By CR, CC BY-SA 3.0,
This is Chapter 16 in the Routledge Handbook on Cooperative Economics & Management.
A worker cooperative, if structured according to the principles of economic democracy (Ellerman 2021; Erdal 2012), is different from a conventional corporation in that the rights to profits and governance are defined as personal rights rather than a freely transferable property rights, and those personal rights are associated with the provision of labour in the firm. Worker cooperatives are a radically departure from capitalist firms in that they prevent the legal rights to be freely transferred on the market and concentrated in the hands of the few because they define these rights are personal rights of each worker in the firm. One of the problems that cooperatives face is that they do not have a standard gradual conversion mechanism but are generally established as new business startups or by an all-at-once conversion of a conventional company to a cooperative. Cooperatives are notoriously rare; however, contrary to the conventional explanation, research indicates that this is not due to inherent inefficiencies (Gonza 2016). One of the main challenges seems to be sluggish growth through starting-from-scratch creations on one hand, and legal, financial, and organizational complexities related to cooperative conversions on the other. We claim that the potential of scaling the cooperative sector is in the gradual cooperative conversion mechanism embodied in the concept of Cooperative ESOP (Ellerman, Gonza, and Berkopec 2022). We argue that the Cooperative ESOP can, with a help of strong supportive institutional environment, gradually create democratic ownership starting with existing capitalist firms without workers having to invest their own personal assets.