Note: This is being re-published after I caught an editing error in the audio.
A little over a month ago, I had the idea of doing a series of conversations with folks about policies that we should be talking about in the election, but which we weren’t talking about.
The conversations were going to be presented both as a text Q&A and in audio format, and I even went so far as to record one of those conversations before coming to realize I’d bit off more than I could chew.
That conversation was with Alex Hemingway, a senior economist with the BC Society for Policy Solutions, about worker co-operatives, and given this week was International Workers Day, I thought it was a good time to share that conversation.
The audio of that conversation runs an hour long — including some pre- and post-amble from me — and it was a really fascinating conversation.
The text, as a result, is also, uhhh, quite long! This isn’t an exact transcript. I’ve lightly edited it for grammar, to organize our (in particular, my) speech into coherent sentences suitable for the text format, etc.
As someone who’s part of organizing a worker co-op with Debrief Communications, I’m not coming to this as a neutral party. I want to see co-ops flourish in this country because I see them as being a real alternative to the status quo that could at least help to address a lot of the issues we’ve been experiencing, from worker alienation to the siloed existences that has become the norm in our society to income inequality and overall work and life satisfaction.
This conversation is based off of a report Hemingway did almost exactly a year ago with University of Victoria professor of business Simon Pek, and if this conversation intrigues you, you should check it out for more details.
For now, here’s my chat with Alex Hemingway.
Dustin Godfrey
Last spring, you had put out a report talking about how the various levels of government can really bolster the employee ownership sector. What was it that spurred you to work on that report?
Alex Hemingway
This was a report with my co-author Simon Pek, who's at UVic and the business school there. I think there are a lot of things that are exciting about worker ownership. And we're in this very politically uncertain, economically uncertain time, obviously right now with the trade war, but we're in a time of great inequality, a lot of dissatisfaction with institutions as they exist.
I think the opportunity for working people to have more control over their working lives and to gain more of the fruits of their labour rather than seeing so much wealth concentrated at the very top in this country. Those are big motivators to look at something like worker ownership.
Really, what we wanted to do is think about [how] these types of firms exist in Canada and around the world, but there are not too many of them in Canada. There are some jurisdictions where there's a huge amount of this. There's potential there. They can function very well. Why don't we have more of them? And how could we get more and how might that contribute to a more equitable and resilient economy and society.
Dustin
And so your report defines a number of different factors in determining what democratic employee ownership could look like. And there are a number of different examples from around the world. You've got the UK, the US, and then other areas of Europe. Can you talk a little bit about what those are and what some of the pros and cons of each of those models is?
Alex
Two of the forms that we touch on most in the report: one is a worker co-operative, which is sort of a classic form of worker ownership. To the extent that we have a worker ownership economy in Canada, that's the more common form. It can look like a lot of different things, but it tends to be very participatory. The people working in the firm not only own it together, but they control and direct the day-to-day of the company.
I think of places here [in] Vancouver, worker co-ops like Shift Delivery. So that's a big one.
And the other one that we highlighted in the report, as you alluded to, comes out of the UK. and that's this model called employee ownership trusts (EOT). We actually now have that model enabled in Canada. There was federal legislation last year [that] creates that structure, makes that structure available as one way of organizing a business. This is a little bit different.
If you're gonna start a worker owned firm from scratch, typically that's taken the form of a worker co-op. But if you wanna convert an existing firm to worker ownership, which is something that happens fairly frequently in some jurisdictions, and there's been a huge growth of these employee ownership trusts in the UK in the past six, seven, eight years, this EOT model is one good way to do it. And it's got some neat features.
It kind of works like a leveraged buyout. You have an existing firm that's humming along, an owner maybe wants to sell, or they're looking to retire and thinking what's going to happen next. And in this kind of situation, we see this in the polling of small business owners: many are actually interested in the idea of selling to their employees if that's possible. This employee ownership trust helps facilitate that.
And essentially, what happens is the owner sells to the employees, but the employees actually don't have to pay out of pocket in this transaction. The owner agrees to essentially take a deferred payout, so they're paid out of the profits of the firm over several years. The employees aren't out of pocket as a result, and the firm comes under the control of this trust where you can actually have representation from the workers, but also, at least for the period in which the owner is being paid out, the owner can have representation on that trust structure as well to make sure that the business is running in a way that ensures they're actually going to paid out over time.
And the deal is sweetened by a capital gains tax exemption for the selling owner. So that really motivates them to take a look at selling to their employees in the U.K.
And now we have a similar thing in Canada. There's a limited capital gains tax exemption if you want to sell your business to employees in this form.
Dustin
And so the EOT, that doesn't necessarily dictate the structure of the employee ownership.
Alex
No, so it leaves a lot open in terms of how the business is going to run day to day.
Ultimately, worker representatives will have a controlling stake at that trust level. The trust sort of sits above a normal company board level, so ultimately the trustees are required to make sure that the governance of the company is in the interests of the workers.
But what we see in practice is that there tends to be a significant increase in the participation of workers and the control of workers over decisions about the company, not just at that trust level, but at the day-to-day level.
In our report, we really emphasize that democratic aspect. So when we make our definition of democratic employee ownership we say that has to include not only that the firm is majority owned by its workers, but they actually have meaningful control rights in terms of important decisions about the company.
But it does leave a lot open. You could run an EOT in a very non-hierarchical way on a day-to-day operations level, or you could run it in a more conventional way, managers and some amount of hierarchy.
And so there's an inherent flexibility there, which I think is a good thing for those of us wanting to expand the role of worker ownership in the economy. Let's have the opportunity for businesses to try out different models and see what works for them and what works for that business so we can grow the sector.
Dustin
You talked about having a substantial amount of control for the workers. I'm coming from the co-op side of things where the principle really is one-member-one-vote, and it is the workers who are determining everything. And you're not getting this structure where it is sort of like shares per se, where one person can have a thousand shares and then another person has one share and therefore functionally has zero votes in comparison, right? Are there ways in EOTs that that sort of structure can be perpetuated, or are there guards against that to be able to ensure that there is more of a democratic structure?
Alex
It depends if you're looking at it from the legislative level or the operation of an individual business. There is a requirement in the Canadian federal legislation around EOTs that shares be distributed in an equitable way, but that doesn't mean an equal way.
So I think there's no question that worker co-ops are the most democratic and most equal form of employee ownership. And I think that's greatly to their credit.
In the case of the EOTs, the requirements are broader, as I just suggested. You do need to have an equitable distribution. There are requirements about who are the trustees and worker representatives being on that board of trustees and having ultimate control over the company. But how it's run internally, I think that there's a lot of latitude for that to be decided.
Dustin
We really tout our ability to vote for who makes decisions on how our country is run, and that is on a sort of one-person-one-vote electing our representatives. But your report mentions there isn't really any particular rationale for why it is that those democratic values stop at the door to your employment, which is something that really affects probably most of our lives, right?
Even beyond the eight hours a day that we are there, the couple of hours that we are commuting to and from there, all the time that we were spending thinking about work and applying for jobs and the Sunday scaries that we get thinking about having to go to work again. It really dominates a whole huge aspect of our lives and yet this democratic society has relegated that to a pretty strict hierarchical structure.
What are your thoughts on, like, is it weird for people to think beyond that traditional corporate structure and to think the workplace should be democratic?
Alex
Not at all. I think that's huge. Work is a big part of our lives. It's how we spend much of our waking lives. And I think our democracy, our political democracy, is flawed in many ways and it's skewed by the inequalities of wealth and power. But in addition to that, it's just fundamentally incomplete in that we don't have economic democracy.
Most people in corporate workplaces and investor-owned companies and including in small businesses that are run in hierarchical ways, don't have much say in day-to-day functioning as a human being. I think that can be extremely alienating.
I know I'm lucky enough these days to have a fair amount of autonomy as a researcher and I value that immensely. I think every worker in the country deserves a right to a say over how their day-to-day work lives function.
Ultimately it's working people in this country that are creating the wealth and profits that our economy generates. So it's only right that they have a democratic voice in their work lives and more of an ownership right over what they're producing.
Dustin
I guess what I was getting at with, like, is it weird for people to think that — is it a hurdle to get people to think beyond what has been just the dominant norm in how companies work?
Alex
Ah, well, I think yes and no. The idea that you should have more control over your work life — I think that is not far below the surface for most people. Many people have dissatisfaction with their bosses and with the lack of control in their work lives.
And even though worker ownership is not an idea that's high profile in our political debates these days. It's an idea that's come up again and again through political history.
And so. I don't think it's a stretch. I don't think it's far below the surface, and actually you can see this in public opinion polling as well. A lot of what I've seen on the polling side comes out of the US and whether you're on the right or left, Democrat or Republican, down there, a huge number of people say, ‘Yeah, I'd love to work in an employee owned company or a democratic workplace.’
So it's one of these things that actually crosses party divides. There's been some legislative progress in the US as well with bills, sponsored by people like Bernie Sanders, but also in partnership with a Republican, if I'm not mistaken, for some legislation that promoted employee ownership in a relatively small way down there.
So it is a potentially depolarizing policy, at least at the working class level. And the only other thing I would say in response to that is you also see in the polling of business owners that they're interested in this model, interested in particular when they're doing succession planning in selling their business to their workers rather than having to either shut it down or sell it to a competitor or sell it to a big corporation.
You have a huge wave of baby boomer business owners in this country who are going to be going through that succession process in the years and couple of decades to come. So there's a big opportunity, I think, to tap into that latent interest in seeing this model expand in Canada.
Dustin
Yeah, and it's interesting that there is that cross-partisan support for this because ultimately what we are talking about here is collective ownership over the means of production and that tends to be a pretty leftist concept.
Alex
Yeah, well, I remember reading some years ago, all the way back to earlier US political history. I'd have to double check this, but if I'm not mistaken, in the Abraham Lincoln days of the Republican Party, there were very withering critiques of wage labour.
And it was just understood that wage labour can be inherently a degrading thing. People are being separated from control over their work lives and from ownership of the product of that work in terms of profits and that was seen as intolerable.
Now back at that time, the idea was everyone's going to be a small landholder or everyone's going to be a small business owner eventually and maybe they tolerate some wage labour earlier in their career.
I think that was a bit of a blind alley, but that intuition that something's wrong with being at the mercy of someone else in your work, it's not unintuitive to people that that's a problem.
Dustin
There seems to be a degree of separation between what was talked about a few hundred years ago and the establishment today. I think you can go back to Adam Smith and even talking about landlords. I think that he tended to consider landlords to be a little bit parasitic, right?
Alex
Right. Yeah, absolutely.
Dustin
And that is the father of capitalism, essentially.
Alex
Well, exactly. And yeah, I think we're seeing some of these classical political economy arguments bubble back up again. Landlords is another great example, as people are struggling with the cost of housing and seeing more and more of their wages actually flowing into landlords’ pockets in addition to the pockets of maybe the owners of the large corporation they work for.
Dustin
I think there seems to be a number of different benefits [from worker ownership]. And one of the ones that does stick out to me is that you were talking about alleviating the alienation over not even having control over your workplace.
And something that I think is a pretty good evidence of that is — even if you don't get into the realm of employee ownership, when you get companies that are seen as genuinely listening to their workers and giving workers this feeling that they have some say in how things are run there, even if they aren't owners or whatever, there does tend to be higher retention and better productivity.
Costco is a pretty good example of that — although, I think there's a history of union busting there. But they have higher wages and benefits compared to other retailers.
Toyota has this system where workers are not just asked to, but really encouraged to provide regular input on ways that their processes could be improved. And it increases people's feeling of ownership over the work that they're doing.
And it seems to me that that is something that really has a productivity boost. Is that correct?
Alex
Yeah. Well, yeah, so you see that some forms of that participation and trying to treat your workers decently in certain capitalist firms, absolutely.
The Toyota example is interesting. Obviously, there's an inherent creativity to work whatever your work is, whether it's manual or cognitive, or you're on a computer all day — manual work is also very cognitive, so I actually don't want to make that distinction.
The point being, one of the benefits of employee ownership is it takes that Toyota insight to the next level, which is not only is the firm that you own open to your ideas, but you benefit from the implementation of those improvements and ideas that you might have because you actually own it at the end of the day.
And when we look at the cross-country evidence on this, it's quite clear that employee-owned firms, worker co-ops have at least as good productivity as conventional firms. And in many cases, the evidence points to higher levels of worker productivity and that makes sense from the perspective that we've just been talking about.
And you can see, for example, there's one region of Italy, Emilia-Romagna, where co-operatives writ large, including worker co-operatives, are something like a third of the GDP of that region. So you do see cases where this can become a very major component of an economy.
There are a lot of benefits to this model, including productivity benefits, and there are certainly benefits for workers in terms of better pay, more equitable pay, more control over your work life. So the puzzle is: why is this model so uncommon in a place like Canada? What are the barriers that are standing in the way and how can they be overcome with policy?
Dustin
What are some of those barriers? I think a pretty obvious one is just access to capital, right?
Alex
Yeah, that's a big one. Obviously, workers by definition don't tend to have a lot of capital at hand to invest in a new firm if they're trying to start a worker co-op.
It's also the case that external investors or banks may be wary of lending to a model of firm that they're not very familiar with, that isn't common in a country like Canada.
When it comes to starting a brand new worker co-op, or other form of democratic employee owned firm, there is a challenge there — starting a business is not easy and it normally requires a lot of legwork upfront by a relatively small set of individuals.
And there's not an obvious way, that's a pre-existing toolbox for how you compensate for all that startup work and the risk inherent in it. So there's kind of a collective action problem at the beginning of creating a new worker-owned firm.
Whereas, if you're creating just a conventional firm, then those early couple of entrepreneurs actually have an incentive to structure their new business as investor-owned, so they can actually reap the benefits through share ownership, and so on.
So there is kind of an inherent challenge there. And so what we see is: where that collective action problem for those who want to start worker-owned firms is overcome is typically in places where there's already a lot of worker-owned firms, where there's lots of models to look at for how to do that startup process, where where there's an ecosystem of supporting institutions that can serve as incubators for new worker-owned firms.
So there's a bit of a catch-22 there. It's a lot easier to start a worker-owned firm in Emilia-Romagna, Italy, or in the Basque region of Spain, where there's the huge Mondragon, which is a sort of federation of multiple co-operative businesses. They have those institutions that latent knowledge and those incubators that make it possible to start a new worker-owned firm.
Whereas if you're trying to do that in Vancouver or here in BC, there are a lot fewer resources to draw on and models to draw on. There certainly are resources and models, but not to that same extent.
Dustin
With Mondragon in Basque country and those regions of Italy where you see a whole lot of them, I think there's a Belgian co-op, Smart Co-op, that really invests in developing co-ops, where you see those really strong structures that support the development of new co-ops, is that something that starts with government investment or is it something that starts more often at the community level and builds momentum by co-ops building more co-ops?
Alex
That's something that's kind of open to interpretation in the research. I believe in Emilia-Romagna, there's a very strong history of the Communist Party in that region. And that, I think, produced a cultural and ideological environment that helped this kind of sector get off the ground. So there can be really on the ground organic buildup of these sectors for idiosyncratic historical and political reasons.
But my hope, certainly, and our hope in writing this report is that actually you can spark the growth of this type of sector using policy tools and in particular learning from the policy tools that were put in place in those places that we were just talking about.
So there may be this cultural origin to Emilia-Romagna's co-operative sector, but there is a huge amount of supporting public policy in place, tax breaks that help support worker co-operatives. There's a system of sectoral funding where as the sector grows, all the existing co-operatives actually pay a small amount of their profits into a fund that helps lend to new co-operatives or helps run incubators to help them get started.
So we can see the institutional bones of what sustains these types of sectors and hopefully reproduce some of them in places like BC and Canada where we want to see those sectors grow.
Dustin
Yeah, it does seem like if you drop a pool of funding from the government or whatever, that's like, we're gonna place millions of dollars or hundreds of millions of dollars or whatever in a pool that will be used to foster the creation of co-operative organizations, and once those organizations become profitable, then they redirect a certain portion of their profits to back into this organization and it fuels itself. It does seem like once you put that initial investment in place it might take a little bit of time for it to get on its feet and get things going. But then once you really do, it does seem like there is the potential for it to just build and build and build a solidarity economy, I think is the term that I've heard used for this.
Alex
Yeah, exactly. In that Bernie Sanders legislation I mentioned that was passed a year or two ago, that was one of the first things they were pushing — and this is one of our recommendations in the report, is seed grant funding to regional employee ownership centers that can serve as incubators and points of access for advice for those who are who are trying to start up these businesses.
I think our takeaway is that you're going to have to come at this with multiple policy levers. So I think seed grants for these types of institutions are great. I think we want to look at how we can facilitate access to capital through things like public investment banks that have a specific mandate to lend to democratic employee-owned firms and worker co-ops.
And it's good to see some new pieces coming into place like this employee ownership trust structure and the capital gains exemption associated with that. That alone isn't going to do it.
We're going to need some of these other policies in place. And actually, one of the things we push for in the report, which sort of came out just as this employee ownership trust legislation was coming in, is this really needs to be explicitly extended to worker co-operatives, this capital gains tax exemption that's been brought in.
And that was promised by the federal government last year, but best as I can tell — that was promised in budget 2024 — that legislation still hasn't passed. Parliament kind of ground to a halt last fall. And so, as a key next step, we need to make sure that worker co-operatives are being put on equal footing with employee ownership trusts in terms of access to that potentially important tax break.
Dustin
Do you have any idea why it is that worker co-ops have not gotten the same attention from the federal government recently as employee ownership trusts?
Alex
It's an interesting question. The good news is they did feel the pressure to promise last year that they would extend this to worker co-operatives. I think it's been encouraging to see the advocates for the employee ownership trust model and the Canadian Worker co-op Federation, the existing worker co-op federation in Canada — best as I can tell, everyone sees common benefit in seeing the democratic employee ownership space expand and are seeing each other as complementary rather than in competition with each other.
And that's similar to what we saw in the UK when the EOT legislation was brought in there. There seems to be a broad push to expand both. I think that's positive.
But in a way it may not be surprising, if you're a political party that has strong ties to Bay Street, that the idea of worker co-operatives, which is the more deeply democratic of these models, might seem a little bit more threatening or might seem a little bit more culturally distant to your worldview. So that may be just speculating why it hasn't got as much rhetorical love as the EOTs.
Dustin
That being said, it does seem like an investment in a worker co-op economy or an employee-ownership economy that there really are actually a lot of rippling-out benefits, not just for the firm itself or the workers at that firm, but also for the community at large.
Alex
Absolutely. Facing down a trade war, I think anything we can do to actually improve our economic productivity is very positive. And that's one of the benefits at a more macro level that we see from employee ownership in the evidence.
I think a big one is economic resilience. And one of the things you see with worker co-ops and employee owned firms is that they're better at weathering economic adversity. They're less likely to lay people off in economic downturns. less likely to fail in economic downturns.
And in this environment where tariffs are a big part of the discussion these are firms that are employee-owned firms, worker co-ops are firmly grounded in their communities. They're much less likely to move abroad in face of tariffs or other shocks. They're here to stay.
And when you're in an economic downturn, it's a very good thing from a macroeconomic perspective to have fewer layoffs, less reduction of hours, because that's always the danger in a recession is that it can be self-perpetuating and deepen itself as people are laid off, have less money to spend, that's less stimulus to the economy. So, yeah, there are absolutely these broader, I think, economic benefits to worker ownership.
Dustin
Yeah, they're not about to outsource their own jobs.
I was actually surprised reading the report because I understood that employee ownership does make organizations more resilient in an economic downturn. My assumption was essentially more that the workers are able to be like, okay, we will take a little bit of a pay deduction to weather the storm or whatever, but continue our hours worked so that we can continue to put out whatever product it is what we're doing or service that we're performing or whatever, that we can kind of continue that so that when the economic downturn bounces back, we haven't really lost any position in the community.
But your report says that actually it's not just that they weather the storm better, there doesn't tend to be that reduction in hours or in pay.
Alex
Well, it's both so you're less likely to see reductions in pay and hours than a conventional firm, but it's both. People are adapting in the way that you describe as well.
Obviously these firms are not immune from the downturns and if they lose customers and revenue, they tend to react exactly as you say by either reducing hours and pay rather than laying people off. If it comes to that, I've heard of scenarios where they have sort of rotating leaves of absence.
So not to say that it's a magic pill that protects you from loss of revenue or an economic downturn, but on the sort of spectrum of what you could do in reaction to that downturn, the response of employee-owned firms seems to be both more muted and more equitable, people not losing their jobs and less likelihood of lower pay and lost hours relative to conventional firms.
Dustin
And is that because when an investor-owned company is seeing a reduction in sales or something like that, and they're saying, okay, well, the profits are going down X amount or whatever, that's really all that they're looking at? Whereas the employee-ownership is saying, okay, well, we have say 15% profit normally, but in this economic downturn, we're going to be seeing 5% or 2% or whatever.
But that's not really a big deal to us because we're getting our wages. Is that part of it, do you think?
Alex
I suspect part of it too is simply when the workers are in control, it's their lives. Like they're not just numbers on someone else's spreadsheet. And so they try and think hard about: how can we, together, weather a downturn?
Because it might not just be a reduction in profits. It might be that you're suddenly not profitable anymore for a couple of years. So you might have to do something a little more dramatic.
But at the end of the day, as a worker-owner, you're concerned both about the health of the business and your position and your coworker's position as workers. So you're gonna be more creative about how you navigate these difficulties and I think more humane.
Dustin
It seems to me like a worker is going to be generally more interested in a whole lot of things, I think, that benefit both the longevity of the organization, but also the community at large.
You see a whole lot of hedge funds that invest in the company and they just sort of bleed it dry, right? Their mode of profitability is just reducing, reducing, reducing costs and once that company goes under, then they can move on to the next one or whatever, right? And it's not particularly linear like that. They're probably doing that to a bunch of different organizations.
But it's this mode of profitability that comes just from draining the resources out of a company. And so they aren't as particularly interested in the longevity of it as much as it is the short-term profitability. Whereas, like you were sort of saying with a worker co-op, this is their jobs. They are very invested in the longevity of that organization.
But then I think that also applies to things like the quality of the products that they produce, right? If you are a person who is in the community and you're going to care a little bit more about the quality of the products or the service that you do, because you might also be consuming that product or service.
Alex
Well, exactly, and you're concerned about what's happening to the environment and the community that you live in, in a way that an absentee investor might not. So I think it really broadens the lens of what the people running a business are taking into consideration in a way that has these types of spillover social benefits.
Of course, it doesn't obviate the need for environmental regulations and so on, but I think it is a very good thing to have businesses embedded with decision-makers who care about these broader community issues deeply.
Dustin
In terms of its longevity as well, I do kind of wonder if people see that the community's values are reflected in an organization by virtue of being a co-op, and the people who are in that co-op are being responsive to the community, and if that might also be a factor in, like, OK, there's an economic downturn, but I'm going to make sure that I specifically support this particular organization, this co-op that's in my community because I love what they do for my community. A certain loyalty, right?
Alex
Yeah, I think that's right. That observation feels like it has some extra relevance in this moment where people are thinking more about where they're spending their money on US versus Canadian goods. And I think that provides that increasing thought that's going into where you're spending your money is maybe an opportunity right now for these types of firms in Canada.
Dustin
I want to move on to some of the other policies that governments can introduce that could help develop more co-ops because we've talked about access to capital and I think that is the obvious one.
But you talk about legislation for having the structure of employee ownership that is a little bit more like enshrined in legislation, and I was wondering if you can expand on that some.
Alex
Yeah, given the social benefits of these types of firms. You want it to be easy to create them.
But we live in a society where that's not the conventional type of firm. That's not what's taught in business schools. Really, what we're getting at here is you want to have an off-the-shelf structure that exists so it's easy to set up a democratic employee-owned firm.
So we've talked about the progress that's come with the establishment of employee ownership trusts as an off-the-shelf option in Canada. That's a very good thing. One thing we heard from advocates in the worker co-operative sector is that some of the provincial legislation around worker co-operatives could be a little clearer.
So for example, some of the legislation doesn't actually specify worker co-operatives as a specific form. They sort of fall under the more general legislation for establishing co-operatives, which might not involve worker control or ownership.
It might be a consumer co-operative or some other form of multi-stakeholder co-operative, where workers aren't necessarily in the driver's seat. So having off-the-shelf options and structures is a good thing.
In terms of legislative actions, one of the other pieces we talked about in the report is the potential to establish a right-of-first-refusal for workers to buy their companies if they're being sold or if they're being shut down. We've seen the establishment of worker-owned firms in BC, and this is a common pattern around the world: often this happens when businesses are being shut down.
So like the Harmac Mill on Vancouver Island was being shut down by its owners and with the help of their union, the workers there managed actually to buy it out and keep it running because it was still a viable business. It just wasn't profitable enough for the owner that was in place and they're still going.
CHEK news over on Vancouver Island is also owned by its employees right now. So I think establishing that as a right in legislation could be really positive.
There are also more expansive proposals out there that we mentioned in the report where, if you think of the case of a large corporation, you could actually have — and this is a proposal, originally, I believe, from Gregory Dow, who was a professor of economics at SFU — that workers could actually have the right to trigger a referendum in a large corporation to vote to buy it out as workers.
And you could use something like the leveraged buyout approach that I mentioned earlier, where the investors would be paid out over time from the profits of the firm. That would be a potentially transformative kind of policy.
That's a bigger swing. But that's another one on the legislative side.
Dustin
Yeah, that feels like something that would get a fair bit of pushback.
Alex
It's one of those policies where it might actually be extremely popular among the population, but yeah, there would be tremendous pushback from corporate Canada for sure.
Dustin
Yeah, just the ability to unionize is always under threat, let alone to be able to buy out your employers.
Alex
Right, yeah, exactly.
Dustin
You mentioned CHEK News and I think that's actually a really good example. A lot of local news in BC and elsewhere is owned by a handful of companies, but they came into ownership by those companies after the original owners, which are usually ma and pa owners, and they're probably local business people or whatever that originally owned it.
And then once they retire, then it gets bought up by Glacier Media or by Black Press or whatever. And we're really seeing the decline of those, a lot of those local publications, one of them being the Burnaby Now, the New Westminster Record, both of which I used to work at and which are closing this month.*
And, but then by contrast, you have CHEK which is not just weathering the storm, but it's been expanding for the last 15 years since the workers bought it out.
*The newsrooms closed last month, along with the Tri-City News.
Alex
Yeah, that's really encouraging. You're really making me think — obviously, there's an opportunity in this moment maybe for more of that. But also just thinking back, the sort of crisis of the news industry that has been unfolding over the past decade-plus, I imagine that if more of the sector had been actually owned by the journalists, we probably wouldn't be in the situation that we're in today.
There would still be some of the big external pressures and the big tech giants gobbling up advertising revenue. But the decimation of newsrooms might have looked very different if that had been the case.
Dustin
You talk about there being a legislated [requirement] for there to be indivisible reserves in worker co-ops. I was wondering if you could explain what that is, where it's been implemented, and why.
Alex
You can imagine forms of employee ownership and they certainly exist where a firm does really well, the workers in it do really well. And ultimately, they decide to sell it to an investor, and it turns back into a more conventional firm.
And in our conception of these democratic employee-owned firms, we really want to discourage that. And so one of the mechanisms that's common in the worker co-operative world is this idea of indivisible reserves. So the capital that's been invested in the worker co-op, you can't actually just cash out and sell to any old investor.
The capital stays in the firm, the workers benefit through higher wages and through better working conditions. But even the workers in that firm don't have the right to cash out and see ultimately that firm destroyed as a democratic entity.
So that's one of the mechanisms that exists. And that can be actually specified in legislation that if you're going to have this type of worker co-operative and perhaps if there are going to be tax benefits of the type that we recommend in the report that the trade off to that is that you can't cash out, and actually you have to have this indivisible reserve structure as part of your co-op.
Dustin
That reminds me of back in the 1980s or whatever in England where they had the council housing, and Margaret Thatcher came in and said we're going to actually implement this rent-to-own structure where people who live in council housing can, once they pay a certain amount of rent or whatever, then they can come to own their unit in this housing.
And I think there's a certain school of thought that's like, yeah this is great because we are creating more ownership for regular people or whatever. But I've been reading David Harvey recently and one of the things that he talks about is that what wound up really happening was it turns public housing into a vector for investment.
And I think that's the kind of thing that you're trying to avoid happening?
Alex
When you talk about that case of the sell-off of the council housing, from what I've read, there was a very conscious political agenda there, which was to create a broader, they called it, I think, property-owning middle class that Thatcher thought would fundamentally shift the politics of the country to the right, as people are encouraged to think of themselves as property owners rather than, part of a more so than being part of a community.
So I think there is a parallel here where part of the suite of policies and the potential agenda we are setting out in the report is aimed at transforming over time the economy in a more democratic and equitable direction.
And actually setting up the institutions and the legislative framework such that these democratic workplaces are durable and lasting is really integral because it's not just about the workers in those individual firms.
It's actually about trying to shift the balance of power in the economy towards workers and shift the society in a more equitable direction. And in particular, yeah, when you're offering tax benefits to these types of firms, as I think we should, I think it's very reasonable to require that you can't just take the money and run.
Dustin
I'd just like to end off on asking if you were to point to three particular policies or initiatives or something like that that the federal government could take whoever it is that forms government,* what three would you say like these are the immediate like the immediate term that you should really be focusing on?
*As mentioned, this was recorded about a month ago.
Alex
Ooh, that's, yeah, you're asking me to choose between my 15 or 16 policy babies in this report. That's tough. But I think part of what we were trying to do is imagine: what would it look like if this was a priority for a federal government.
So I think one of the pieces we haven't talked about yet is actually creating a ministry or a high-level public agency with an explicit mandate towards expanding democratic employee ownership, reviewing existing policy and putting this on people's radar, because awareness is one of the other missing pieces in a jurisdiction like Canada, where this is not a common model.
So (A) let's put it on the agenda in a big way; (B) we want to see both the creation of new employee-owned firms and the conversion of existing firms. The conversion route is faster and has that huge potential with the business succession of the boomers that we're going to see in the next couple of decades.
I would prioritize making permanent the capital gains exemption for the sale of existing firms to employee ownership, both in the form of trusts and worker co-operatives. That really would send a signal that this is here to stay.
And actually, with that tax break on the table already, business advisory consultancies and so on, they essentially have an obligation at this point to let their clients know that this option is available to them. And that's really positive for awareness of this because it is a pretty beneficial tax policy.
And if I was gonna pick one more, I think the other might be really ensuring that we can see the creation of regional democratic employee ownership centers that can serve as incubators and hubs for advice and providing some seed grants to establish those around the country. That needn't actually come at a huge cost either. So I think that's low-hanging fruit as well.
Dustin
Do you have much hope that we'll see this be a priority whoever forms government next?
Alex
There does seem to be a lot else on the political agenda right now. So I'm not going to predict that this suddenly becomes a big election issue. Having said that, I think there is the potential there if the advocacy in this area continues to grow, because it really does have that broad appeal that we talked about earlier. And there is, both on the left and the right, appetite for more employee ownership.
Different people will put different emphasis on [different] aspects of it, but I think there's an opportunity there and, if we're able to make progress on the policy front, it's potentially the type of policy that's less likely to be torn down by successive governments because of that broad appeal.
Dustin
Yeah, I guess if you even create an investment fund or whatever for or like an investment bank or whatever specifically for co-ops, that's, as you're kind of saying, like it's sort of a self-perpetuating machine as opposed to something that you can like dismantle through like social welfare, things like that.
I would also argue that it is a thing that could be even framed as being a response to the current political moment, right? A potential response in terms of industrial policy, terms of economic resilience in the face of economic downturn, the productivity crisis that we are experiencing, a whole bunch of different issues that we are experiencing, the climate crisis, that movement to this sort of economy could at least have a role in helping.
Alex
Absolutely. We're suddenly thinking bigger than we have been in some time and talking about potentially the need to fundamentally restructure our economy away from dependence on the US. I think this fits in that moment. I entirely agree with you.
Dustin
Alright, well thank you so much for your time.
Alex
Thanks, Dustin.
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