CO-OPS ON THE RISE
I’m still excited about the budding alliance between the United Steelworkers (USW) and the Mondragon Cooperatives – and the general awakening consciousness about worker co-operatives and co-operative business in general that I wrote about last month.
And there’s more.
Rodney North of Equal Exchange (the Massachusetts-based worker owned co op fair trade coffee company) 
made me aware of an article on the New York Times Economix blog by Nancy Folbre, an economics professor at University of Massachusetts. In “The Case for Worker Co-ops” she says, “Since many of our most prestigious economic institutions have embarrassed themselves at our expense over the last year, maybe it’s time to look around. Worker-owned and -managed businesses combine the romance of entrepreneurship with solid family values and commitment to community. What’s not to like?”
In addition to the Mondragon/US Steelworkers agreement and the worker co-ops featured in Michael Moore’s new movie, she says, “Rousing examples abound. CNN Money recently profiled six worker-run businesses including Pelham Auto, whose mechanics have cheerfully fixed every car I’ve owned for the past 20 years.” One of the companies CNN profiled, by the way, is South Mountain.
But all this attention being paid to worker co-ops makes Folbre, the economist, wonder what the economic research says. Not much, according to her. Worker owned and managed companies are “largely ignored in economics textbooks.”
I have found that even the socially responsible business movement, to my ongoing surprise, pays little attention to true workplace democracy.
But she does, at least, find a little research – or maybe it’s just opinion. Mostly it’s about the troubles – or potential troubles – with employee ownership. One of these is that worker-owned and managed companies, with more complex goals than maximizing profit, tend to be less growth-oriented than other companies.
“Don’t tell Wall Street,” says Folbre, “but that could be a good thing.”
I want to say more about the USW/ Mondragon agreement.
The Mondragon initiative is not the first innovative Steelworkers alliance. In the 1990s, the USW helped found the Blue-Green Alliance together with the Sierra Club and other environmentalists and they have been involved with Van Jones’ Green For All.
And now, if this new alliance works, it might make a system of worker-owned enterprises assembled with the purpose of a green restructuring of the U.S. economy. That could be a powerful force.
The USW-Mondragon collaboration grew out of a ‘green industrial revolution’ project that created a partnership with Gamesa, 
a Spanish wind turbine firm, to retrofit abandoned steel plants in the U.S. (40,000 U.S. manufacturing facilities have closed since the beginning of the current economic crisis) and produce wind turbines (there are 200 tons of steel and 8000 moving parts in every large wind turbine). Gamesa’s connection to nearby Mondragon brought the USW and the co-operative giant together.
While this historic business alliance gives hope to the possibility of reviving manufacturing (and the communities that have been devastated by the losses), there is also congressional activity coming along to support employee ownership. According to the Vermont Employee Ownership Center, Senator Bernie Sanders of Vermont
will introduce two new bills that would seek to expand employee ownership in the United States.
The first, the Worker Ownership, Readiness and Knowledge (WORK) Act would create an Office of Employee Ownership and Participation within the Department of Labor to promote employee ownership and employee participation in company decision making. The second bill, the U.S. Employee Ownership Bank Act, would provide loans and loan guarantees to employees to purchase a business through an ESOP or a worker-owned cooperative.
On the eve of the Copenhagen meetings, this collection of related activity is heartening. Perhaps the most important thing about the expanding co-operative business movement, in the long run, may be as an avenue to the large-scale collaborative alterations to the architecture of the economy that will be necessary if we are to successfully tackle the challenges of climate change and the post peak oil transition to come.
AN HISTORIC ALLIANCE
My friend David Smathers of the TeamWorks Cooperative Network in California writes:
“The Mondragon cooperatives and the United Steelworkers have announced an historic partnership through which they will buy or start manufacturing businesses in the U.S. and Canada that will combine Mondragon’s democratic structure of ownership and governance with collective bargaining.
It will take many years to implement. But particularly in the face of the economic crisis that has exposed Wall Street’s failure to provide responsible stewardship of the economy, this is a very heartening development. Together, these two institutions have the resources, technical expertise, and vision to demonstrate to the public that it is possible to structure and run large corporations in entirely different ways than what we have become accustomed to.”
The Mondragon Cooperative Corporation (MCC) is the world’s longest-running, highest-grossing, most successful experiment in workplace democracy. Now 53 years old, the Basque association of worker cooperatives consists of roughly 260 cooperative enterprises with more than 100,000 employee owners.It is the seventh largest corporation in Spain and the world’s largest industrial workers’ cooperative. Its enterprises include its own university, research center, and bank.
In January 2001 I visited Mondragon with a small group of Americans for a four-day examination of the culture of both the town and the MCC. Having used a version of the Mondragon principles as the basis for the restructuring of South Mountain Company fourteen years before that, it was thrilling to get a firsthand look at this system of worker-owned cooperatives that appears to be unparalleled in its dynamism and its impact on a region.
Mondragon has created a total system wherein people can learn, work, shop, and live within a cooperative environment. The town, in its isolated valley, has a vital, prosperous feel—a small bustling city with a comfortable mix of young people from the university, new middle-class families, and those who have been in the valley for generations. The surrounding hills are verdant and productive, dotted with villages and farms. The MCC’s influence reaches into every aspect of community life.
I’ve always wondered why the amazing story of Mondragon is such a secret in the United States. It has attracted significant attention worldwide, but far less here. Even the U.S. based socially responsible business movement pays it little mind (as it does the issue of ownership in general). Is the idea that capital is a tool, rather than the residence of power, too radical to embrace? Instead of awarding profit and control to capital, Mondragon has succeeded by awarding profit and control to labor in a system of democratic capitalism. It has developed an enduring way to use capital productively and distribute income equitably at the same time.
For too long the idea of worker-cooperatives as a potent business model has flown under the radar, but in Michael Moore’s new film: Capitalism: A Love Story (marquee photo) people all over the country have been seeing worker cooperatives and workplace democracy in action. 
He presents them as a possible solution to the undemocratic, inequitable and greed-driven economy that he spends most of the film building a case against.
Featured on film are Alvarado Street Bakery in Rohnert Park, California, and Isthmus Engineering in Madison, Wisconsin. Scenes of workers making decisions, working on production lines, and eating and laughing together paint a picture of worker cooperatives that stands in marked contrast to the exploitation and abandonment shown in other parts of the film.
The new Mondragon/Steelworkers association will further raise the profile of cooperative business in the U.S. More importantly, it may jump start the crucial re-industrialization of the nation that is so essential to our future.
In the Steelworkers announcement of the agreement USW president Leo Gerard says, “We see Mondragon’s cooperative model with ‘one worker, one vote’ ownership as a means to re-empower workers and make business accountable to Main Street instead of Wall Street.”
I’m excited by the prospect of seeing where this will lead.
Sharing Ownership of the Future
One more post (which might become two) about employee ownership and workplace democracy before I veer off toward some related topics. . . .
Despite the Obama administration’s recent shift in emphasis from homeownership to rental housing (which I will discuss in detail in a future post), homeownership is at the very heart of the American dream. Owning our work, and finding meaning there, seems as essential to a good life as owning our homes. But although many of us own homes, far fewer own our work.
But the idea that the people who use our productive assets should own them is as old as America. As John Logue of the Ohio Employee Ownership Center says in The Real World of Employee Ownership, “Thomas Jefferson argued passionately that what set this country apart from the Old World and made it so suitable for democracy was the fact that the ownership of productive property was widely dispersed: farmers owned their land in the countryside; artisans owned their tools and shopkeepers their shops in the towns.”
Employee ownership is emerging from beneath the radar. There is an awakening interest in the potential of broadly shared ownership of enterprise. The idea is beginning to surface all over the world in companies small and large. Today over 11,000 companies nationally, with over 13 million employees, have some form of employee ownership. In fact, today more Americans work in firms partly or wholly owned by employees than are members of unions in the private sector. Most of these do not share the SMC co-op model, and many can hardly be characterized as democratic, but all indicate that we may be learning something as we try to assemble the components of a restorative future.
The context is important. My fellow baby boomers own several million businesses, and during the next two decades, most of these founders will exit. The businesses will either be shut down, or sold to outsiders, or passed on. Selling to employees is an option that deserves to be more widely understood, for it offers powerful benefits to all parties. There is a need for more information as employee ownership becomes an important entity of choice, not only for aging boomers but for the millions of young people intent on finding real meaning in their work. Employee ownership is one way to open that door. There is new knowledge and there are new practices that make employee ownership more widely applicable, and growing interest among these business owners.
Tom Greer is one of them.
Many people pass through Martha’s Vineyard (how’s that for understatement?). Some of them want to visit our facility, or see some of our work, or talk business. 
Each of these visits takes time, so we have to be careful. It’s a delicate balance because, mostly, these are well-meaning people with good stories and legitimate interest. How can you possibly turn them away, how can you possibly not generously accept? Maybe someday we’ll have designated visiting days, but for now we field the e-mails and calls and decide whether time will allow and the inquiry is serious enough to warrant the time.
Tom Greer, a builder from Charlottesville, Virginia, was on the island. He asked to visit, and and wanted to ask a few questions. Turns out his successful, stable business 31 years old, has 25 employees and annual revenues of $8 million (about our size). A decade ago he took two longtime colleagues in a partners; each owns 20% and Tom owns 60%.
He is interested in examining the possibility of becoming a co-op. I asked him why, given the success story, he is interested in rocking this stable boat by considering a shift to co-operative ownership. He responded, “As I have grown up with my people, I have wondered what it is like for them to give their working life to a company, and then upon retirement walk away from their life’s work with only Social Security. I have benefited greatly from their sweat, loved every minute of my ownership, and think that with the co-op concept I can help paint a better picture.” As he digs deeper he’s beginning to understand the challenges. Whether they ultimately make the shift or not, Tom Greer is the kind of person who will change the way we do business.
He knows that it’s about sharing ownership of the future.
Moving A Mountain
Blogging is new to me. In fact, this is my first entry. The question is: why am I doing this? Why am I doing it to me and why am I doing it to you? I hope for good reason. There are two I can think of, so far.
The first is this. Over time, as South Mountain Company has matured (sort of), and in the course of my professional relationships, book adventures, speaking opportunities, and teaching experiences, I have found a small group of people who seem to be interested in what’s going on at SMC – what we are doing and thinking about. I’m curious to communicate with you, and others – in some organized way – to see what might come of this far-flung web of relationships.
The second is selfish. There are many obligations in my life – external demands which require attention and discipline. Writing is not one of these; it derives only from internal desire. I have little discipline, but I do have an over-developed sense of responsibility. I’m hoping I will respond to the duty of maintaining this blog (I’ll try to write once every week or 10 days, and try to respond quickly to any responses I receive) by writing more steadily. It’s something I love to do, something I need to do to feel whole. But, like exercise, sometimes it’s hard to get to. Perhaps this endeavor will help.
I expect, in this space, to expand on the topics and issues tackled in my book, Companies We Keep (recently released by Chelsea Green), particularly the promise of employee ownership and the importance – and challenges – of conducting business with community, people, and planet as our top priorities. I will relate what is happening in our design/build and renewable energy business and how that may connect with larger events. I will pass on currents of relevant thinking we uncover in our interactions with others. And I will talk about new influences on my own thinking as they emerge.
Hard Times, Hard Work
At the moment we all seem to be holding our breath, waiting for economic recovery. We may be waiting for the wrong thing. Instead, I hope, the economy will shift, and I welcome the prospect, although I am frightened by it too.
As the warm glow of a thrilling election has faded into the stark grey tones of the hard work ahead, I still believe that Obama’s election said something encouraging, even exhilarating, about the current state of mind of the American people.
For us, at South Mountain, it has been a tumultuous year of change. We had to think about uncomfortable issues that had not previously been necessary to address. We had to think differently. We had to re-assess our own state of mind. Last September, while one of my co-owners was preparing the plans for a large project for construction – and nearly ready to begin – we received a call from our client, who said the crashing economy made it imperative that he and his wife put their project on hold.
That was the defining moment of our year – it was, in fact, the beginning of an avalanche of backlog-diminishing postponements. It jolted us from the petrified status quo that prosperity had layered into our collective company consciousness for many years. It became a catalyst that drove us to take a sobering look at who we are, what we do, and how we might insist on the future we’re after. It became, oddly, a very good thing.
For 33 years, every SMC employee has come to work each day of each week of each month of each year and had productive work to do. Now, perhaps for the first time, that legacy might come to be in jeopardy. For us, 2008 began like a carnival; we were in the midst of some of the best times we’ve ever had. But when the effects of the US economic collapse came, they came quickly. It became the year of trials and tribulations, stormy weather, scrambling to stay ahead of big waves, and trying to move mountains. Hard work in difficult times.
Tackling the Unthinkable
But difficulty and opportunity mingle; at times it is hard to distinguish one from the other.
The author Andre Gide relates the experience of a trip he took into the Belgian Congo: “My party had been pushing ahead at a fast pace for a number of days, and one morning when we were ready to set out, my native bearers, who carried the food and equipment, were found sitting about without any preparations made for starting the day. Upon being questioned, they said, quite simply, that they had been traveling so fast in these last days that they had gotten ahead of their souls and were going to stay quietly in camp for the day in order for their souls to catch up with them. So they came to a complete stop.”
We can’t come to a complete stop, but it may be that we need to find time, especially in these slower economic times, for our souls to catch up with us. This is what we had to do this year at South Mountain. It was our year of reckoning. I hope our souls are, at least to some modest degree, catching up.
Along with considering innovative ways to re-build our shrinking backlog, it was our moment to tackle the unthinkable: what happens when the day comes that there is not enough work for all? Countless businesses have had to do this in these times. For us, the examination of the unthinkable had surprising results. Our cooperative structure proved to be robust. After several meetings a policy emerged:
In the event of not enough work to provide full-time employment for all individuals in the company, we will take the following six steps, in this order:
- Voluntary temporary rolling furloughs;
- Employ our capital to do speculative work (income postponed) for a limited period of time;
- Employ our capital to do non-income-producing community work for a limited period of time;
- Strategically reduce hours worked;
- Reduce wages across the board, graduated from highest paid to lowest;
- Involuntary temporary rolling furloughs.
The thrilling part of this was that never, during these difficult discussions, did the word “layoffs” come up. Never did anyone suggest that those who had been with us for the shortest time should be at greater risk. Never did anyone suggest that we should use this time to rid ourselves of those who may be less productive or in other ways perhaps less worthy – to separate the wheat from the chaff. This was a time of coming together, as a workplace community, rather than a time of fragmentation and protection of individual self-interests.
Fortunately we have not yet had to take any of the steps outlined above, partially because my colleagues’ vigorous defense of community and democracy inspired me, as an individual, and us, as a company, to double our efforts to re-build backlog and creatively manage workload.
Each year we conduct company-wide individual evaluations. Part of the process is a written self-evaluation. One of the questions asks us to rate the company’s year on a scale of one to ten. Most years, the average hovers around 8. Last year, our most profitable and upbeat year ever, it was 8.4. This year, our most trying ever, it was 8.7. Hmmm. . . what does that mean? I think it means that collaborative discussion and constant internal communication enhanced our sense of community. People felt cared for, by each other. That’s what a culture of shared ownership can do. Self-interest was indistinguishable from the welfare of the whole group.
America the Possible
But we cannot just tend our own small garden; there are far larger forces in play. We are in the midst of a cascade of spectacular events. Several years ago, Al Gore released An Inconvenient Truth. About the same time, NYT columnist and best-selling foreign affairs author Tom Friedman saw the green light and began to write about climate change and energy (which will be, he says, “the greatest innovation project in history”). Venture capital shifted its focus from software and internet to clean technology. Oil prices shot up. Climate change and energy suddenly became a high level presidential campaign issue. Never before.
After a childish financial elite ran the global economy unsupervised, and ran amuck, Wall Street was finally unmasked, revealed, and crumbled. With that, the impossible global economy – predicated on perpetual growth in a finite world – became wobbly. None of this came without warning or predictions. A few intrepid economists, and others, have insistently pounded the warning drum but nobody, as far as I know, expected it to happen so soon or so fully. Those entrusted with guiding us hadn’t a clue. That’s not unusual – as economist John Kenneth Galbraith once said “. . the reason for the existence of economists is to give credibility to astrologers.”
Our country is experiencing more mood swings than a teenager. But it may be a prelude to the good things we hope will come next. There are no guarantees, only possibilities. As my friend William Greider so eloquently tells us in his remarkable new book Come Home America, we cannot re-build the same economy we had before and the new one must be based on new knowledge and new circumstances. He calls it America the Possible.
It’s also America the Different. John Fullerton, former Managing director of JP Morgan, says, “At the beginning of the 20th century scale did not matter. At the start of the 21st century, scale redefines our economic challenge. The world may be flat, but far more critical in terms of its implications, the world is full, and that changes everything.”
Our future will require us to transform our economy. We will have to manage the sky as a commons, auction emission permits, and use the income to serve the public good – to re-distribute wealth and wean ourselves from fossil fuel. The current Waxman- Markey Energy Bill is only a crude and tentative first step by government. There must be far more to come.
Owning the Endeavor
I can’t help but think that this long-term global transformation we need – the “new operating system for the planet” as author Paul Hawken calls it – will require more than political will and appropriate investment; it will also require collaboration of a type and scale heretofore unknown. We will need new tools, new abilities, and new ways of working together. Businesses will need to “share information and support each other rather than engaging in competitive exclusion” says Tom Wessel in The Myth of Progess. All of us will need to own the endeavor. A central requirement may be the ability to own our workplaces and share responsibility for the outcomes, both good and bad.
Employee ownership may be an important part of this. It’s about the recognition that when the people who are making the decisions bear the responsibility for the consequences of those decisions, and also share in the rewards that accrue, better decisions will result. It’s about building community within the workplace and connections to the communities where we work and live.
The task at hand is to unwrap the complex bundle of convergences that suggests that the next twenty years will be dramatically different from the last twenty, to try to understand what the differences will be, and to change our businesses and our selves so we are ready, able, and above all willing to do what it takes. The challenges are immense, but I think it can be a rousing journey if we take the time to prepare – if we make room for our souls to catch up. It’s a time to breathe deeply the opportunity that this new era brings. 
There it is, my first blog entry. Longer than I meant it to be, but hey – it’s the first one. I will hang my hat here, and I hope it will stimulate an exchange that helps us learn to work together in healthier, more beneficially productive ways. If so, I’ll be glad. My colleagues and I look forward to communicating with others who are thinking about employee ownership, social enterprise, and cooperative, community based business that keeps our planet front and center. “Markets,” as Marjorie Kelly, the former editor of Business Ethics Magazine says, “are a subset of the earth and subject to its requirements.”
So are we.
Wherever you are out there, I hope you’ll join in and let us know what’s up with you!
-
JOHN ABRAMS is co-founder and CEO
of South Mountain Company and the author
of COMPANIES WE KEEP read more
-
COMPANIES WE KEEP is published by Chelsea Green Publishing
read more -
