There is exciting business news brewing in the Rhode Island General Assembly. Imagine a business model that places as much priority on growing and retaining meaningful jobs as it does on profits? Enter...workers' cooperatives, an idea introduced to Rhode Island by Fuerza Laboral, a Central Falls non-profit organization dedicated to leadership development and workers' rights. Workers' cooperatives, a business model that actually existed during the great depression, would exist alongside S-Corps. C-Corps, LLC's, LLP's and other business entities. Although we live in a hyper-capitalist society, workers/investors could opt to operate their business as a workers' cooperative.
Workers’ cooperatives are businesses that are owned and democratically operated/governed by the employees, with each employee serving as a part-owner of the business. Because the owners are also the workers, co-ops concentrate as much on creating lasting and meaningful employment and good, healthy working conditions as they do on generating profits for the owners/workers.
This is an innovative and proven business model that is taking hold across the country. Currently, 13 states have enacted this legislation, including our neighbors, Massachusetts and Connecticut. Another 15 states, including Rhode Island, are deliberating this innovative business model this year in legislatures across America. That's why we have sponsored 2017-S 0676 / 2017-H 6155aa; it would allow workers and investors to form workers’ cooperatives here in Rhode Island, electing said form of business entity.
The heart of this legislation is aimed at empowering workers. Owners are often the hardest workers, most invested in the success of the company. The members of workers' cooperatives seek to contribute to the local economy, strengthen community life, show initiative and escape poverty, all in an effort to pursue the American dream of success, security and prosperity for themselves, their families and their communities.
While some companies move when the tax or regulatory environment is more favorable in another state, workers cooperatives are more likely to remain loyal to their state of origin, since the owners/investors/workers all live and work locally. If one of the several wishes to move on, the others often remain, creating stable economic development.
Workers’ cooperatives have a track record of creating and maintaining good jobs, generating wealth, improving quality of life, and spurring local economic development for the owner/operators and their surrounding communities. Workers’ cooperatives also have been shown to have relatively low business failure rates and the ability to survive during economic downturns.
The workers also learn about democracy and the American way! By giving each employee-owner a voting share equal to her/his investment in the company, each employee-owner has direct control over the working conditions, wages and profits. In fact, the profits go straight to the employee-owners.
Workers’ cooperatives are typically lean businesses with high efficiency and employee motivation. The employee-owners play meaningful roles; they not only do their jobs, but they also collectively determine the future direction of the company. This, in turn, often leads to higher productivity and better overall business performance.
If their business is performing well and the employee-owners have more money in their pockets, the community and the local economy prosper.
It is no secret that Rhode Island’s economy has been struggling for far too long. When other states have bounced back from bad economic times, Rhode Island’s economy has continued to struggle. Rhode Island should embrace any innovative model with a potential promise to boost our economic recovery. Workers’ cooperatives are thriving in 13 other states, and are proposed in 15 more. Let's hope Rhode Island joins the workers' cooperative bandwagon.