The Future of Cooperative Corporations
The striking economic success of Mondragon has conveyed worldwide the message that a worker cooperative need no longer be considered simply a utopian ideal of a few visionaries on the fringes of an industrial economy. The complex is attracting increasing attention and interest from both practitioners and scholars searching or better ways of organizing production and distribution and the relations between labor and management. Yet few companies have been able to replicate the levels of success that Mondragon has produced.
This is most likely due to the problems of free market entry and exit and employee loyalty, two problems that Mondragon is not greatly effected by.
--Workers may try to leave in a cooperative and the bosses may have to resort to extreme means to make sure they stay--
Cooperatives in the US
How an Employee Stock Ownership Plan (ESOP) Works
Employee ownership can be accomplished in a variety of ways. Employees can buy stock directly, be given it as a bonus, can receive stock options, or obtain stock through a profit sharing plan. Some employees become owners through worker cooperatives where everyone has an equal vote. But by far the most common form of employee ownership in the U.S. is the ESOP, or employee stock ownership plan. Almost unknown until 1974, about 11,000 companies now have these plans, covering over 8 million employees.
Companies can use ESOPs for a variety of purposes. While most of the press attention has focused on ESOPs in public companies used as a takeover defense, this explains less than 2% of all ESOPs. Nor are buyouts of failing companies (1% of the plans) or exchanges of stock for concessions (3% of the plans) common purposes. Instead, ESOPs are most commonly used to provide a market for the shares of departing owners of successful closely held companies, to motivate and reward employees, or to take advantage of incentives to borrow money for acquiring new assets in pretax dollars. In almost every case, ESOPs are a contribution to the employee, not an employee purchase. ESOP Rules
An ESOP is a kind of employee benefit plan, similar in some ways to a profit-sharing plan. In an ESOP, a company sets up a trust fund, into which it contributes new shares of its own stock or cash to buy existing shares. Alternatively, the ESOP can borrow money to buy new or existing shares, with the company making cash contributions to the plan to enable it to repay the loan. Regardless of how the plan acquires stock, company contributions to the trust are tax-deductible, within certain limits.
Shares in the trust are allocated to individual employee accounts. Although there are some exceptions, generally all full-time employees over 21 participate in the plan. Allocations are made either on the basis of relative pay or some more equal formula. As employees accumulate seniority with the company, they acquire an increasing right to the shares in their account, a process known as vesting. Employees must be 100% vested within three to six years, depending on whether vesting is all at once (cliff vesting) or gradual.
When employees leave the company, they receive their stock, which the company must buy back from them at its fair market value (unless there is a public market for the shares). Private companies must have an annual outside valuation to determine the price of their shares. In private companies, employees must be able to vote their allocated shares on major issues, such as closing or relocating, but the company can choose whether to pass through voting rights (such as for the board of directors) on other issues. In public companies, employees must be able to vote all issues. (Taken from The National Center for Employee Ownership)
What is a Cooperative Corporation | Internal Structure | History of Mondragon | Creation and Use of Social Capital | The Future of Cooperative Corporations | Mondragon Works Cited | Cooperative Corporations
