I recently attended the Eastern Conference for Workplace Democracy in Worcester MA. Worker co-ops from around the country were represented. As I listened to people relate their struggles to align values with business, it made me think of our good fortune with one aspect of our company: our owners’ equity fund.
In 1987 SMCo transitioned from a sole proprietorship to a worker cooperative. Part of the re-structuring was a commitment to profit sharing – we would distribute 35% of annual net profits as cash bonuses to each employee, based on hours worked. The purposes: to share the wealth (of which there wasn’t much at the time) and to partially mitigate our hierarchical wage scale.
In addition, our new by-laws called for the distribution of annual dividends to internal capital accounts for each of the co-op owners. Generally, these distributions were (and are to this day) roughly 50% of the remaining net income after profit sharing.
The internal capital accounts are paper accounts; they do not have cash in them. They are an obligation – the company owes the money to each owner/employee when that person leaves the company.