I am enjoying the dated but wide-ranging Bill Moyers: A World of Ideas: Conversations with Thoughtful Men and Women About American Life Today and the Ideas Shaping Our Future.
The book was finished in 1989 and most of the intellectuals interviewed grapple with the Reagan revolution one way or another. Moyers interviews 41 famous American intellectuals, and I was especially taken by his interview with iconoclast Noam Chomsky (pp. 38-58).
As part of his critique of American society of the 1980s, Chomsky stated that corporations should not be run by their shareholders—private owners or public stockholders. Instead corporations should be run by their employees [what we used to call, “the workers” --MS] because employees would get more share in how the corporation should be managed. Otherwise, a few wealthy shareholders that own most of the stock make the decisions on how the company is run. Chomsky stated that shareholder ownership is anti-democratic because the wealthy own more shares and thus control more votes. The poor are shut out of corporate governance. Chomsky’s argument, radical sounding as it may be, is not a Marxist argument—workers’ labor exploited by the capitalists. Rather, he complains that the workers (or employees) don’t control the corporations that they run. The corporate world is completely controlled by the rich, and corporations act in ways that favor that class and only that class.
Fortunately, employee-owned “cooperatives” do exist, so we can analyze them as an alternative to the traditional corporate structure of outside ownership.
Perhaps the most famous of the San Francisco Bay Area cooperatives, the Cheese Board Collective makes and sells pizza, breads and pastries, and cheese. It has operated in (the People’s Republic of) Berkeley, California as a “worker-owned collective since 1967” (website). Both the products and pizza restaurant are successful—lines stretch around the block every day at lunch and dinner—for good reason. The pizza is very good. The fresh ingredients are organic, local and vegetarian except for the cheese and given to you right out of the oven. The Berkeley community also wants to support the Cheese Board for political reasons (it closes every May 1st), and the Cheese Board donates to non-profit community projects. The Cheese Board’s employment application contains a brief description of their philosophy and how it works. (See also the Cheese Board’s self description)
San Francisco Bay Area cooperatives try to support each other and the Israeli kibbutz movement was the inspiration for the Cheese Board Collective. Sheirin Iravantchi writes in the Daily Californian that the cooperatives share a philosophy: employee satisfaction and ownership are most important.
More specifically, by “giving members more freedom of choice and more conducive work environments, these cooperatives attempt to increase employee satisfaction rather than profit margins…”(Daily Cal, December 7, 2000)
Why are cooperatives so rare in the corporate world? Why don’t we any cooperatives among the larger corporations? I believe that there are a number of reasons. First the cooperative structure does not allow enough flexibility for rapid growth. A growing business must take risks, often taking on debt or a increased monetary investment from its owners or venture capitalists in order to expand. Members of a collective would be less likely to take entrepreneurial risk and unlikely to take money from outside investors.
Secondly, cooperatives hire new employees quite carefully if not painstakingly. Each new employee must serve as a generalist, not a specialist, and must work with everyone, not just within a small department. The cooperative’s employment style slows down the pace of hiring.
Third, only those in the bottom half of the labor pool would be interested in accepting a San Francisco Bay Area job for $21/hour with no possibility of promotion. It’s nice not to have a boss, but it’s also nice to be a boss. It is nearly impossible to buy a house in Berkeley or afford the finer things in life at $21/hour, even if $21 is a generous and superior wage for a food-industry job. The most talented in the labor pool may pass if that’s the best they can do.
The above three explanations show the inflexibility of cooperative labor. Ironically, some investors claim that many corporations are run for the benefit and enrichment of top management, not the shareholders, and CEO pay has reached astronomic levels. Stockholders elect a board of directors, and that board is supposed to monitor management expenses, so if there is a problem with executives grabbing too much of the company cash, it is the stockholders’ fault.
Let’s step back and compare the structure of for-profit corporations with cooperatives. Most corporations respond to the concerns of their owners, shareholders, which are, in order of importance, profitability (passed onto the shareholders through dividends and capital gains in share price), good citizenship and community. Profitability is necessary but is less emphasized in a cooperative. Cheese Board pizzas may be characterized as gourmet pizzas, the restaurant bakes only one type every day and the pizzas are not price competitive. The cooperative is less efficient than for-profit companies and its prices will be higher. (In the words of economists, the cooperative is inferior to the for-profit firm in both productive and allocative efficiency.) In a nutshell, the cooperative produces fewer goods and its prices are higher. Consumers spend more and receive less. Cooperatives have their place, but Chomsky is wrong. For-profit corporations do a better job raising consumers’ standard of living.
Postscript: Shaila Dewan's March 30, 2004 NYT article, Lose the Boss is worth reading for an update on co-ops and inequality.Jonathan Kauffman's August 9, 2015 San Francisco Chronicle article, Food Co-op Survivor Thriving for 40 Years gives the history and management structure of co-op Rainbow Grocery in San Francisco. Could it have thrived anywhere else?
The book was finished in 1989 and most of the intellectuals interviewed grapple with the Reagan revolution one way or another. Moyers interviews 41 famous American intellectuals, and I was especially taken by his interview with iconoclast Noam Chomsky (pp. 38-58).
As part of his critique of American society of the 1980s, Chomsky stated that corporations should not be run by their shareholders—private owners or public stockholders. Instead corporations should be run by their employees [what we used to call, “the workers” --MS] because employees would get more share in how the corporation should be managed. Otherwise, a few wealthy shareholders that own most of the stock make the decisions on how the company is run. Chomsky stated that shareholder ownership is anti-democratic because the wealthy own more shares and thus control more votes. The poor are shut out of corporate governance. Chomsky’s argument, radical sounding as it may be, is not a Marxist argument—workers’ labor exploited by the capitalists. Rather, he complains that the workers (or employees) don’t control the corporations that they run. The corporate world is completely controlled by the rich, and corporations act in ways that favor that class and only that class.
Fortunately, employee-owned “cooperatives” do exist, so we can analyze them as an alternative to the traditional corporate structure of outside ownership.
Perhaps the most famous of the San Francisco Bay Area cooperatives, the Cheese Board Collective makes and sells pizza, breads and pastries, and cheese. It has operated in (the People’s Republic of) Berkeley, California as a “worker-owned collective since 1967” (website). Both the products and pizza restaurant are successful—lines stretch around the block every day at lunch and dinner—for good reason. The pizza is very good. The fresh ingredients are organic, local and vegetarian except for the cheese and given to you right out of the oven. The Berkeley community also wants to support the Cheese Board for political reasons (it closes every May 1st), and the Cheese Board donates to non-profit community projects. The Cheese Board’s employment application contains a brief description of their philosophy and how it works. (See also the Cheese Board’s self description)
The Cheese Board Pizza Collective is an independently operated adjunct to the larger Cheese Board Collective. Currently, we are a collective of sixteen people. Everyone who works at the Cheese Board Pizza is a member of the collective with equal decision-making power. There is no boss, manager, or employees—it is worker-owned. Everyone makes the same hourly wage, currently $21 per hour. We receive paid time off, medical and dental benefits. (http://www.cheeseboardcollective.coop/uploads/Pizza_Application.doc)
San Francisco Bay Area cooperatives try to support each other and the Israeli kibbutz movement was the inspiration for the Cheese Board Collective. Sheirin Iravantchi writes in the Daily Californian that the cooperatives share a philosophy: employee satisfaction and ownership are most important.
More specifically, by “giving members more freedom of choice and more conducive work environments, these cooperatives attempt to increase employee satisfaction rather than profit margins…”(Daily Cal, December 7, 2000)
Why are cooperatives so rare in the corporate world? Why don’t we any cooperatives among the larger corporations? I believe that there are a number of reasons. First the cooperative structure does not allow enough flexibility for rapid growth. A growing business must take risks, often taking on debt or a increased monetary investment from its owners or venture capitalists in order to expand. Members of a collective would be less likely to take entrepreneurial risk and unlikely to take money from outside investors.
Secondly, cooperatives hire new employees quite carefully if not painstakingly. Each new employee must serve as a generalist, not a specialist, and must work with everyone, not just within a small department. The cooperative’s employment style slows down the pace of hiring.
Third, only those in the bottom half of the labor pool would be interested in accepting a San Francisco Bay Area job for $21/hour with no possibility of promotion. It’s nice not to have a boss, but it’s also nice to be a boss. It is nearly impossible to buy a house in Berkeley or afford the finer things in life at $21/hour, even if $21 is a generous and superior wage for a food-industry job. The most talented in the labor pool may pass if that’s the best they can do.
The above three explanations show the inflexibility of cooperative labor. Ironically, some investors claim that many corporations are run for the benefit and enrichment of top management, not the shareholders, and CEO pay has reached astronomic levels. Stockholders elect a board of directors, and that board is supposed to monitor management expenses, so if there is a problem with executives grabbing too much of the company cash, it is the stockholders’ fault.
Let’s step back and compare the structure of for-profit corporations with cooperatives. Most corporations respond to the concerns of their owners, shareholders, which are, in order of importance, profitability (passed onto the shareholders through dividends and capital gains in share price), good citizenship and community. Profitability is necessary but is less emphasized in a cooperative. Cheese Board pizzas may be characterized as gourmet pizzas, the restaurant bakes only one type every day and the pizzas are not price competitive. The cooperative is less efficient than for-profit companies and its prices will be higher. (In the words of economists, the cooperative is inferior to the for-profit firm in both productive and allocative efficiency.) In a nutshell, the cooperative produces fewer goods and its prices are higher. Consumers spend more and receive less. Cooperatives have their place, but Chomsky is wrong. For-profit corporations do a better job raising consumers’ standard of living.
Postscript: Shaila Dewan's March 30, 2004 NYT article, Lose the Boss is worth reading for an update on co-ops and inequality.Jonathan Kauffman's August 9, 2015 San Francisco Chronicle article, Food Co-op Survivor Thriving for 40 Years gives the history and management structure of co-op Rainbow Grocery in San Francisco. Could it have thrived anywhere else?
Pretty arcane, Mike. Still fighting your Berserkley roots?
ReplyDelete16 employees makes an awfully small body, and yet I still would expect any meetings to be hellish. Aren't boards of directors usually considerably fewer in number? And a portion of them are pre-beholden to others on the board. So... I would expect the board of directors meeting to be boredom punctuated by high-drama power battles. I would expect a cooperative's meeting to be low level sniping and occasional all out skirmishes. Hellish. Look out for anti-personnel land mines!
> "Most corporations respond to the concerns of their owners, shareholders, which are, in order of importance, profitability (passed onto the shareholders through dividends and capital gains in share price), good citizenship and community."
I believe, possibly erroneously, that BY LAW a corporation's board of directors' mandate is to maximize profits ONLY. That is one of the real problems I see with the legal system enmeshing corporate structures. I think that ethical decisions are barred by law from influencing the director's behavior.
When you combine this with the recent grotesque Supreme Court decision equating a corporation's free speech constitutional protections with those of an individual citizen's, you get what we have got now, unlimited access to media (mega bucks pays for the broadsides on TV etc.) and a corporate "individual" forbidden by law from using conscience or ethics in his (its) message.
Good citizenship and community are (I believe) explicitly illegal as motives if they interfere with profit making. They are allowed if the resulting "good will" will result in more profits. I believe that this may lead one to suspect that "Ronald McDonald House" is a charity permitted because it is expected to increase revenues.
> "Cheese Board pizzas may be characterized as gourmet pizzas,... (cut)...In a nutshell, the cooperative produces fewer goods and its prices are higher. "
This seems to be self contradictory. If CB Pizzas either are very good, or make the consumers feel they are superior individuals for their taste buds, or their social consciences, don't they (CBP) provide more than the lower priced crap pizza joint? I don't think Louis Vuitton luggage is more utile than my paper bag, but many folks raise their own sense of social superiority (a valuable commodity even in a pack of jackels) by strutting with that identifiable crap. Just 'cause I think it's stupid, doesn't diminish the value certain others put on it. The same holds for all identifiable consumer goods.
A Toyota Camray will get you to NYC more comfortably and surely than a Ferrari, but the abstracted "Getting Laid Probability Scale" (every thing can be thus rated, even when one is happily monogamous) difference is quite considerable.
For anyone basing their self esteem on what they own or buy (our whole economy is based on promoting this system of purchased self actualization), the CBP pizzas are a better value than Pizza Hut's.
ESOPs got a good trial in the 1990s, IIRC. Generally, they were quite successful, based on the literature and the many segments on lamestream TV. Employees, figuring that they were finally going to get something more than a paycheck, began actively trying to rationalize their jobs to improve their productivity. The ESOPs also got favorable tax treatment. Have they all faded away? Dunno. If so, it would not be for lack of success; more likely it would be that they've been gobbled up.
ReplyDeleteBTW, shareholders are not antithetical to good management, IF (if and only if) they're not co-opted by the organization's boardroom management. RARELY do you hear of a stockholders' revolt, mostly because the rules of stockholder organization and voting make it prohibitively difficult for stockholders ever to force significant change. (Management itself owns significant voting shares.) If stockholders REALLY had any power you'd see more of the following scenarios:
"Wow! We had a great year! Let's reward management with hefty salary and bonus increases!" (Happens all the time.)
"Wow! We had a crappy year! Let's fire the corporate managers and/or reduce some salaries in a significant way!" (NEVAH HAPPENS!) Instead, the Board awards Senior Management with even higher salaries and bonuses "for managing the company so well in this awful environment."
While I think that cooperatives are more ethical, democratic, and overall ideal, I agree that they may not always be as feasible or efficient. Although members of the cooperative will have obvious incentive to avoid managerial mistakes that would cost them money, they're still human and cannot avoid mistakes all together. I think that cooperatives on a local level are a great idea because of the smaller scale. On a larger scale, however, cooperatives stand to lose a lot of money. You're not making the max amount of money in a co-op. In a perfect world, co-ops would be more prevalent than corporations, but as it is today, I don't see that happening. Still, I much prefer cooperatives. They allow members to have a say which keeps them invested in the business. But therein lies the difference between co-ops and corporations. Co-ops seek to be inclusive and share mutual responsibility while corporations seek to maximize profit. It really just depends on the person I guess. If you're willing to lose some profit for the sake of democracy, then cooperative it is.
ReplyDelete