Minding Their Own Businesses

by David Scott

Since precious metals were first found there earlier in this century, Silver City, New Mexico, has been a site of struggle—at times bloody—between mine owners and the people they hired to haul ore out of the ground.

Today those struggles have ended. The earth is scarred and exhausted, stripped of its buried treasure, and the mine owners have pulled up stakes to seek fortune elsewhere.

But in this community of mostly poor Mexican-Americans is still the scene of radical projects and dreams. Several years ago, these ex-mineworkers began an ambitious experiment: trying to start worker-owned, cooperative business—small companies of which they are sole owners, managers and employees.

Feeling that they had nothing left to lose after a series of layoffs and mine closings that peaked in 1987, they were ready to listen when a local parish administrator and community organizer, Philip Dahl-Bredine, spoke to them of “worker-owned cooperatives.”

 Home health aides with the Bronx-based Cooperative Home Care Associates in the Bronx, an employee-owned business.
Home health aides with the Bronx-based Cooperative Home Care Associates in the Bronx, an employee-owned business.

It was an idea that had first grabbed his attention when he was a young Catholic Worker in Chicago in the 1960’s. His pitch for co-ops was backed up by a priest who was then visiting Silver City from the Basque region of Spain. The priest told the people how worker-owned cooperatives have formed the backbone of the Basque economy since the 1940’s.

With that inspiration, and with moral and financial support from Bishop Ricardo Ramirez of Las Cruces, New Mexico, and the American bishops’ Campaign for Human Development, the people of Silver City launched the Cooperative Ownership Development Corporation. Dahl-Bredine directs the non-profit project, which helps residents get their own businesses off the ground by providing business advice and know-how.

As if to symbolize their commitment to rebuilding their community, Silver City’s first worker-owned company was a three-man concern for rehabilitating homes for sale or rent at affordable prices to low-income people. The three called their company La Capilla, after a little hilltop chapel in a Silver City barrio.

In the several years since then, La Capilla and the Cooperative Ownership Project have had more downs than ups. But, according to Dahl-Bredine, they continue to be “a vision of how a community like ours can change and gain more control over its economy and its future.”

A Growing Movement

As economic times have gotten tougher, with some of the nation’s biggest businesses closing plants and laying off thousands, more communities and workers are going the way of Silver City—looking to employee ownership as a way to save jobs and neighborhoods.

The number of worker-owned companies has jumped sharply in the last decade, according to Frank Adams, education director for the Boston-based Industrial Cooperative Association.

“Ten years ago, the economic significance of co-ops and worker-owned companies was almost nil,” Adams notes. And while they still register only a tiny blip on the gross national product—3,000 to 10,000 according to the best estimates—employee-owned companies number among their ranks such household names as Republic Steel, Avis, Ocean Spray, and Land O’Lakes.

And virtually unnoticed, the Catholic Church has been on the leading edge of efforts to promote worker-ownership. Working through their Campaign for Human Development, the American bishops in the past decade have granted more than $3 million in low-interest loans and outright grants to poor workers seeking to start their own businesses.

All told, some 75 worker-owned companies, including one of the country’s largest cooperatives of low-income people, owe a part of their beginnings to the bishops’ campaign.

Annie Donovan, the bishops’ economic development coordinator, describes their efforts as both a response to hard times and an expression of the Catholic Church’s heritage of economic thinking.

“The economic systems that are now in place are such that the human dimension is not always accounted for in the workplace,” she says. “Poor people, especially, are left out of economic decisions that affect their lives. When people own their own businesses, the mere process of having a stake in the business enterprise and decision making is empowering. This helps poor people, particularly, feel less alienated, like they have a place in the community and they’re doing something that benefits themselves and other people.”

“Empowerment” of the poor is the main aim and promise of Catholic visions of worker ownership, says Peter Glassman, the lawyer and community activist who directs the Employee Ownership Project in the Diocese of Albany, New York. Along with the Silver City development corporation, the Albany project is one of the first diocesan experiments in promoting worker ownership.

ESOPs and Cooperatives

Worker ownership has been an integral, if understated, element in the Catholic Church’s social agenda since the industrial revolution in 19th-century Europe. In Rerum Novarum, Pope Leo XIII’s 1891 letter to the world, he said the answer to “the great labor question” was “to induce as many people as possible to become owners” of businesses.

Even before that, worker ownership had been the fire in the belly of American Catholic trade unions. In its heyday in the mid-1880’s, the Catholic-led Knights of Labor ran some 135 cooperatives—including large mines and factories—across the United States.

In recent years, Catholic leaders in the U.S. have stepped up their appeals for worker ownership.

There are two basic ways that American workers can own their own business. The more common is the employee stock ownership plan, or ESOP, in which workers own all or most of the stock of the company for which they work.

While workers in an ESOP exercise the rights of stockholders in any company, except in a few instances, their stockholding rarely translates into day-to-day corporate control.

The Church favors worker-owned cooperatives, in which workers are directly responsible for their companies’ planning and operations. In a worker-owned business, the workers themselves make all the decisions about production, marketing, wages and benefits, and company investments.

“Employee ownership is not just about the legal ownership of a company,” Glassman explains. “It’s about personal development and giving workers democratic control over the place in which they work.”

The words heard most often when advocates describe worker cooperatives are “democratic” and “participatory.” Those concepts distinguish co-ops from traditional business partnerships which hire employees and which require legal changes to add or drop partners.

In a co-op, the workers are sole owners and the legal structure easily allows the company to take on more worker-owners or to let others go, according to Richard Shirey, president of the Albany Employee Ownership Project and chairman of the economics department at Siena College, a Franciscan school in Loudonville, New York.

According to Shirey’s extensive study of cooperatives in Europe and across the United States, most successful co-ops follow a standard pattern: To join, each worker pays a membership fee (usually subtracted from the worker’s initial wages).

Most important is having “the personality needed to work cooperatively,” according to Shirey. That is why most cooperatives require new worker-owners to take six months of after-hours classes in the cooperative ethic and management style.

Membership in a worker-owned cooperative gives the worker an equal vote in all decisions from the shop floor to the top management of the company.

In small cooperatives, usually all the workers belong to a board of directors, while in larger co-ops the workers elect a board from among their ranks and appoint a manager to oversee operations. Either way, the workers themselves are the ones who set all company policies, Shirey says.

Though worker-owners have equal votes in company operations, they do not all earn the same wages, especially in larger cooperatives. Like any good business, worker-owned companies set their wages according to the skill and education required, the difficulty of the job and its value to the company.

The difference when compared to traditional corporations, Shirey explains, is that there is usually “much less of a spread” between the highest and lowest paid workers in a cooperative; the workers themselves, not bureaucrats or managers, who determine what they will take home.

In larger cooperatives, there are also opportunities for advancement within the company, again based on the needs of the business and the workers and the consensus of the worker-owners. Workers also determine mechanisms for assessing their job performance and disciplining themselves when they are not holding up their end of the cooperative bargain.

In some cooperatives that he has studied, Shirey says, workers have been forced to reprimand and even to fire one of their co-owners. But unlike traditional corporations, pink slips aren’t issued without warning and without the full vote of the membership, including the vote of the employee in question.

When worker-owners leave the company, either to work elsewhere or to retire, their membership fee is given back plus interest, Shirey says. In addition, many worker-owned companies offer attractive pension plans and savings-incentive programs.

Some Bottom-Line Success

Meaningful work and a sense of personal control was what journeyman electrician Richard Kavanaugh of Wynantskill, New York, was looking for when he started his own business several years ago.

For 20 years he had labored for a host of companies under union contracts. But he was feeling increasingly alienated from his work. “I got reasonable wages but not much satisfaction in my paycheck,” he recalls. “Something was missing: There was no sense of accomplishment, no pride I could take in my work, no fulfillment.”

Kavanaugh also worried that the changing economic climate could, at any moment and without notice, leave him out in the cold without a job. “I felt used and exploited, like I was cannon fodder,” he reflects. “When they want you, they use you; and when they’re done with you, they’ll lay you off. I had a total lack of control in my environment.”

The Albany Diocese’s Employee Ownership Project helped him and two other men start Great Blue Heron Electrical Wiring. The diocese backed them with legal advice, helped them to raise capital and taught them how to manage their company.

The experience, Kavanaugh stresses, has not been easy, especially as the nation’s economic slump has stalled local construction and contracting business. But even with the struggles to make ends meet, he says, “it’s a more enjoyable working environment. There are times when it’s actually fun.”

According to Annie Donovan, the U.S. bishops’ advisor, Church-sponsored and other worker-ownership projects have been producing real results in helping poor people pull themselves out of poverty and renew their communities.

For example, when a textile plant was about to shut down in North Carolina, the bishops’ Campaign for Human Development stepped in to help 150 workers save their jobs by forming Almanac Workers’ Owned Knitting Self-Sufficiency Project.

In another case, Zuni Indians in New Mexico used a $50,000 grant from the bishops to form a retail cooperative for selling their arts and crafts. The bishops’ campaign also helped a group of Haitian garment workers in Florida start their own clothiers, freeing them from the unsafe sweatshops they had been used to working in.

Catholic efforts at the national level have inspired Catholic involvement in numerous local initiatives as well. For instance, in Florida, the Orlando Diocese is experimenting with cooperatives as a way to begin cracking the cycle of exploitation that keeps immigrant farmworkers down among the nation’s poorest and most burdened workers.

“Analyzing our situation, we found that our main problem was the labor contracting system,” says Tirso Moreno, a leader in Orlando’s Mexican-American community who has worked in the fields since he was a boy.

Labor contractors serve as middlemen, paid by huge corporate farmers to hire the crew that harvest their vegetables and fruits.

In addition to not paying good wages, these contractors often pocket monies that they are supposed to kick in to workers’ unemployment and insurance funds. Even though workers know they are entitled to such benefits, most won’t speak up for fear of being blacklisted from future jobs, according to Moreno.

A few years back, he and a few others decided to shake off these middlemen and form their own labor contracting company, which they call PEP (People’s Enterprise Project). PEP got a hand from the Orlando Diocese’s Office of Farmworker Ministry, which pitched in money and legal and technical help.

By paying a $200 entrance fee and attending some ownership training courses, any farmworker can now become an employee and owner of PEP. Depending on the season, PEP employees between a dozen and two dozen people. The pay is still poverty level—workers still make less than $200 a week—but it’s much better than what labor contractors pay, Moreno says.

PEP’s success has also led Orlando diocesan officials to work with farmworkers to set up a cooperative store, a credit union and a company to build affordable housing for farmworkers.

Far from the Florida fields, in the heart of the South Bronx, the U.S. bishops helped start what is now one of the country’s largest companies owned by poor people.

The seven-year-old Cooperative Home Care Associates is owned by 175 low-income black and Hispanic women, many of whom once relied on public assistance. The company does about $3.5 million a year in visiting nursing business. The bishops provided $50,000 in seed money to help them realize their dream of pulling themselves out of poverty and unfair working conditions.

“It’s the best thing that ever happened to me,” says Alma Velasquez, a work-owner from the Bronx. “It gives you a lot of rights—we can vote about wages and how money can be distributed and we have benefits. I just love it.

“In my country, we never had anything like this,” she adds. “It helps us with money for our families, sure, but it also helps us to realize our own lives. We are really making decisions.”

Opportunity for Hope

Overall, the influence of worker-owned cooperatives in America remains slight. But for individuals like Alma Velasquez and communities like Silver City, this new way of doing business means more opportunities and a brighter future.

And though they admit their efforts have been long on frustration and short on clear-cut success, advocates see employee ownership as a way to address the economic needs of low-income communities, especially in America’s troubled inner cities.

The Albany Diocese’s Employee Ownership Project recently has begun a long-term partnership with inner-city parishes which it hopes will lay the groundwork for economic development in Albany’s poorest neighborhoods.

Albany Bishop Howard Hubbard, an early supporter of worker ownership, has given the organization control of a diocese-owned community center in Albany’s inner city. The project plans to start a variety of cooperatives to serve the community. First will be a worker-owned cooperative made up of local musicians, who plan to offer low-cost music lessons and ensemble training to the poor.

In Silver City, Dahl-Bredine is helping launch a worker-owned business that would produce wood pellets for use as an alternative, cleaner fuel in wood-burning stoves. In addition, the organization has built a relationship with a Christian base community in Brazil, which has invested $30,000 in a nearby community loan fund, monies which are earmarked for loans for Silver City cooperatives.

To advocates, these efforts are examples of the kinds of community-building business and relationships that worker-owned companies can promote. They are encouraged by the growth of employee-owned business, technical-support groups like the Industrial Cooperative Association, and alternative financing sources like the National Association of Community Development Loan Funds.

Advocates admit, though, that they face an uphill battle against the trend of corporate consolidation in America. Also, they say they have to counter the stubborn individualism and consumerist mentality that infects the rich and poor in America.

According to Silver City’s Dahl-Bredine, there is a need to create a new business culture, which emphasizes cooperation, not competition. In that sense, he adds, working for worker ownership is an exercise in faith.

“We’re too quick to accept the propaganda of the rest of society—that this is a world in which people don’t cooperate and can’t work together effectively,” according to Dahl-Bredine. “That view shows too little faith in the coming of Jesus, who potentially changed our relationships. Since his coming, we can do these things, using our talents and the graces we’re given.”’

Leaders in the field suggest that worker-owned cooperatives could work on a regional or national basis, even in a cutthroat global economy. Shirey, of the Albany project, points to the cooperatives of Mondragon, Spain, which were started in the 1940’s by Father Jose Maria Arizmendiarrieta.

When Shirey visited Mondragon recently, he found it to be a thriving corporate community, in which 20,000 people are worker-owners of roughly 200 cooperatives, including the local financial institutions. Even in a global economic recession, Mondragon sells about $200 million a year in merchandise—from machine tools and auto parts to refrigerators.

Yet in the U.S., worker ownership is still looked on with suspicion by politicians, labor and business leaders, according to Shirey of the Albany project. Their wariness shows how deeply entrenched the divisions between capital and labor, owners and workers, in the American mind, Shirey believes.

Until relatively recently, the laws of incorporation in many states did not recognize the legality of cooperative, worker-owned businesses, he points out. Moreover, it is a rare management education program which trains future business leaders to work in a cooperative business.

Nevertheless, Shirey and other advocates believe that worker ownership should be a priority on the nation’s political agenda. Shirey would like to see government funding, on both the national and state levels, for the development of worker-owned businesses.

Worker ownership should also be a part of the Catholic social agenda for the 1990’s, according to Shirey. Developing new ways of doing business is part of the “unfinished business in the American experiment,” which the U.S. bishops spoke of in their 1986 pastoral letter, Economic Justice for All.

Shirey sees the building of new worker-owned businesses as a step towards the establishment of what the bishops called “economic rights” such as the right to adequate work, shelter, housing, health care, and education.

The quiet growth of cooperatives continues, despite the lack of support from politicians and chambers of commerce. Even in the scarred earth of Silver City’s forgotten mines, the seeds of a new American way of doing business are being sown.

“What I’m learning is patience,” says Dahl-Bredine. “This is going to take a long, long time. But little by little we’re creating the vision, the infra-structure for a new way of doing things.”

Originally published in St. Anthony Messenger (September 1993)
© David Scott, 2009. All rights reserved.