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Why Unions Are Going Into the Co-op Business

The steelworkers deal that could turn the rust belt green.

“Too often we have seen Wall Street hollow out companies by draining their cash and assets and hollow out communities by shedding jobs and shuttering plants,” said United Steelworkers (USW) President Leo Gerard in 2009. “We need a new business model that invests in workers and invests in communities.”

Gerard was announcing a formal partnership between his 1.2-million-member union and Mondragon, a cluster of cooperatives in the Basque region of Spain.

Mondragon employs 83,000 workers in 256 companies. About half of those companies are cooperatives, and about a third of Mondragon’s employees are co-op members with an ownership stake in their workplace. Mondragon companies do everything from manufacturing industrial machine parts to making pressure cookers and home appliances to running a bank and a chain of supermarkets. With billions of euros in annual sales, Mondragon is the largest industrial conglomerate in the Basque region and the fifth-largest in Spain.

The cooperatives use workers’ cash investments as part of the capital needed to finance new projects, and worker-owner co-op members get to vote on strategy, management, and business planning. The highest-paid managers’ salaries are capped at six to eight times what the lowest-paid workers make—as opposed to the United States, where CEOs now make 380 times more than the average worker.

Building union co-ops

As manufacturing in the United States continues in free fall, the USW is working to bring the Mondragon cooperative model to the Rust Belt. It aims to use employee-run businesses to create new, middle-class jobs to replace union work that has gone overseas.

A March 2012 report from the USW, Mondragon, and the Ohio Employee Ownership Center (OEOC), lays out a template for how “union co-ops” can function. “A union co-op is a unionized worker-owned cooperative in which worker-owners all own an equal share of the business and have an equal vote in overseeing the business,” the report states.

But how do union co-ops differ from traditional worker-owned co-ops? The report explains that the key difference is that workers in a union co-op can appoint a management team (from within their own ranks or from outside the co-op) and then bargain collectively with management. The resulting collective bargaining agreements can set wage rates for all the co-op’s jobs, choose health care and other benefit packages, decide how workers will earn time off, and determine a process for grievances and arbitration of workplace disputes.

In addition to producing the union co-op template, the USW has worked to get pilot cooperatives started in the United States. The union has carefully examined the Evergreen Cooperatives, which were started in Cleveland in 2009 with a blend of foundation money, public funds, and private investment capital. Drawing from Mondragon’s principles of shared prosperity for workers and democratic governance, Evergreen launched a commercial laundry that now cleans more than four million pounds of laundry per year and employs 30 people. It also has plans for a solar installers’ cooperative and a greenhouse that grows high-end salad greens and herbs for the Cleveland Clinic, as well as universities and restaurants. The example was an important one for the USW’s pilot projects, suggesting a blueprint to keep jobs local, tie new businesses to existing city institutions, and give workers a voice in company operations.

OEOC Director Bill McIntyre worked with the Cleveland Foundation on crafting the organizational framework for the Evergreen Cooperatives. At a March 2012 press event at United Steelworkers headquarters, he observed that employee-owners more often kept their jobs during the recent economic meltdown. “Employee-owned companies,” he said, “have more stable, loyal, and experienced work forces, which translates into real cost savings, productivity, and quality advantages.”

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