Leiden Law Blog

Worker Cooperatives and the Social Economy: Something old, something new

Posted on by Iris Wuisman and Morshed Mannan in Private Law
Worker Cooperatives and the Social Economy: Something old, something new

In December 2015, the European Council adopted conclusions on the promotion of the social economy, a sector which has gained political attention for its contribution to economic and social development across Europe. The ‘social economy’ lacks a common definition but refers to certain cooperatives, mutual benefit societies, associations, foundations and other, newer forms of social businesses which produce goods, services and knowledge, while pursuing economic and social aims. These organisations are hybrid in character, as they make profits, but not solely for the sake of shareholder value maximisation.  As such, they inhabit the space between the market and the state and have been collectively referred to as the ‘third sector’. The common denominator of such organisations can be found in certain shared values:  solidarity, empowerment, and primacy of people and work over capital distribution. These key principles shape the way the activities and relationships between the different constituencies of a business are governed.

Nowadays, people want greater control over what influences their day-to-day affairs and independence is highly valued. Conventional, wage-based labour in traditional investor-owned corporations might not align with this desired autonomy. “Think outside the boss” is a mantra that is becoming more prevalent. A changed attitude towards the corporate objective of profit-maximisation, and a desire for higher-quality work in collaboration with others, has strengthened the urge to look for alternative opportunities. The workers’ cooperative form may serve as a supportive legal framework for this new paradigm.

A workers’ cooperative is an autonomous legal person, governed by private law, which undertakes economic activities in the interest of its worker-members. In general, workers democratically participate in the management and control of the cooperative in exchange for a capital and labour contribution. Workers cooperatives have a long, tumultuous history but are currently undergoing a renaissance, as a result of their possible fit with contemporary needs.

While cooperatives have an intuitive appeal to social theorists across the political spectrum, on account of their potential to nurture democratic values and their capacity to encourage free enterprise, some argue that worker cooperatives are intrinsically doomed to failure. If workers can organise themselves, they allegedly cannot grow in scale without departing from democratic values and adopting the orthodox practices of capital-managed firms. However, empirical studies show that labour-managed firms have greater survival rates than conventional firms and point to the obstacles impeding their creation as the reason behind their scarcity. In the Netherlands, the workers’ cooperative has yet to receive much attention. The Dutch association for cooperatives states that they are almost non-existent in the Netherlands. In contrast to other European countries, the Netherlands lacks freely-available public information on this organisational form which could help interested people to take steps towards forming a worker cooperative. In order to keep pace with contemporary developments and meet the requests of the European Council to support initiatives that strengthen social entrepreneurship, an increase of Dutch attention for worker cooperatives is merited.

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