(Crossposting from my Beehaw Post.)

Let’s talk brass tacks. A lot of people I interact with online seem to see top-down reform as the only option for real societal change, and often despair when they see the rampant corruption in our government and private companies as being unsolvable problems.

Similarly, Union organizing efforts have largely stalled despite significant effort from activists. This is simply due to the enormous power wielded by capitalist corporations, who will always protect their own interests above those of their employees. Again, we reach a point where many people despair at an apparently unsolvable problem. Indeed, unionization has faced a steady decline in the US for over 40 years, and is now likely below 10%.

The problem here is that people keep trying to organize against their employer, when in fact there is another option: they could organize without their employer. Put another way, the workers of a company could pool their resources and found a worker’s cooperative which they all operate together through elections and democratic voting. Then they simply quit their old jobs as work in the cooperative becomes available.

However, the problem with worker’s cooperatives is that there are very few successful examples, and I am not aware of their internal documentation being available for review. The best information I could find was this diagram of the Mondragon Corporation, which has similar elements to my organizational diagram, but isn’t descriptive enough to give insight into the inner working of their management.

There simply doesn’t appear to be a standard template on which to construct such an organization, at least not one that I would expect to be successful. This post is the beginning of an attempt to address that shortfall.

Hierarchy by Consent: The concept that a strategic executive at the top of an operational hierarchy should be legitimized in their position through a popular election enfranchising all stakeholders.

Many worker’s cooperatives built in the 19th and early 20th centuries failed because they weren’t as productive as other companies at the time. Researchers have indicated that this is likely due to the lack of hierarchical management in the organizations, which resulted in a “flat” management structure.

I would agree with this analysis, and point out that hierarchical decision making is what gives an organization strategic direction. Without such structured teamwork, productive efforts are less coordinated and as a result suffer from reduced overall productivity. In biology I was taught that a cell is greater than the sum of its constituent parts, but if those parts can’t coordinate properly then I would expect the effect is diminished.

The problem with traditional capitalistic companies, in my opinion, isn’t the hierarchy itself, it’s that the hierarchical management structure results from conditions over which a worker has no control and there is therefore no incentive for the hierarchy to act in accordance with the worker’s best interest.

A person is forced to find work for their own survival, but because there are almost no democratic companies to work for, they’re forced into a traditional company, where the top of the hierarchy could be determined by any number of inappropriate factors including generational wealth, nepotism, favoritism, or other corrupt circumstances. Those decision makers then have no incentive to act in the best interest of the workers who fall under them in the hierarchy. I would call this arrangement Hierarchy without Consent.

By integrating elections into the empowerment of key decision makers, an organization can maintain a healthy, productive work environment while letting the workers have self-determination in their work environment and goals. I believe this will lead to much healthier and more productive workplaces.

Call to Action: Help me Write a Template

Some time ago I started writing a template for an Articles of Association for such an organization, which you can read as an odt or as a pdf. The image on this post is the organizational diagram.

The organization I envisioned is governed by General Conferences, which are meetings to include all of the Owners. The GC first elects a President, who acts as head of the labor union and is the primary facilitator of company business. The GC then elects a CEO who becomes the executive at the top of the operational hierarchy for productive work. The CEO is elected based on their business plan, which is voted on by all owners. Elected leaders serve for a term after which they come up for reelection.

I’m here to ask for input and debate on this template. It has not had a legal review so if you’re a lawyer or co-op expert expect to notice lot of missing legal clauses and the like.

Incentive Structures

To make this work, there should be some sort of incentive for Owners to step up and take on the burden of leadership. To keep things balanced, however, the incentives should provide different objectives to different positions.

In my template, the President receives a percentage of the total payroll as a bonus, while the CEO receives a percentage of the business income (aka “surplus”) that their project generates. In this way, the President seeks to maximize payroll while the CEO seeks to maximize surplus, and in that back and forth the organization will theoretically achieve long-term stability while maximizing the financial return for the Owners. The effect would be similar to the political pendulum metaphor.

Similarly, if the cooperative is big enough to require a Board of Directors, those people would also be eligible for an incentive bonus based on company performance, perhaps including factors such as workplace safety and legal compliance.

Worker payroll could be handled a number of ways, but my current thinking is that it would be an hourly pay scale similar to union payscales, with progression for years of service, but also with performance ranges so that production management can offer performance incentives to all workers.

The bonus rates, the payroll chart with ranges, and performance metrics would all be voted on by the GC.

Equity Control

Another key pitfall of traditional capitalist companies is ownership rules. Most workers own very little or no stock in the company for which they work. They have no opportunity for financial growth except what the hierarchy decides to give them each year, while the investor class, which does no work, makes off with the surplus.

I’m proposing a system of equity control where owners are forbidden from owning more than a single share in the Company’s stock, called an Equal Ownership Share (EOS). Once an Owner has a full share they have full voting rights, but they are not permitted to purchase any more stock.

New and Partial Owners can have a partial EOS during their Provisional Period, during which they will have a corresponding partial vote. The length of the Provisional Period is set by vote, and Equity is awarded to the new Owner incrementally during that time.

Because the Owners have stock in the Company, they are the recipients of all the Company’s declared dividends. This way they are paid twofold, once from their hourly compensation and again from their dividends.

Incorporation

An open question I have is how to legally incorporate such an organization. One strategy might be to incorporate as an S-Corporation, which is a “pass-through” organization, meaning all business income is distributed and reported on the tax returns of the Owners. This may run into trouble due to regulations concerning voting rights, since my template has custom voting.

Another alternative may be to incorporate as a not-for-profit of some type.

I’m not sure about the answer to this one, but I certainly welcome input, especially from any legal or co-op experts.

Team Management Software

I’m in the early stages of developing open-source team management software for this specific type of cooperative. The software will ideally include things like Accounting and Payroll, Secure Voting, Document Control, Chat Functions, Video Calls, and other team management solutions. This is key to making sure these cooperatives can function efficiently right from the get-go.

The software should include multiple users with multiple roles and permissions, and should work over LAN, with the option to run it without being connected to the internet (as it should be resilient).

I have experience with local programming including database and GUI design but I’ve never done anything over a network, so I have some learning to do if I’m taking this all on myself.

I plan to host the files on Codeberg.

EDIT: Further Discussion:

Block Diagram Discussion on Programming.dev

If you or someone you know might be interested in contributing to this software, please let me know.

The Big Picture

The key take away here is that most people seem to be waiting for someone like a politician to come along and make a change for them. Instead, we should be working on reform from the bottom up in the places where we spend the most of our time: our workplaces.

I believe that if we are able to incrementally build up an alliance of these organizations we could begin to fix some of the bigger problems currently facing our society.

If you or someone you know would like to contribute time and effort to this project, please direct them here. Also, feel free to make your own version if you like.

TLDR: Workplace hierarchies traditionally increase productivity at the expense of worker enfranchisement. I’m proposing a new type of worker’s cooperative to include what I call “Hierarchy by Consent” and asking for help realizing it.

Thank you,

Juniperus