There’s more than one way to do things

Judging by the attitudes of most people, you’d think there was only one way to do things.

Coming into adulthood, the focus is on “getting a job”. Sure, some go to not-for-profits or charities, a larger number go into the broader public sector, and no small number these days take up the cudgels of entrepreneurship.

But the focus is relentlessly on a standard model of what a business is. It’s some form of corporation, with shares of stock.

Compensation turns on stock — share grants and options. Investor capital is sought by selling shares. The “exit strategy” could be to go to the public markets, or to sell the venture to another firm, thus “monetizing” the shares.

Is this the only way to do things? I think not.

We’re just not told about the other ways.

Cooperatives and mutual societies, for instance, once held a large place in our society. There are traditional companies whose shares instead passed into the hands of their employees. Credit unions are owned by their members. There are many models to choose from.

All of these come with a built-in “plus” — they all are potentially very long term ventures, that think about a longer-term future than next quarter’s financial results.

Community-building is far more likely to draw upon these types of structures than upon the traditional joint-stock corporation, going forward.

The bonds become greater, multi-dimensional in nature. Cooperative ventures are not planning for an “exit strategy” that allows for instant monetization and a return of capital.

They can be as simple as the accumulation of capital via participation in an account, profit-sharing as you stay, and presentation of your accumulated capital account upon leaving. Ownership never leaves the cooperative: as the dairy producer cooperative in New Zealand says when someone wants to “buy shares” in a very successful venture, “buy a farm and start milking cows, because that’s the only way to get in on this”.

As the Basque region’s Mondragon cooperative has shown, a cooperative venture needn’t “stick to its core” at all. It can provide different lines of business to work in for its members. Some arms simultaneously can serve some of their needs (a cooperative bank, for instance).

It’s interesting as well to note that in the United States — a place where cooperative ventures don’t spring necessarily to mind as anything more than a frill around the edges — the average lifespan of all cooperative ventures is eighty, whereas the average lifespan of all corporations is seven years.

Building a community that can be sustained needs structures that will stand the test of time. It also needs enterprises that aren’t being built to “sell out” and stop putting the local environment and market first.

Cooperatives are also far better at retaining people: there is far less churn. This — as a coop in Cleveland that handles laundry services, operates an urban greenhouse, and employs primarily people from the underclass has learnt — has allowed them to pay wages that start at 35% better than their “private enterprise stockholding corporate” competitors while competing on price (for they do not suffer 30%+ staff turnover, with the training costs involved, annually).

In other words, well-structured cooperative enterprises could do a great deal of social “lifting” (just as cooperative housing societies have in Toronto). At the same time, as they grow, they often become self-financing, freeing them from risks in the rest of the economy.

Cooperatives are not a “big city only” operation. For smaller centres, they would allow a town to have greater certainty that a primary employer wasn’t suddenly going to close up shop and move their plant elsewhere (or threaten to to gain further concessions at the expense of the town). A town could achieve the kind of multi-generational anchoring that a German Mittelständ company often supplies its community, but by an institutional structure that no longer depends upon the noblesse oblige of a single owner.

A thoughtful town council might well choose to privilege cooperative ventures, rather than multi-national corporations, simply to acquire a stable tax base and community. (It would make far more sense than the incessant quest for yet another subdivision, and the tax abatements to get some MNC to set up shop or stay put.)

How we choose to work together, and how we choose to handle ownership issues, does matter.

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2 Comments

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  1. Yeah, you’ve put your finger on something That I’ve often thought about. The way things are is not to be seen as “the natural order of things” or just the way things come to be, but rather the accumulated results of the machinations of feudalists, early capitalists, bankers and others with money & clout. It doesn’t have to be the way it is.

    We could. for example, re-write GAAP and FASB standards and taxation laws such that triple-bottom-line performance is what gets rewarded in capital markets as opposed to short-term quarterly performance absent those costs .. etc., etc., etc.

    Didn’ythe USA, the bastion of freedom and the holiness of capital, turn its banks into cooperatives, just for a wee few days whilst the taxpayer’s money was being shovelled in the back doors of the banks.

    • What we need to do as ordinary folk is seek out opportunities to use/reward what exists — deal with a credit union rather than a chartered bank, for instance. As someone who might guide a startup (I know you’ve had your time doing that as have I) maybe point them in this direction. Little moves that may pay bigger dividends down the road…

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