3 ms·

I'm working on starting a small worker co-operative. The advantages are normally considered for a large group (say, to increase buying power for interested cons

by gatlin 16y ago

I'm working on starting a small worker co-operative. The advantages are normally considered for a large group (say, to increase buying power for interested consumers) but in the case of a lean startup, the law simplifies these questions. After bills and other fixed costs, you apportion net savings to the members proportionate to their contribution. Additionally, in a small group democratic (maybe even consensus) voting allows everyone to be equally in control of what is a joint partnership. I know Texas has laws covering "cooperative associations," can't speak for other states. Thoughts?

autarch 16y ago
I'm actually planning something similar. I want to start my own business, and when I get to the point of bringing in other people, I want the company to be cooperatively owned. Each person hired will get an equal share, but I'll probably put in some sort of probationary period (3-6 months), just for safety. As for governance, it always makes sense to divide up responsibilities instead of making every decision via consensus, but for the big things (taking on a big financial risk, selling the company, etc) the employee-owners are the board, and get to make the decision.
- gatlin 16y ago
  What's your business? Probationary period sounds reasonable. Yeah, consensus is something I'm toying with. I'm writing a CEO into the bylaws who, in spirit, should be the vision guy; not sure how powerful to make him or how influential. But the board is elected by the members, have short term limits, and I'm making it really easy for members to review board members and officers. The trick for all this working is vetting prospective new members. Until we get more than 10 members, the board meetings will also be membership meetings (sorry, you 3: you have to sit this one out). Third Coast Workers for Cooperation is a great organization to help out with the pesky legal details and bylaws; I'd give them a ring.
- markklarich 16y ago
  I am not at all sure that those big decisions should be made by consensus, however.I once worked on a deal where the founder was very experienced in group dynamics and he insisted on solving all major issues by majority with all minor issues by consensus. Since then, I offer that solution to groups and generally they take it. In my experience consensus is so subject to the "holdout" that only the most sophisticated groups can avoid it. You don't want the major issues to be hijacked by one unhappy party. Its way too time consuming.
- bruce511 16y ago
  I'm in a company with a similar system. I graduated from employee to "equal owner" - we've since had 3 more people do that - but also 3 owners (including the 2 original founders) have moved on. We've made some mistakes along the way, and refined the system somewhat as well. What we realized (somewhat painfully) was that we wanted those working "in" the business to "own" the business. So while we have a vested system for earning shares, we also have a vested system for getting them back. Once you leave, over a period of time, your shares revert back to the company. (we're a private company, not public, so the shares would only have any actual value in the event of a buyout, or dividend. The length of this vesting-out phase is proportional to the time spent in the company (with a cap). During the vesting-out phase dividends are paid out to "not present owners" in proportion to their share. To make sure this isn't completely manipulated we limit bonuses to the owners to the same % as what the staff get. The idea is that while you're here, you're adding value. That value persists after you leave, but will becomes less important as time goes by. The key thing - know how people get _out_ and agree on that before you start. Getting out is harder than getting in.If the rules are in place while everyone is still keen then they'll be fair. when it comes time for someone to move on, they already know the rules so there's no animosity on that front. By determining the rules _before_ you know which person will actually _use_ them you're likely to come to a very fair agreement. You know you could be on either side of the agreement later on. If you're negotiating this after one person has decided to use, then you've both staked out your camp and so both sides have very different goals - which leads to very difficult and painful arguments. My partner once described business as a "marriage" and like a good marriage a pre-nup serves the interest of both parties.
bradleyjoyce 16y ago
sounds like a multi-member LLC with a well-outlined operating agreement?
- markklarich 16y ago
  Amen.
- gatlin 16y ago
  Yeah, cooperatives can be implemented on top of whatever legal distinction you choose; Texas happens to have a "cooperative association" status that operates as a sub-set of non-profit and makes a lot of the decisions for you (as in, you are required to have a 5 person board, membership meetings, pay equal dividends, etc, so there is no point even discussing it). Also, tax benefits.

by gatlin 16y ago

autarch 16y ago

I'm actually planning something similar. I want to start my own business, and when I get to the point of bringing in other people, I want the company to be cooperatively owned. Each person hired will get an equal share, but I'll probably put in some sort of probationary period (3-6 months), just for safety. As for governance, it always makes sense to divide up responsibilities instead of making every decision via consensus, but for the big things (taking on a big financial risk, selling the company, etc) the employee-owners are the board, and get to make the decision.

gatlin 16y ago
What's your business? Probationary period sounds reasonable. Yeah, consensus is something I'm toying with. I'm writing a CEO into the bylaws who, in spirit, should be the vision guy; not sure how powerful to make him or how influential. But the board is elected by the members, have short term limits, and I'm making it really easy for members to review board members and officers. The trick for all this working is vetting prospective new members. Until we get more than 10 members, the board meetings will also be membership meetings (sorry, you 3: you have to sit this one out). Third Coast Workers for Cooperation is a great organization to help out with the pesky legal details and bylaws; I'd give them a ring.
markklarich 16y ago
I am not at all sure that those big decisions should be made by consensus, however.I once worked on a deal where the founder was very experienced in group dynamics and he insisted on solving all major issues by majority with all minor issues by consensus. Since then, I offer that solution to groups and generally they take it. In my experience consensus is so subject to the "holdout" that only the most sophisticated groups can avoid it. You don't want the major issues to be hijacked by one unhappy party. Its way too time consuming.
bruce511 16y ago
I'm in a company with a similar system. I graduated from employee to "equal owner" - we've since had 3 more people do that - but also 3 owners (including the 2 original founders) have moved on. We've made some mistakes along the way, and refined the system somewhat as well. What we realized (somewhat painfully) was that we wanted those working "in" the business to "own" the business. So while we have a vested system for earning shares, we also have a vested system for getting them back. Once you leave, over a period of time, your shares revert back to the company. (we're a private company, not public, so the shares would only have any actual value in the event of a buyout, or dividend. The length of this vesting-out phase is proportional to the time spent in the company (with a cap). During the vesting-out phase dividends are paid out to "not present owners" in proportion to their share. To make sure this isn't completely manipulated we limit bonuses to the owners to the same % as what the staff get. The idea is that while you're here, you're adding value. That value persists after you leave, but will becomes less important as time goes by. The key thing - know how people get _out_ and agree on that before you start. Getting out is harder than getting in.If the rules are in place while everyone is still keen then they'll be fair. when it comes time for someone to move on, they already know the rules so there's no animosity on that front. By determining the rules _before_ you know which person will actually _use_ them you're likely to come to a very fair agreement. You know you could be on either side of the agreement later on. If you're negotiating this after one person has decided to use, then you've both staked out your camp and so both sides have very different goals - which leads to very difficult and painful arguments. My partner once described business as a "marriage" and like a good marriage a pre-nup serves the interest of both parties.

bradleyjoyce 16y ago

sounds like a multi-member LLC with a well-outlined operating agreement?

markklarich 16y ago
Amen.
gatlin 16y ago
Yeah, cooperatives can be implemented on top of whatever legal distinction you choose; Texas happens to have a "cooperative association" status that operates as a sub-set of non-profit and makes a lot of the decisions for you (as in, you are required to have a 5 person board, membership meetings, pay equal dividends, etc, so there is no point even discussing it). Also, tax benefits.