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Worker Cooperative Toolbox

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Worker Cooperative Toolbox TOOLBOX SERIES Published by Northcountry Cooperative Foundation in partnership with Northcountry Cooperative Development Fund WORKER COOPERATIVE TOOLBOX In Good Company: A Guide to Cooperative Employee Ownership Published by Northcountry Cooperative Foundation in partnership with Northcountry Cooperative Development Fund with special funding from the United States Department of Agriculture Acknowledgments This publication is one in a series of toolboxes published by the Northcountry Cooperative Foundation. Funding for the development and production of this toolbox was provided by a grant from the United States Department of Agriculture. To purchase a copy of this toolbox, contact: Northcountry Cooperative Foundation 219 Main Street Southeast – Suite 500 Minneapolis, MN 55414 612-331-9103 www.ncdf.coop Thanks to: Margaret Lund, Northcountry Cooperative Development Fund Kerstin Larson, Volunteer in Service to America (VISTA) Newell Lessell, ICA Group Tom Pierson, consultant John McNamara, Union Cab Emily Anderson, consultant Don Jamison, Vermont Employee Ownership Center Kim Rice, Volunteer in Service to America (VISTA) John Logue, Ohio Employee Ownership Center The University of Wisconsin Center for Cooperatives Rural Cooperatives Center at the University of California–Davis Cover illustration by Ricardo Levin Morales. About the Publisher Northcountry Cooperative Foundation (NCF) is the nonprofit, educational affiliate of the Northcountry Cooperative Development Fund (NCDF). NCDF was founded in 1978 by a group of natural foods consumer and worker cooperatives whose members wanted to invest their capital in business activities that supported their values. What began as a simple tool for self-preservation—a handful of co-ops lending money to each other because no one else would—soon grew into one of the first community- development loan funds in the country, and a model for community-based capital control. Since its founding, NCDF has made millions of dollars in capital available to a range of small con- sumer, worker, housing, and producer cooperatives and their members, playing an instrumental role in the success of these enterprises. From its beginning as a collaboration of local cooperatives, NCDF has grown into a regional network of more than one hundred community-based, democratically owned and governed enterprises. NCF, as the nonprofit arm of NCDF, was formed to more effectively carry out and expand the educational and technical assistance activities with which NCDF has long been involved. Copyright 2006. Northcountry Cooperative Foundation, in partnership with the Northcountry Cooperative Development Fund. Information contained within may not be reproduced in whole or in part without permis- sion of the Northcountry Cooperative Foundation. ii Worker Cooperative Toolbox TABLE OF CONTENTS Acknowledgements. ii About the Publisher . ii INTRODUCTION. 1 CO-OP BASICS . 3 What is a Co-op? . 3 Joint Ownership. 3 Democratic Control . 3 Member Benefit . 4 Cooperative Principles . 4 The Cooperative Story . 4 Is there any relationship between worker co-ops and the labor movement? . 5 Co-ops Today . 5 The Mondragon Cooperatives. 6 WHAT IS AN EMPLOYEE-OWNED OR WORKER-OWNED CO-OP? . 8 The Basics. 8 Rights and Responsibilities of Worker-owners . 9 Divisions of Power in a Worker-Owned Cooperative . 9 Another form of employee ownership: Employee Stock Ownership Plans . 10 WHEN DOES AN EMPLOYEE CO-OP MAKE SENSE?. 11 Co-op Case Study – Builder’s Commonwealth . 12 FUNDAMENTAL ELEMENTS OF AN EMPLOYEE COOPERATIVE . 14 Legal Structure . 15 Co-op Case Study – South Mountain Company . 17 Employee Ownership Comparison . 18 MAKING MEMBERSHIP MEANINGFUL. 20 Who Can Be a Member of a Worker Co-op? . 20 Governance and Decision Making . 21 Selecting the Board . 21 Six Traditional Areas of Responsibility of the Board. 21 Challenges in Co-op Governance . 22 Board of Directors Code of Conduct. 23 Learning to Promote Sound, Fair Governance: Qualities of an Effective Board Member . 24 Personal Characteristics of an Effective Board President . 25 PLANNING FOR PERPETUITY . 26 Stock Purchase, Allocation, Valuation, Transfer, and Dissolution . 26 Initial Buy-In and Transfer . 26 Terminology . 26 Allocation of net margin . 27 The Importance of Retained Earnings and Equity Capital . 29 Patronage Dividends . 30 Co-op Case Study – Collective Copies . 32 Valuation . 33 Dissolution . 34 List of Key Decisions for a Worker Cooperative. 34 Worker Cooperative Toolbox iii TABLE OF CONTENTS BUSINESS MANAGEMENT . 35 Governance vs. Management . 35 Co-op Case Study – Pelham Auto Service. 36 Basic Elements of a Personnel Policy . 37 Standard Elements of a Job Description . 37 Co-op Case Study – Union Cab . 38 Hiring and Firing in an Employee-Owned Cooperative . 39 Compensation . 39 Co-op Case Study – Isthmus Engineering . 40 Expansion and Growth . 41 5 C’s of Credit . 42 A Last Word . 42 Lessons from Other Worker Owners . 43 Keys to Success . 44 APPENDIX A—Frequently Asked Questions . 46 APPENDIX B—Board Orientation . 48 Sample Agenda for Board Orientation . 48 APPENDIX C—Business Plan Basics. 51 APPENDIX D—Effective Meetings . ..
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