Management–Labor

Conversations with Equal Exchange’s Worker–Owners

J. Michael Lillich

When LERA announced that its 66th annual meeting was going to be in Portland, Oregon, I knew I’d look up my former student, Jessie Myszka, a class of 1996 economics major who had taken a road less traveled to work at Equal Exchange (EE). I’d stayed in touch with Myszka and followed the growth of EE, an importer of and other foodstuffs under the mantra of . Equal Exchange’s guiding principle is fairly traded goods that benefit small farmers. Equal Exchange is for profit and worker owned. There are also outside investors (full disclaimer: I’ve owned shares of EE as an investor for more than fifteen years). Portland is EE’s Northwest Region headquarters, where Myszka works. Before LERA’s annual meeting, I spent the day at Equal Exchange talking to the worker–owners about their jobs and their company.

qual Exchange (EE) Inc. was percent to 30 percent per year—hardly founded in 1986 by three food conducive to entrepreneurism. Authentic co-op managers—Jonathan fair trade provides pre-financing so that ERosenthal, Michael Rozyne, the co-ops may purchase their members’ and Rink Dickinson—with a big, ideal- harvest before the co-op finally sells the istic dream: nothing less than to change crop. the way food is grown, bought, and sold The three founders began their import around the world. It began as a strange business with Nicaraguan coffee, dubbed hybrid: a for-profit business model with it Café Nica, and brought its first product a nonprofit mission. to market—but not with- Equal Exchange is a successful The highest-profile rule of fair out fighting and ultimately democratic co-op with trade is providing producers a high- Somehow, overcoming a Reagan- complementary visions er-than-market price to at least cov- and against all administration embargo er costs of production. More game of all products from the • EE is a for-profit, worker-owned fair trade odds, by the import and wholesale distribution business. changing, however, is the principle Sandinista government. EE of purchasing only from farmer co- added high-quality black • EE’s main product is coffee, followed by third year EE . Most products are organic and operatives. These co-ops function was breaking tea from civil war–torn Sri grown sustainably. Sales last year were simultaneously as businesses and Lanka to the product line $55.6 million. social-development organizations. even. its second year. That effort • Co-executive directors report to a democrat- Many offer services such as health ultimately failed. But the ically elected (one worker, one vote) board of directors. and education because government ser- three founders persevered. vices in their member areas are lacking. First independently, and then with the • EE worker–owners receive “patronage,” a share in EE’s annual profits, in addition to Nearly as significant is pre-shipment help of the European network of alterna- their 401(k) retirement plans. financing. Conventional lenders in rural tive traders, Equal Exchange identified areas abroad often charge as much as 20 and began working with a growing list of

34 PERSPECTIVES ON WORK / 2014 democratic farmer coffee co-ops interna- and worker–owner patronage disburse- own retail cafés. A few years ago, EE even tionally. Somehow, and against all odds, ments, had a net income before taxes of became part of a national retail agreement by the third year EE was breaking even. $2.7 million. Product sales broke down developed to help food co-ops better com- In 1991, EE launched itself as a fair like this: pete with the big chains like Whole Foods. trade gourmet coffee company offering • coffee, 67 percent U.S. food co-ops a full line of bulk coffee Worker–Owner Governance • chocolate, 17 percent beans and reached $1 million in sales. EE is a complex organization with 120 Fair trade, EE style, serves as the cor- • fresh fruit (from the produce equal worker–owners, with their in- rective for the dominant corporate free fair trader of which EE owns dividual views and opinions, housed trade whose assumptions are rarely true the majority), 8 percent in a democratic ownership structure. in practice. EE in its literature describes • food snacks, 4 percent So, worker–owners can’t mail it in, go its business practice as “authentic fair • tea, 3 percent home, and forget work. They orga- trade” to “challenge the existing trade nize ownership meetings roughly every • other (cups, lids, T-shirts, etc.), model, which favors large plantations, two months, with an annual meeting 1 percent agri-business, and multinational corpora- to celebrate the business’s tions; support small farmers; and connect Fast-forward to May 2014: founding day, May 1—not consumers and producers through infor- EE’s mission, based on prin- “[EE] is in the coincidentally, International ciple, product, and process, mation, education, and the exchange of trade business Workers’ Day. products in the marketplace.” continues to grow and evolve. Jessie Myszka has been at In 1995, EE moved its headquar- The fairly traded foods EE not the aid Equal Exchange for almost ters from Stoughton to Canton, distributes now include olive business.” twenty years. After years at EE’s Massachusetts, and opened a second oil from the West Bank, apri- Massachusetts headquarters, —Jessie Myszka office in Madison, Wisconsin. In 1996, cots from Pakistan, raisins from she’s now co-director of opera- EE opened a West Coast office in Hood Chile, and cashews from India tions, based in EE’s Northwest River, Oregon. That same year, EE began and El Salvador. EE packages and sells distribution facility in Portland. In her role a collaboration with the Lutheran World its products through its networks of food as one of EE’s more-seasoned workers, she Relief organization, which became EE’s co-ops, natural food stores, church con- says the most important things she does interfaith program. Seven years later, gregations, and, more recently, though its are to understand what EE’s various teams 10,000 church congregations and their members were buying EE’s . In 1998, a system was put into place in the United States. In 1999, one of the EE founders, Rink Dickinson, and Rob Everts be- came EE co-executive directors, and the board of directors (consisting primarily of workers) approved a strategic plan for 2002–2003. EE also launched a choco- late line. Chocolate’s on a worldwide roll these days, and that made EE’s sales of that product grow quickly. In 2004, EE purchased a new head- quarters building in West Bridgewater, Massachusetts, and soon installed its own coffee roasting and packaging ma- chinery. In 2007, EE opened a new branch office in Minnesota.

In 2013, EE saw sales of $56.1 mil- Equal Exchange worker–owners take their jobs, their ownership responsibilities, and fair treatment of their farmer lion, and after charitable contributions co-operative producers seriously.

PERSPECTIVES ON WORK / 2014 35 Equal Exchange

are trying to accomplish, educate others, is adjusting and evolving in tune with and facilitate the communications to make external conditions and worker–owner things happen: understanding. Myszka says access to We don’t typically hire for traditional information is key to the basic collabora- experience but rather smart people who tive question: “How do we function as a think critically. They have to be well in- co-op? We are long on vision, short on formed to be effective owners—and thus written planning.” our worker–owners tend to want to know Here’s how EE officially describes everything. So we have to share informa- what its governance model is and what tion. We also have to get stuff done. it’s not: A worker cooperative is an alternative Sometimes the farmer groups we deal for-profit structure based upon standard with are well organized but others not democratic principles. It is not designed very. Just like in co-op development in to maximize profits, nor returns to inves- the U.S., successful cooperatives begin Jessie Myszka tors, but rather to bring to the workplace with a committed core. So those farmer many of the rights and responsibilities co-ops really need to focus on educating worker committee. Myszka elaborates, that we hold as citizens in our com- their own members about the benefits of “New hires need to understand the gov- munities. These principles include one- being in the co-op. But we’re in the trade ernance structure itself, the products, person/one-vote equality; open access business not the aid business. So we and fair trade. The worker–owners are to information (i.e., open-book manage- don’t seed new farmer co-ops—we look encouraged to spend up to 10 percent ment); free speech; and the equitable dis- for emerging groups who need a market. of their time on personal–professional tribution of resources (such as income). Myszka says EE’s melding of a for- development such as board membership, A worker co-op is not owned by outside profit business model and a cooperative learning Spanish, or organizing educa- shareholders or a small group of found- organization can be a puzzle in the terms tional activities.” ers or partners but by all the employees of management because “business people In addition to individual education, in equal portions. Top-level managers don’t tend to know much about co-ops there’s also a learning curve for the and entry-level employees alike own an and co-op people don’t tend to know whole organization. EE is not a finished identical share and receive an equal much about business.” product with policy and practice finally share of any profits or losses. These EE has an ambitious education model in place. Rather, it is a work in progress “worker–owners” both elect the board for its worker–owners, a bi-weekly train- where all the worker–owners are get- of directors and fill six of the nine board ing called Exchange Time, led by a ting up to speed and the organization seats. The board in turn is responsible

Equal Exchange worker–owners at its Portland, Oregon, warehouse-distribution center spend Senior graphic designer and Equal Exchange board member Greta Merrick (left) and Jessie 10 percent of their time on activities such as board membership, the broader co-operative Myszka (center), co-director of operations, work with an outside designer on a print publica- movement, and learning Spanish. tion project.

36 PERSPECTIVES ON WORK / 2014 majored in environmental studies and agroecology. At a study-abroad program in Peru, by chance he stayed next door to an Equal Exchange cacao producer co-op: That was my first exposure to fair trade abroad. It’s different from Ben & Jerry’s kind of fair trade—Ben & Jerry’s is better than most. I worked for them at a scoop shop, and there’s no education of em- ployees. I thought I knew what fair trade was until I was studying for my EE em- ployment interview. At EE we’re providing better access to information, educating people (inside and outside) about what the essence of fair trade is—sustainable

Equal Exchange’s Governance for Leadership, Accountability, Scalability, and Success (GLASS) model. agriculture and social justice. We work with small farmers organized Portland office, they sent me to the main as existing co-ops, some with as many office in West Bridgewater, Massachu- as 10,000 farmers, who need a market for setts, to introduce me to the whole orga- their coffee and cacao—the essential in- nization there. gredient in chocolate. We have a guaran- teed floor price for farmers, even though Ellen is coming up on her one-year coffee is traded as a volatile commodity anniversary. She’ll have to pass a vote by on the global market. We pay a premium the whole worker–owner body to join for organic coffee. We also pay a social their ranks. She’s quietly confi- premium that farmer co- dent. (Editor’s note: Ellen was ops use to fund projects voted in soon after the interview “I’m still learning Ellen Mickle like clean water and new for this story.) the structure of schools. for hiring and supervising management. The Young Firebrand EE and where my But there’s as much mis- Consequently, a circle is formed, as in understanding about fair American civic democracy, of everyone Tyler Hall, an EE sales rep for two intervention points trade in a Dominican Re- years, started working on farms being accountable to someone else. are most effective.” public farmer co-op as in high school. He studied sus- there is among Ameri- The Newbie tainability and social movements —Tyler Hall can consumers. It can at the University of Vermont. He Ellen Mickle, customer relations, came be confusing. There’s no one, official criteria or authenticator for to EE from organic farming work. She fair trade. There are multiple certifica- worked at a research farm in Pennsyl- tions depending upon the organizations vania, then moved to the Northwest and conferring them. worked at farmers’ markets, food banks, and AmeriCorps. Quintessential to her In the future, I’d love to be an EE buyer generation, she found EE online: and work with the farmers. EE wants to nurture long-term relationships that lead I wanted to move out of seasonal work. to increased quality and yield. That’s mu- My take was that EE was established, tually beneficial to the farmers and to EE. successful, and growing, but still a mission-driven business. It was personal Hall understands that there’s little that and welcoming. There’s good teamwork is black and white, even in the idealistic and it feels good. After I started at the Tyler Hall and democratic organization that EE is.

Continued on page 110

PERSPECTIVES ON WORK / 2014 37 Equal Exchange Continued from page 37

Hall says: In a given year, a patronage por- Sometimes I’m frustrated with manage- tion is on the order of $3,500. The ment decisions, on the choice of a prod- worker–owners receive half in uct, for example. I’m still learning the cash. The other half is reinvested structure of EE and where my interven- in EE. Worker–owners can take tion points are most effective. But I rec- their investments out tax free ognize that I may not know the scope or when they leave the co-op or the context of a decision. It’s my job to retire. sell the product. We have a 4:1 pay ratio, which means the executive directors aren’t making more than four times the wage of the lowest- paid worker. There’s a “no buy-out clause” for the organization. What that means is that the worker–owners can’t decide to sell the company to another entity. There’s no exit plan As a board member, I represent the for the organiza- other 120 worker–owners as well as our

Jim Feldman “[Equal Exchange tion, no financial other stakeholders—the farmers and their incentive to the co-ops and EE’s outside investors. I’m has] a 4:1 pay ratio, The Activist worker–owners going to my first meeting next week at EE Jim Feldman has been at EE for nine which means the in a sale. If EE is Massachusetts headquarters—aka the Mothership. I don’t years. He started as a temp and has executive directors sold, all the mon- ey goes to the have an agenda recently been promoted to Northwest “I want to own aren’t making larger fair trade other than making regional sales manager. He’s currently a and co-op move- my hard choices. sure we stay true to board member: more than four ments. Some of our mission. times the wage of I am consciously I started as a political activist in Chicago our farmer co-ops I’m not a manager organizing against genetically modified the lowest-paid have invested in getting out of in my job, but I can food. I moved to Portland to pursue ac- EE through its worker.” my comfort take on a leader- tivism full time. I like the idea of a large nonvoting pre- ship role wearing worker-owned co-op. Equal Exchange —Jim Feldman ferred shares. zone. It’s also is unique, a model. It’s a good example my board hat. Part an investment in of my goal is to and a nice alternative to corporate domi- Board Matters nance. myself, a different change my point of Senior graphic designer Greta Merrick view of EE. I want We just hired four new sales people. My has just been elected to Equal Exchange’s way of getting a to have my say and job is to get them trained up. I’ll have the board after five years with the co-op: promotion.” also gain under- opportunity to get out more, to get the standing on how —Greta Merrick EE name out, to help the public to under- issues are decided. stand the difference between fair trade I want to own my and corporate trade. Consumers want hard choices. I am consciously getting more of that. out of my comfort zone. It’s also an in- We have a different DNA here at EE on vestment in myself, a different way of some fundamental things. There’s a lot of getting a promotion. pride in ownership, and all the workers Greta describes the worker–owner have a big stake in the enterprise. We governance model as balanced, “but worker–owners have standard American more or less assertive. The worker– 401(k) retirement plans. We also have a owners can step in if things aren’t going profit-sharing plan known as patronage. Greta Merrick right.”

110 PERSPECTIVES ON WORK / 2014 There was a governance crisis be- laboratory of ideas: engaged workers; cooperatives. The Institute, while incor- tween the board and executive directors fair treatment of suppliers; ecologically porated more recently, has been working at EE in 2010 that went on for about a aware business model; a new three-legged for several years in a planning and con- year. After the adoption of a rather rules- stool retirement program, consisting of sulting mode. Its strategic efforts include based governance philosophy, the execu- Social Security, five areas intended to propel worker tive directors felt the board was too rigid 401(k), and ownership speedily ahead: and not collaborative, while the board patronage in- Resolving the • access to capital felt its execs were not responsive enough vestment; and conflict began with • conversions via retiring owners sell- to its requests for reports. limits on CEO ing their business to workers Resolving the conflict began with one pay. Equal Ex- one big, strong, and big, strong, and persistent worker voice change ques- persistent worker • documenting effective practices when the co-op voted to say, “This is not tions so much • rural development voice when the co- working” and mandated mediation. It that we take • technical assistance to co-ops from ended with a co-op–wide submission of for granted in op voted to say, “This certified peer advisers proposals for a new governance system the employ- is not working” and Equal Exchange’s success stands as a and selecting one to implement. ment realm. mandated mediation viable model of how to do business, do EE also has outside investors. Organi- EE points out it well at home and abroad, be success- zational investors include congregations that there are [between the board ful, and profit through a smart, engaged, and farmer cooperatives, among others. innovative and the executives and collaborative workforce. Not only There are also individual investors. EE ways to go can EE inspire other like-minded new directors]. targets to pay a 5 percent dividend. Out- about business business experiments, it can also model side investors (like me) have no official organization practices that will spawn new experi- say in EE governance unless they are and practice, the relationship between ments in worker organization and even elected to the board of directors. management and workers, and doing change how the big corporations do their business both day to day and long term. business by demonstrating that it can, The question the worker-owned co- indeed, be done. Many of LERA’s best academic research- op model doesn’t answer yet is scale. ers look at the future and worry about While there is growth and vitality in the where the next generation’s good jobs co-op movement, realistically speaking, with decent pay, good benefits, and ad- worker-owned enterprises aren’t going J. Michael Lillich equate retirement will come from. In to supplant the corporate model in the Michael Lillich is principal of Clearly Expressed LLC, a profes- fact, today’s long-term unemployed and global economy anytime soon. sional writing service. He formerly was the managing editor of young worker unemployment and under- Says Myszka: LERA’s online think tank, the Employment Policy Research Net- employment can look like dark harbin- Two organizations are blooming that are work, based at the School of Labor and Employment Relations at gers of a bleak future for workers and the accelerating the [co-op growth] process: the University of Illinois at Urbana-Champaign. Lillich contributes larger economy, both in the United States writing and editing to LERA’s online and print publications. To the U.S. Federation of Worker Coopera- and globally. contact him with LERA member news, honors, and books, write to tives and the Democracy at Work In- Worker-owned co-ops like Equal 202 W. Columbia Ave., No. 103, Champaign, IL 61820, call (217) stitute. The Federation was founded in Exchange provide a good alternative 898-1928, or send an e-mail to [email protected]. 2004 as a membership group for worker enlightened-governance model and a

PERSPECTIVES ON WORK / 2014 111

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