserve account that represents the collective wealth of the coopera-
tive. In addition, 20% of the annual net income is set aside immediately for the
collective reserve account (which if there was a liquidation would not pass to
members but would go toward public benefit). The combination of these fac-
tors has given the corporation a vast pool of wealth to invest in expansion and
development.
Within the complex Mondragón corporate structure, there is a financial divi-
sion – the Caja Laboral Popular (or Working People’s Bank) – that shares with
outside banks financing the system’s development, in effect mobilizing the
local population’s savings. This arrangement has helped Mondragón overcome
weaknesses that have plagued share-capital worker cooperatives: the availabil-
ity of reasonably priced capital for expansion and the maintenance of the
initial member investment at an affordable amount. The Caja Laboral also
addresses another worker cooperative weakness – entrepreneurship – by pro-
viding venture capital for new cooperatives and technical assistance through
its Entrepeneurial Division.
Other noteworthy features of Mondragón are its heavy investment in
research and development through a series of research centres – Ikerlan, Ideko,
and Garaia – and in education, initially through a technical school and then
through Mondragón University. Like the Italian coops, Mondragón cooper-
atives are organized into industrial groups, which facilitate the exchange of
labor. These groups are tightly linked to the overall Mondragón federal body.
Mondragón has a strong, collectivist value system of creating employment
and development in the Basque country. For example, normally 10% of the
net income is dedicated to an Education Fund to promote cooperatives, the
cooperative university, and general community development. This amount
of community contribution is staggering compared to the average corpora-
tion, where 1% is considered excellent. Mondragón is a bold and highly
successful initiative in community economic development, much like the coop-
erative network in the Emiglia-Romagna region of northern Italy (Logue 2006).
However, Emiglia-Romagna and other integrated systems of cooperatives (see
Wilkinson and Quarter 1996) are based upon consumer, financial and pro-
ducer cooperatives, with some large worker cooperatives; Mondragón is based
upon an integrated system of worker cooperatives, with some other forms of
cooperatives included. Mondragón’s worker cooperative core makes it unique.
(d) Model 4: Non-share worker cooperative
Non-share worker cooperatives represent an idealization of the cooperative
model – high levels of member participation and a strong collectivist ori-
entation – that is, the anti-thesis of capitalist business. Non-share worker

442 Major Activity Areas of Volunteering and Associations
cooperatives shun equity investments by members as a means of financing
because of the concern that member equity creates a capitalist dynamic with
greater preoccupation with share values than the conditions of work. Most non-
share worker cooperatives are micro-businesses in alternative services, such as
whole foods, and have a strong sustainability ethic and are often rooted in
broader social movements. These organizations are democratic collectives, simi-
lar to other nonprofit collectives, and with a membership that is likely to accept
wage flexibility at times of crisis.
In the United Kingdom, the non-share worker cooperative was inspired by
the alternative economic and social movements in the 1970s that led to the
formation of the Industrial Common Ownership Movement (ICOM). ICOM
was founded in 1971, with encouragement from an eccentric industrialist
and devout Quaker, Ernest Bader, who in 1951 converted his privately held
chemical firm into a non-share worker cooperative called the Scott Bader Com-
monwealth and gave it to his employees (Hoe 1978; Quarter 2000). By 2001,
when ICOM merged with Co-operatives UK, ICOM had 2,000 member coop-
eratives. However, that was the high point for the movement. In general, this
form of organization has remained on the social margins, albeit still of great
practitioner and intellectual interest.
Non-share worker cooperatives tend to be small because they finance their
development through loans and retained earnings, without member equity
investment and often without the benefit of indivisible reserves (Ellerman
1990). Some economic disadvantages to this approach are: the coop can be
burdened with debt payments that are a financial drain; the ability to raise
external financing is hindered by a lack of member investment; and a non-share
structure creates a disincentive to retain the firm’s earnings for modernizing
equipment, because such investments become social property over which work-
ers have no claim. In summary, the non-share worker cooperative tends to
be underfinanced (Vanek 1977). Not having shares may also be unfair to the
founding members because even though their labor has contributed to devel-
oping the cooperative, if they departed before the firm has earned a good
income, they are unlikely to receive an appropriate financial return for their
labor and would have subsidized those who entered the firm after them. How-
ever, non-share worker cooperatives emphasize their social advantages of a
highly democratic and egalitarian workplace; they may view themselves as a
radical collectivist organization that is part of a political movement to change
the economy. To ensure this commitment, upon dissolution their assets are
transferred to another cooperative.
(e) Model 5: Hybrid worker cooperatives
At first glance, a hybrid arrangement could be viewed as compromising the ide-
als of a worker cooperative, but there are some apparent advantages, given the

Marcelo Vieta et al. 443
struggle of worker cooperatives to establish a presence in modern economies.
There are two relevant categories of hybrids: a worker cooperative within a busi-
ness corporation; and the multi-stakeholder cooperative where employees are
one of several categories of people who may be members (Spear 2010). We shall
discuss each of these in turn.
(i) A Worker Cooperative within a Business Corporation. This arrangement may
seem unusual, but it has existed within Québec since 1985, encouraged by
provincial legislation and a tax credit program. This program allows the
employees of an existing company to form a worker cooperative, and then to
purchase a portion of the stock and enter into an agreement with the other
shareholders (Canadian Co-operative Association 2011). The employees are
members of the worker cooperative and govern it according to the cooperative
principle of one member/one vote. In addition, the cooperative has represen-
tation on the board normally proportional to its company stock. The worker–
shareholder cooperative makes it possible for groups of employees to participate
economically in larger, better financed enterprises than is usual for worker
cooperatives. Some worker–shareholder cooperatives are buyouts of financially
troubled companies, but most involve companies in good financial shape.
There are variations of this arrangement in Argentina (Ruggeri 2009) and
in France, where a worker cooperative, known as SCOP (Société coopérative
ouvrières de production), need not own a company in its entirety, but must own
a minimum of 51% (Craddock and Kennedy 2006). Again, this recognizes the
challenges that groups of workers have in financing ownership arrangements
of any scale. However, there are also risks of degeneration and less member
democracy in these arrangements (Côté 2001).
(ii) Multi-stakeholder Cooperative. One of the first initiatives of this sort was
Eroski, founded in 1958 and currently the Retail Division of the Mondragón
Cooperative Corporation and among the largest retailers in Spain and the south
of France. Eroski has two stakeholders or membership classes: the workers and
the consumers. Both in the general assembly and the board of directors, the
votes are split evenly between these classes of members, but the chairperson of
the board must be a consumer (Irizar and McLeaod 2010).
This hybrid arrangement has also taken root among cooperatives in social ser-
vices – typically referred to as social cooperatives. In Italy, these social cooper-
atives have grown in popularity (Borzaga, Depedri, and Tortia, 2010; Defourny
2001), often serving people with disabilities and on the social margins. These
cooperatives have a strong collectivist orientation with tight asset lock rules
ensuring that the firm’s assets are always engaged in socially entrepreneurial
activity that meets the interests both of their multi-stakeholder members and

444 Major Activity Areas of Volunteering and Associations
of the broader local community, while protecting the co-op’s members dur-
ing economic downturns. In the Type-B social cooperative, a unique form
of state-supported work integration co-op, at least 30% of employee-members
must consist of otherwise unemployed or unemployable people who bene-
fit also from national insurance contribution exemptions. The co-op receives
exemptions from certain taxes and the organization must focus on “programs,
activities, and services related to labor force integration” (Gonzales 2010:227).
Type-A social cooperatives provide other social services such as care for chil-
dren, the elderly and disabled, and immigrant integration. Most of Italy’s social
cooperatives also rely on member and non-member volunteers (Becchetti and
Borzaga 2010). Both Type-A and Type-B social cooperatives have highly con-
strained distribution rights and therefore may be considered like nonprofit
social enterprises, incorporated as a cooperative, with membership also open to
users, volunteers, community leaders, and employees. This model, or variations
of it, has been picked up in Sweden, the United Kingdom, Belgium, France, and
Poland. The terminology also varies by country. For example, Québec refers to
such organizations as solidarity cooperatives (les coopératives de solidarité;Girard
2008); in France, they are referred to as SCIC (Société coopérative d’intérêt
collectif).
2. How worker cooperatives originate
Worker cooperatives originate in differing ways, the most common being a
start-up of a new enterprise via social entrepreneurship, which includes collec-
tive risk sharing and workers’ pooling of start-up funds (Connel 1999; Spear
2010). The challenges for worker co-op start-ups tend to be financing and, as
for small businesses in general, surviving the early years in a highly competi-
tive market and drawing a decent income for the members (Ben-Ner and Jones
1995; Sauser 2009).
Worker buyouts of failing firms are another way that worker co-ops emerge.
They often generate more publicity than start-ups, particularly if the firm is
high profile – as in the case of Chicago’s former Republic Windows and Doors.
This buyout resulted through a workers’ occupation and conversion to the
New Era Windows worker co-op (Alperovitz 2011). Buyouts also draw public-
ity if many jobs or the survival of an entire community is at stake (Jensen
2011, 2012), as has been the case recently in Italy, France, Spain, Greece, and
Argentina. But buyouts are more precarious than planned start-ups, because
businesses fail for a reason, and often the workers have to take large wage
sacrifices to make the business viable (McCain 1999).
Conversions of healthy companies into worker co-ops – either via a retiring
owner’s selling or bequeathing the firm to employees – have better prospects
and come about for many reasons, including idealism by the owner (Erdal
2011) or the desire of retiring owners to see their firm continue (Quarter 2000).

Marcelo Vieta et al. 445
Conversions of businesses into worker cooperatives have also been facilitated
by ESOP legislation in the United States (Freeman 2007). The Marcora law
in Italy (Legge Marcora), and the pago único (single payment) model and the
Sociedades laborales (SALs) in Spain – where workers can draw advances on
their unemployment insurance to contribute capital into a new worker cooper-
ative or a buyout – also facilitate such conversions, specifically for transforming
failed or failing capitalist businesses. In 2008 in Spain, for instance, there
were 17,637 SALs providing 133,756 jobs, while Marcora law co-ops in Italy
have seen a resurgence in recent years (CentroStudi 2012; Vieta, Depedri, and
Carrano, Vieta, Depedri and Carrano 2016).
Perhaps the most fascinating dynamic is the worker-recuperated enterprise
in Argentina (Atzeni and Ghigliani 2007; Ruggeri 2009; Vieta 2010, 2013, 2014;
Vieta, Larrabure, and Schugurensky 2012), in which hundreds of businesses
abandoned during the sharp economic downturn in the late 1990s and early
2000s were taken over – uninvited – by groups of employees, who struggled
to save jobs and make the business successful. Over 95% of these firms have
become non-share worker cooperatives, a recognized business model that facil-
itated restarting the business and made it possible to access some government
subsidies and value-added tax exemptions on revenues (Ruggeri 2009). Only
around 9% of these firms have since closed; nevertheless, they subsequently
experience hardships in raising capital and renewing aging machines (Rebón
2007; Ruggeri 2010). Although there have in recent years been reforms to
Argentina’s bankruptcy laws, which now make it easier for employees to take
over troubled firms, the government still lacks consistent policies for assist-
ing worker-recuperated firms. Given these challenges, in recent years these
firms have been assisted by cooperative federations, some unions, and myriad
community groups and social movements (Ruggeri and Vieta 2015).
Underscoring how worker co-ops often emerge in moments of distress
(Birchall 2003, 2012 Briscoe and Ward 2005), similar experiences, but with
more state support, exist in Uruguay, Brazil, Venezuela, and to lesser extents
in Paraguay, Peru, Mexico, and Bolivia (Novaes 2007; Vieta and Ruggeri 2009).
Older worker takeovers, dating back to the 1970s and 1980s, have also existed
in Spain, France, the United Kingdom, and Italy, emerging from similar situ-
ations of market crises and severe unemployment (Jensen 2011; Paton 1989;
Vieta et al. 2016). And, as direct responses to the lingering post-2008 crisis,
most recently new worker-recuperated firms have emerged again in South-
ern European countries, including experiences in Serbia, Greece, and Turkey
(Jensen 2011, 2012; Vieta 2013). These are fascinating examples of grassroots-
driven and social movement-affiliated worker cooperatives with strong labor
struggle dimensions.
Another arrangement that leads to the development of worker coopera-
tives is through a government initiative, as occurred in the former Soviet

446 Major Activity Areas of Volunteering and Associations
Union under Perestroika and more generally in Eastern Europe as commu-
nism collapsed (Ellerman 1990). Soon after the fall of the Soviet Union, worker
cooperatives were converted mostly into conventional businesses. Examples
of government initiatives are new cooperatives and cooperative-like labor-
managed firms in Chavez’s Bolivarian Revolution and, since 2013, with Cuba’s
new, “non-agricultural co-ops” in sectors such as tourism, public transport,
and construction, which have been encouraged by the economic reforms of
the Sixth Congress of the Communist Party (Donéstevez-Sánchez 2013; Vieta
2012; Vieta, Larrabure, and Schugurensky, 2012). It is too early to determine
the outcome of the experiments in Venezuela and Cuba (Malleson 2014;
Piñeiro-Harnecker 2013).
3. Why members/people participate
As can be seen from the discussion of the five models, worker cooperatives
are associations of members with the common contribution of labor (Webb
and Cheney 2014). But compared to most nonprofit associations, they have a
greater economic emphasis. They earn their revenues from the market, though
some – such as social cooperatives in Italy – also obtain government rev-
enues, like nonprofits that function in partnership with government programs
(Gonzales 2010).
Generally, worker cooperatives have high levels of member participation
compared to other nonprofit associations. The financial investment by mem-
bers and the link between member employment and the firm’s success probably
enhances member participation (Webb and Cheney 2014).
Although the motivations for joining differ, research in the United Kingdom
suggests that worker cooperatives may appeal more to workers with social and
political motivations (Cornforth et al. 1988). More recent research into par-
ticipation in worker co-ops emerging out of moments of distress – especially
from takeovers – is also suggesting that workers’ strong sense of camaraderie
arising from having to self-manage a firm and overcoming crises and difficul-
ties together radicalize some workers as they informally learn to self-manage
firms cooperatively “through struggle” (Vieta 2014; also see: Delahaye 2005;
Jensen 2012; McCain 1999; Paton 1989). In that respect, their members’ moti-
vations to participate may be similar to members of nonprofit associations or
ideologically driven collectives.
However, research undertaken in US plywood worker cooperatives gives a dif-
ferent perspective and suggests that the motivations are largely monetary and
that the members are conservative in their orientation (Greenberg 1986), and
research in Israel (Russell 1995) found that the members were very pragmatic.
The difference between these findings may reflect the circumstances of these
worker cooperatives. The UK study and research into workplace takeovers and
conversions were undertaken with the non-share type of worker cooperatives

Marcelo Vieta et al. 447
(model 4), a very idealistic approach that seemed to attract young activists or
distressed workers threatened by job loss and permanent unemployment; the
US and Israeli research was undertaken with share-capital worker co-ops, and,
in the case of the plywood co-ops, with buyouts of conventional firms where
they had mostly consolidated and entered a mature stage of development by
the time of the research. Put simply, there does not appear to be one motiva-
tion for why members participate and the variation seems to be related to the
different models that we presented above.
4. Impact of worker cooperatives
The impact of worker cooperatives varies. In countries such as Spain and
Italy, their impact has been very significant. Worker cooperatives in Spain are
widespread, with over 18,000, including the Mondragón Cooperative Corpo-
ration and providing 221,844 jobs (2008). Italy also has some of the largest
worker cooperatives in Europe with 25 cooperative groups each having an
annual turnover greater than EUR 100 million (CentroStudi 2012; Euricse
2011). In other parts of the world such as the United States and Canada, the
worker cooperative is but a fringe player in the economy (Artz and Kim 2011;
Quarter, Mook, and Armstrong 2009).
As noted, worker cooperatives are businesses that are normally based upon
more collectivist values than conventional businesses (also see: Ben-Ner and
Ellman 2013; Navarra 2010; Pérotin 2006). They function within the context
of modern capitalism, but the fit is not ideal and seems not to appeal to busi-
ness leaders, nor to management faculties, in most business schools (Whitman
2012). They seem not to be an ideal fit within the communist or state-
controlled economies either, though there are episodic examples (Ellerman
1990; Fain 1998; Harrington 2013; Piñeiro-Harnecker 2013).
Given this lack of fit with any of the predominant ideologies, it could be
argued that worker cooperatives represent a utopian ideal that is achieved
by groups of determined workers in response to appropriate social conditions
(Melnyk 1985). Examples include the economic despair resulting in Argentina’s
workplace takeovers by ex-employees, mentioned above (Atzeni and Ghigliani
2007; Ruggeri 2009; Vieta 2010; Vieta, Larrabure, and Schugurensky 2012), or
the post-war destruction in the Basque region of Spain that led to the birth
of the Mondragón Cooperative Corporation (Whyte and Whyte 1988). It is
impossible to predict whether worker cooperatives will become more salient
in the future, although increased interest in labor-managed and community-
owned organizational forms might be pointing to a revival in worker cooper-
atives (Atzeni 2012; Alperovitz 2011; Curl 2009; Vieta 2010, 2013; Webb and
Cheney 2014). There is also increased recognition that worker cooperatives and
labor-managed firms show strong resilience during economic troughs, varying
wages rather than furloughing worker-members, as workers express intrinsic

448 Major Activity Areas of Volunteering and Associations
psycho-social benefits from owning and controlling their firms (Birchall 2003;
Birchall and Kettilson 2009; Pérotin 2012). At minimum, they continue to rep-
resent an ideal to which select groups of workers subscribe and are willing to
work toward.
E. Usable knowledge
Worker cooperatives vary, but their norm is an idealistic attempt at putting a
democratic workplace into practice. Nonprofits struggling with issues of mem-
ber participation can learn from worker cooperatives – in particular, how to
engage a membership in decision-making and the experience of an employee
board of directors elected by other employees.
For nonprofit housing social enterprises, worker cooperatives are a model that
they could adopt. In every country, there are umbrella associations for worker
cooperatives who can assist with development. An innovative model of social
enterprises being structured as worker cooperatives is Common Ground, an
organization in Toronto set up to employ the persons with intellectual disabil-
ities, and operating services in catering, coffee outlets, and cleaning (Quarter,
Mook, and Armstrong 2009).
Social cooperatives created in Italy also are a structure that nonprofit leaders
could utilize for both social services and for creating employment opportuni-
ties for persons on the social margins. The social cooperative is analogous to a
nonprofit that works with government programs and also relies heavily upon
volunteers. It is an idea with legs, existing in Italy since the late-1980s and hav-
ing been picked up in other parts of Europe and the world increasingly since
the early 2000s; it is also an outstanding example of community mobilization.
Their multi-stakeholder governance represents a model that nonprofit organi-
zations can study and utilize, especially as they engage different constituencies
on their board.
F. Future trends and needed research
It is difficult to predict whether worker cooperatives will grow in the future.
At this point, they remain on the economic margins, even more so than
other forms of cooperatives. Nevertheless, understanding the participative gov-
ernance and the member commitment in worker cooperatives could be of value
to nonprofits.
For businesses engaged in market activity, worker cooperatives demonstrate
that a company that is governed by its employees can be successful in com-
petitive markets. Possibly, this important lesson may influence the functioning
of conventional businesses, especially given the interest and deployment of
workplace participation models in recent decades (Cheney et al. 2010).

Marcelo Vieta et al. 449
Another central concept for cooperatives and nonprofit associations is mem-
bership. The assumption is that membership leads to greater employee commit-
ment, but is it membership per se or engagement in the organization? Worker
cooperatives generally demand a high degree of member engagement. Recent
research suggests that more engagement means more commitment to the firm
(Cheney et al. 2010), more participation in the interests of surrounding com-
munities (Pateman 1970; Pérotin 2012), and even increases in employee health
and well-being (Erdal 2011; Wilkinson and Pickett 2010). The idea that mem-
bers’ engagement with their jobs is related to the success of their organization
and to the well-being of workers and communities is tantalizing. But more lon-
gitudinal and comparative research, across regional and national boundaries
and economic contexts, needs to be carried out in this regard.
Relatedly, do organizations that make greater demands of their members
achieve greater commitment to the organization than organizations with nom-
inal demands? This would be another issue worth exploring. Cooperatives and
nonprofit associations generally are based upon the premise that membership
involves a commitment, but does it, if the membership fee is nominal and
participation is optional, as in other forms of cooperatives? By definition, and
via anecdotal evidence, worker cooperatives seem to be organizational mod-
els primed for increased workers’ participation and commitment. And, finally,
another issue that has been barely researched and that would be worth explor-
ing is the comparative benefits of the different models of worker cooperatives
presented in this chapter.
G. Cross-references
Chapters 18 and 21.
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