Mike Leung offers another thoughtful look at worker cooperative economic structure, this time exploring startup losses.
Worker Cooperative Startups
Worker cooperatives are worker owned, democratically managed businesses. Worker ownership means that members appropriate any profit or loss the coop incurs. Outside investors are limited to a fixed rate of return. Democratic management means one member, one vote in the governance of the cooperative, giving the workers control. The standard worker cooperative model has internal capital accounts comprised of member investments, a collective reserve account of unallocated retained earnings, debt, and preferred equity (non-voting, non-convertible, fixed value, fixed return shares). This paper focuses on the special case of a worker cooperative startup. Startup worker cooperatives are expected to have an initial operating loss. After the startup period worker cooperatives are generally expected to be profitable, barring unforeseen circumstances. Worker cooperatives create a unique investment situation where initial members are required to make an investment that is expected to decline in value, something unprecedented in mainstream finance.
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