Jessica Mason
Executive Director,
Jessica Mason
Executive Director,
Greg Brodsky
Greg Brodsky

What is a co-op? How does this corporate governance model enable a more equitable, just economy? What distinguishes co-ops from other forms of multi-stakeholder corporate governance?

Show Notes

This episode covers an important corporate governance form: the cooperative, also known as a co-ops. There are many types of co-ops which makes it challenging to fully understand what distinguishes them from other corporate forms.

This is an essential topic, as it is within the incentives of corporate governance that alternative economic outcomes can be designed.

In this conversation Jenny, Jessica, and Greg cover:

  • What defines a co-op? [3:22]
  • Examples of well known co-ops [4:28]
  • How co-ops address inequality and other issues with captialism [5:24]
  • Performance stats for co-ops vs. other corporate governance structures [5:48]
  • Drawbacks of co-ops [6:39]
  • Why there aren't more co-ops [7:35]
  • Greg's definition of a co-op [10:42]
  • Co-ops vs. employee stock ownership plans (ESOPs) [13:32]
  • Ownership, financial rights, and governance rights [15:16]
  • Co-ops vs. other multi-stakeholder forms of governance [17:41]
  • Variables for cooperative governance design [19:25]
  • Patrons vs. investors [27:34]
  • Co-ops and philanthropy [31:45]
  • Unions vs. co-ops and deeper structural change [34:09]
  • Co-ops and scale [37:44]
  • Access to financing [39:44]
  • Cultural change and moving from stakeholder capitalism to shared ownership [44:33]
  • Shared ownership and growth / extraction incentives [47:06]
  • Entity options for co-ops [49:47]



"Jessica Mason (JM): It is really an important distinguishing factor, because it's not just about financially benefiting, but it's really about having a say in the decisions that the company makes, and the way the company shows up in the world and the way the company lives out its values. When you start to talk about extraction, when you start to talk about who's creating value versus who is benefiting and profiting off that value. When you have the opportunity to have a voice, to have a say in how the company makes decisions, that's a really different scenario. Then we're really starting to talk about something new." 

[00:00:39] Jenny Stefanotti (JS): That's Jessica Mason, Executive Director of, an accelerator for early stage companies adopting cooperative models of governance. This is the Denizen podcast. I'm your host and curator, Jenny Stefanotti. 

In this episode, we're talking about co-ops, a form of corporate governance where members collectively own and govern the company. As we'll see, there are many different types of co-ops, which can make it confusing to understand what they are, especially as we see concurrently shifting the economy writ large away from shareholder to stakeholder models of governance. And so, we'll explain the difference between a co-op and other forms of stakeholder capitalism. We also talk about the various ways co-ops can be designed and structured, as well as the barriers that inhibit wider adoption of this more progressive corporate form.

Our guests for this episode are Jessica Mason and Greg Brodsky. In addition to her role as Executive Director of, Jessica has a diverse background in social sector innovation, equity-centered innovation, nonprofit and foundation strategy and social entrepreneurship. She teaches design thinking and facilitates design and innovation processes for a wide range of social sector organizations. She's the founder of Social Impact Studio, a multi-disciplinary firm that partners with nonprofits, foundations and governments to spur social innovation. 

Greg is the Founder of, which he co-directs with Jessica. He also has many years in the co-op ecosystem. First as a VP of CCA Global Partners, one of the largest cooperative buying groups in the US across four industries. And also 10 years as president of a purchasing co-op of over 300 independent bicycle stores. They have a wide range of experience both in the co-op space as well as the adjacent space of social innovation that they bring to this conversation. 

This is the first of a string of conversations that we'll have on this podcast about corporate governance, which on one hand isn't the sexiest topic. But in many ways, it's one of the most important because this is where the rubber hits the road. This is where new forms of capitalism take hold that are fundamentally more just, equitable and purpose-driven. I hope that you are as excited about this topic as I am. I hope you walk away with a better understanding of this really important type of corporate form. 

This is one of our essential topics. You can go on our website, For show notes and resources to dig deeper on this topic, we also have created a summary of our research with additional resources in the learn section of our website. Again, that's There, you can also sign up for our newsletter where we bring our latest content to your inbox. We also bring announcements from our partners and invite subscribers to attend virtual events with the Denizen community. With that, I hope you enjoy this important conversation. 


[00:03:22] JS: We're going to get into co-ops today. And part of the reason they're not super well understood is because there's a lot of different variations of them. They can be owned by employees, suppliers, consumers, investors. There are multi-stakeholder co-ops. We want to elucidate what that landscape looks like and talk about the different governance structures and also the economic structures. 

What is a co-op? A co-op is a member-owned business structure with at least five members where both profits and economic rights, and governance and control rights are distributed among the members of the co-op.  It generally serves the interests of the members. And governance is some form of democratic control. In primary co-ops, members have equal voting rights. One member, one vote. But I think there's a lot of different structures that could take form of. And I'm excited to talk about that today. 

Co-ops can be, as I mentioned, employee-owned, customer-owned, producer-owned, business-owned, and even multi-stakeholder-owned, including investors. It'll be interesting to talk about “Where are the boundaries between a stakeholder governance model and a co-op?” 

And some examples of co-ops. The employee-owned co-op, many of you probably heard of King Arthur Flour. It's one of the things that Rebecca Henderson mentions in her book Reimagining Capitalism. REI is a consumer-owned co-op with 2.8 billion in revenue. Blue Diamond and Ocean Spray are two different examples of producer-owned co-ops. They're farmer-owned. $1.6 billion in revenue annually respectively. There are business-owned purchasing co-ops such as Ace Hardware. And then there are multi-stakeholder co-ops.

And many of you of course have heard of Mondragon in Spain, which is the largest co-op in the world. It was founded in 1956. It's a federation of worker-owned co-ops in the Basque region of Spain. It has 257 companies and organizations in four different areas of activity. And in 2019, it employed over 80,000 people. That's the one you'll hear talked about a lot. 

I think the thing that gets us most excited about co-ops is that it addresses inequality at a structural level by more equitably distributing the value that's created to a wider set of stakeholders. That's the economic rights piece. But then we talk about governance and control rights. It's also just fundamentally baking into the way that the entity is controlled the interests of different constituents. 

The stats speak for themselves. The employee-owned companies experience higher sales growth of 2% to 3% a year on average than their non-employee-owned peers. Not surprisingly, studies show that employee-owned businesses are more productive, stable, and have lower failure rates. 

One of the really big things actually is that you see, in times like the pandemic, that they're much less likely to have layoffs. A lot of times co-ops will opt to have everyone take a pay cut in order for everyone to continue having a job. They are also more resilient. The five-year survival rate for employee-owned co-ops is almost 70% percent higher than non-cooperatively-owned businesses. And of course, now consumers care more about things like this. Consumers report that knowing that business as a co-op makes them more likely to use its goods and services. 

Some of the drawbacks are that the biggest challenge is really access to finance because investors don't control the companies in the way that they do in other corporate form. They may not have the same kind of returns necessarily because value is distributed more equitably. 

Because they're more difficult to finance, co-op business models are often easier to implement when there's not a lot of startup capital needed and where workers can bootstrap it and contribute their labor in order to get it to a point where it starts to generate revenue. 

Just a couple things about the history. It started in the 19th century, primarily in Britain and France. In 1844, the Rochdale Society of Equitable Pioneers established what's called the Rochdale Principles, on which they ran their cooperative. And that's the basis for the modern cooperative movement. 

First, tell me a little bit more about And Greg, I just love to hear more about your impetus for starting it and what you're seeing across the landscape. 

[00:07:35] Greg Brodsky (GB): Yeah. Thanks, Jenny. Yeah, cooperatives are this funny word where, as you mentioned, they're all throughout the economy, right? You have examples ranging from REI, to Ocean Spray, to Ace Hardware. And when you tell people what a co-op is about, to your point, people love hearing about them, and people want to buy from them and people would like to see more cooperatives. I think we're all at this moment where people see the massive wealth inequality you're talking about. And people would love an economy more based on equitable distribution, right? 

And so, there was this question of, "Well, if co-ops are so great, if they're such an excellent alternative, why aren't there more?" And several years ago, a few of us were talking about this and we really figured out there were three basic reasons there weren't more cooperatives. 

Number one was this misperception problem, that 89% of people can't accurately define what a co-op is. And maybe we'll talk a little bit about how we define it. The second challenge being that there were entrepreneurs who wanted to create cooperatives but didn't necessarily have the support. That it felt like a more mysterious, opaque, confusing path. And not that it's that much more complicated to be frank. It's just that there's so much infrastructure and support. If you want to do a Delaware LLC or C Corp, there's so much there. But co-ops feel more complicated. And finally, number three, that there wasn't enough financing. And I'm sure we'll talk about that as well. 

And so, really what we wanted to do is just give a better structure for the entrepreneurs who wanted to create a cooperative ownership model with more support. And the accelerator has been used in many other sectors to take the best entrepreneurs every year and to give them a boost.

[00:09:09] JM: We're really focused on these three areas that caused Greg and those around him to want to start Start.Co-op in the first place. To think about, “How do we cultivate the next generation of co-ops to carry the torch and move us into a more cooperative economy looking forward?” 

And so, it is really about these three pillars, if you will, of work. One is really focused on helping people understand what co-ops are and how they work. That's partly about education. It's partly about expanding the pipeline of people who are interested in learning more about cooperatives who are interested in starting cooperatives. 

The second piece is really about helping entrepreneurs access the support and resources they need to build cooperative businesses. And that's where the accelerator falls among other activities. And then the third piece is really around connecting these cooperative entrepreneurs to capital. And as you mentioned Jenny, and as Greg has mentioned, that's one of the real biggest challenges that we face. 

The accelerator itself is – in some respects, quite like other accelerators, other business startup-focused accelerators, it consists of a great curriculum with fantastic instructors. We have a world-class group of mentors both from within and outside the co-op community. We do individualized coaching. We provide a small investment. And we provide some access to shared services of service providers who we know understand the co-op model and can provide real value for the entrepreneurs in our cohort. 

It's fantastic, there's just a really incredible group of entrepreneurs. People who are deeply and fiercely committed to rethinking the economy, rethinking capitalism and imagining a better future through business ownership. 

[00:10:42] JS: You both mentioned the confusion about what it is. And of course, we're going to talk about what your definition is. Let's start there. I'd love to hear it from either of you.

[00:10:51] GB: Yeah, sure. I think we're all familiar with the traditional model of ownership, where maybe a handful of founders or investors get very rich, make the decisions and benefit from the corporation if it's successful. And usually, on the other side, there's a lot of people supporting that business, right? There are workers. There are consumers. We can say they are being extracted from.  At the very least, they're not sharing all the benefits of ownership, right? 

And so, what we're trying to do with cooperative ownership is we're trying to bring the Venn diagram together and say, "What if the people supporting the business actually owned a share of the business?" And in some ways, it's that simple, right? 

I think where it gets a little more complicated, to your point, is that that shared ownership structure can exist at any level of the supply chain, right? You can have a worker-owned company. Here on the East Coast, there's an 80-million dollar a year coffee, tea and chocolate company called Equal Exchange. And it's worker-owned. There's a lot of worker-owned companies around the US. 

You can have a consumer-owned company. REI is a consumer-owned cooperative, consumer food co-opts or consumer-owned. You go one level up, and you can have a small business-owned cooperative. Ace Hardware is a cooperative owned by 4,000 independent retail stores who have made the decision that they want to buy like a national chain and they want to benefit from a common brand. But it's owned by the individual stores. It's very much a cooperative. And then you can go up one level higher to the agricultural level, Cabot Cheese, Ocean Spray, Blue Diamond Almonds are owned by the farmer. 

I think this is where it gets complicated for people. And sometimes people think, "Well, as a co-op, is that your business model?" Right? Like, "Tell me about that business model." And we always try to explain to people it's not a business model. It's an ownership model. And so, that's kind of the jump. It's like saying, "Well, are LLCs just in this category?" Well, no. Of course, they're not. Right? And that's why people get confused when we say, "What is REI, which is a consumer-owned outdoor retailer, have in common with Ocean Spray, which is farmer-owned cranberries?" Right? But it's the shared ownership model.

But I think what it does – you can get caught on the structure. To the benefits, it shares wealth. It shares power. And in an era where so many people are looking for an alternative, I think when you have different people at the board table, the incentives become really different. It's not just about maximizing shareholder return. And so, these organizations also make different decisions around employee wages, health care, the environment. It's got  multiple levels of benefit where you're sharing the wealth, you're sharing the decision-making power – that organization tends to create better societal outcomes as well.

[00:13:32] JS: Let me ask a question that might be on someone else's mind. What about a company that has an employee stock option program? And most people have options, right? They have ownership of the company. Why doesn't that count as a co-op? 

[00:13:48] GB: Yeah, that's a great question. Yeah. There's this broader landscape of what we call shared ownership, right? And I want to be clear. We love shared ownership. We love any company that is making the decision to share the wealth created by entrepreneurship. And that is really what it's about. And I talked to a lot of founders these days who say, "Yes, I want to create this company. But I'd like to bring people along for the ride." 

And so, the model a lot of people, especially if you're talking about the Silicon Valley Tech startup model, are familiar with is the employee stock option pool. And I think the difference is that – and that's great, right? A small group of people are benefiting from that. But usually, it's a very small group at the top is getting very, very rich. And usually, the maximum percentage of allocation is about 5% to 15%. I would say occasionally get an outlier that's 20%. 

And by the time the company either sells or goes public, which is the goal of most of these businesses, the investors own around 70% of the company. And the balance is between the founder and that small pool. What we're talking about is actually – and it's a good thing, right? It's better than if they didn't have any ownership. But we're flipping that on its head and saying that to be a cooperative, the majority of the financial benefit and majority in the decision-making power actually has to be of that community of member owners, not with the investors. Right? I think that's the difference. And there is a spectrum of ownership all the way from 100% member-owned to maybe 5% employee-owned. We're happy to talk about the iterations of it. 

[00:15:16] JM: Yeah. And I would just double click on this ownership being sort of those financial rights and also the governance rights. And so, governance is just such a key part here. We speak so frequently about the financial piece because it's the easiest for people to grasp. People understand investors. They understand returns. Not everyone obviously. But in this world, there's a good solid understanding of the financial benefits of ownership and how that accrues. 

But what we don't think about is this model of democratic governance. What does it means to have a voice in how decisions are made? And there are so many different ways you can do that within a cooperative. But it is really an important distinguishing factor because it's not just about financially benefiting, but it's really about having a say in the decisions that the company makes, and the way the company shows up in the world and the way the company lives out its values. 

When you start to talk about extraction, when you start to talk about who's creating value versus who is benefiting and profiting off that value, when you have the opportunity to have a voice, to have a say in how the company makes decisions, that's a really different scenario. Then we're really starting to talk about something new. 

And there's a myth that needs to be busted that goes hand-in-hand with that, which is the myth of the leaderless co-op. The myth that, in every co-op, every decision has to be made through some democratic voting process. And that's just – that is exactly a myth, right? It's flat out untrue. Some co-ops operate in a direct democracy. But many, most operate in some sort of representative democracy. 

Day-to-day decisions are made by managers. Day-to-day decisions are made by the executive. It's the really big strategic decisions when an elected board is weighing in or the full membership weighs in. 

[00:16:57] JS: I want to make two really important observations. Because often, when we talk about ownership, the way that we think about ownership for most companies, you're really bundling economic and control rights. You can have control over some subset of decisions, right? But traditionally, companies have the management team that makes day-to-day decisions, the board which governs some decisions. And then some smaller subset of decisions which can be voted by the shareholders. And those come with voting rights attached to a share. 

And so, when we talk about ownership and we really want to think creatively about what a new economy can look like, a lot of that is decoupling in some cases, not in all cases, economic rights and the economic distribution from the control rights over a broader set of decisions related to the company. 

We talked about these different variations. Some of which can be multi-stakeholder. Some of which can have investors. When does it become a co-op? We talked about the investors not having more than a 50% stake. Is that how you think about it? 

[00:17:56] GB: Well, I should add before I get in trouble with a dear friend of mine who's a lawyer in the co-op scene, is that the definition of a co-op can – there are state statutes, okay? And in some states – about getting too technical. Some states have a definition of the co-op, at the state statute level, you can incorporate as a co-op. Some don't. We have co-ops that incorporate that way using the state level incorporation. Some are just an LLC. There’s a caveat - anyone thinking about this, we always encourage you to talk to an attorney. 

I would say the most important kind of philosophical thing is, “Who is the majority of the company’s economic benefit for?” and “Who's making the majority of the decisions?”  And within that, there's a wide variety of options. And you're right, the most powerful thing here is that you can decouple the economic rights from the government's rights. 

Usually, if someone puts in the majority of money into a business, they get to make the majority of decisions. Whether they're right or not, they get to make that call because they had the wealth, right? And so, what we are doing is we're perpetuating our systems of inequality because they had more money coming in and they're probably going to have more money coming out. 

But now, all of a sudden – and this is really where I was so excited to have Jessica join our team, and maybe Jessica can talk about a little more, is now, all of a sudden, we can actually design ownership based on what we want the outcomes to be. Not just who has capital in their way in. We can start to say, "Okay, what are the various groups you want at the table, first of all? And what are the percentages if you want them?" And maybe the voting rights are actually different than the economic rights. And it's different for each company. But it totally opens up the landscape.

[00:19:25] JM: And as you dive into the weeds, another thing that you think about through this question of the economic benefit is how you want to use the economic benefit to incentivize certain behaviors. And which behaviors and contributions you want to incent with this benefit, right? 

You can really dive deep in the weeds. You build a patronage dividend allocation, the way in which profits are distributed, based on a formula that you get to design based on “What are the behaviors you want to incent?  Who do you want to reward? And how do you wish to reward them?”  And that's just such a powerful thing to say, "You design everything else in your business." Right? We design our business plan. You design your logo. You design your packaging. You design your go-to-market strategy.” We design everything else in our business. And then everyone defaults to traditional ownership. 

And doesn't realize you can sit down and say, "What if we were to design ownership?" What if we were to say, "How do we want to show up in the world? What are our values? Who do we want to benefit?" And then design ownership intentionally around that.

[00:20:28] JS: And I want to also just get clear on those design variables. What are the economic rights? What are the control rights? But what I love is also how do you think about differential economic rights or control rights for different constituents if you have a multi-stakeholder co-op? Which I think in many cases you will. And then there's these questions of when it comes to decision making, what gets voted on by members versus – like, members basically in a co-op take the place of what you would consider the shareholder voting that happens in a traditional company. What do members vote on? Versus the board of the company? Versus the management team? Right? 

[00:21:07] JM: Yeah. And this is where it gets super exciting. Multi-stakeholder co-ops are a relatively new thing where you can have different groups of stakeholders who are going to benefit from ownership in the business. And so, you can sit down and say – Let's take Airbnb for example, right? Let's all imagine in our beautiful hypothetical world that Airbnb was a co-op. And so, there may have been an ownership class for the founders. And there could be an ownership class for the investors. And there could be an ownership class for the hosts. There could be an ownership class for the service providers in host homes. So, the cleaners and the repair people, right? 

You have the opportunity to separate out different kinds of stakeholders into groups and say, "Here are the governance rights that they'll have. And here are the economic rights. And here's how we'll calculate that economic benefit based on a certain formula." For hosts, you might say, "It's going to be the average of how many nights you hosted over the last two years. And that will be used as a percentage of the total number of nights on the Airbnb platform. That's how we'll figure out what your economic benefit is," the patronage dividend it's called, which comes from profits at the end of the year. 

And then from a governance standpoint, the thing to think about is, when it's obviously in direct democracy, people are voting on the issues themselves directly. And in representative democracy, folks are electing a board. And you have a choice to say, "How is our board composed? Who comprises our board? And which stakeholder groups have how many seats on the board?” 

In many cases, the investors have a voting right. In other cases, they don't have a voting right. They can have a non-voting seat in the governance structure. And then similarly, we always come back to this principle of one member, one vote. 

To Greg's earlier point, you're an investor, you've put in a ton of cash. You are one member and you have one vote. Whether that's one vote on the board or whether that's one vote in the overall membership. 

[00:22:59] JS: Yeah. I mean, again, the things that the members adjudicate over is open for design in any co-op? Yeah. 

[00:23:08] JM: Exactly. I guess I'll give you an example, which is that we have a phenomenal graduate Ampled, which is a musician-owned platform, which is basically a competitor to Patreon where musicians can become members of this platform. Their fans can support them on a monthly recurring basis and they provide their fans with exclusive content and things like that. But the platform itself is musician-owned. And I was fortunate to be elected to the board as a representative of a community group of stakeholders. Folks who want to see Ampled thrive and are supporting Ampled financially, even though we're not musicians and we're not necessarily fans of artists on the platform. 

And when we had our first board meeting, we had to sit down and say, "Great! What's the role of the board? What decisions will we make versus other stakeholder groups within Ampled?" And so, Ampled had started a decision-making matrix, which went through all the kinds of decisions they might make, and said, "Who makes those decisions now? Does the board make them? Is it the executive? Is it the chief of product? Who makes those decisions?" 

And we went through that process and we iterated upon it. And now we have a decision-making matrix that really helps us know “What are the kinds of decisions we as a board make? And how do we make them?” And there's a difference and – “Is it consensus? Is it by direct vote? How are we going to go about making those decisions?” Not only who makes them.

[00:24:23] JS: Yeah. And I love, too, the example that you gave where you have differential voting rights and economic outcomes for different stakeholders. And then potentially also some sort of equation that determines what it looks like even across particular types of stakeholders in order to incentivize certain behaviors. I mean I talk a lot about decoupling them. So in some cases, you might have an investor that has economic rights that just is completely stripped of control rights. And I actually think that's what Zebra Unite does. And in the steward ownership model, you just get a complete decoupling of that. 

But here, I think the elegance really comes more into how you differentiate what this looks like across members in designing – Yeah, go ahead. 

[00:25:01] JS: Sorry, Jenny. I didn't mean to cut you off. I was going to say, yeah, I think what's interesting – I mean we're actually just rolling out this thing called the ownership model of canvas to help entrepreneurs kind of have a space. Very similar to the business model canvas, which I imagine most of your audience is familiar with. 

But to give people space to think through these permutations. Because there are a lot of options and that is part of what's exciting but can also feel confusing with people. We want to give people a space to say, "Okay, by class, how do you want to think about governance rights and financial rights?" 

But to your point on investor rights, we have co-ops that say the investors have no voting rights. They only get back their economic participation. We have co-ops that say the investor class gets a single board seat or a minority board seat. And then we have one that says they get board observer rights. There is a range of how it's set up. That's where people have options. 

As a friend of mine has said, “When you've seen one co-op, you've seen one co-op.” That's why I know people love generalization. But each one is a little different, right? We have graduates where – we have patient-owned health care. We have musician-owned technology. We have a co-op of black farmers who have innovated CBD technology. We have all these interesting companies. And each one kind of chooses their levers for their community. 

[00:26:15] JS: Yeah. No. I love that quote. I definitely need to put that one in my back pocket and use it again. Again, I just think it is really important for us to just understand that it really is a spectrum from these co-op structures that we're talking about to what we would call stakeholder governance. 

The real hard line is investor control and also potentially something around the value-created distributed across constituents being at least an investor minority. Is that a fair line if we had to draw one in the sand? 

[00:26:44] GB: Yeah, if there was investor control, it would definitely not be a co-op. You're 100% right.

[00:26:48] JS: But if it was like 51 across other constituents and 49, could we call it a co-op? 

[00:26:53] GB: You could. I mean, I would say that's the bleeding edge. There's a lot of people in the co-op community that would – it sort of depends how big a tent you are versus how pure. I can think of people in my virtual role text who might say, "Well, it's pretty iffy." But Jessica and I are trying to create a big tent and just get people to consider more shared ownership. We want people to kind of test the bounds of that and find out what works for them.

[00:27:14] JS: And then would you – sorry to split hairs. But I'm just curious what you were thinking. What if the investors didn't control it but there was still disproportionate allocation of value-created towards the investors? Would that still be considered a co-op? 

[00:27:27] GB: Well, the majority of financial benefit and the majority of control have to go to what we call – 

[00:27:30] JS: So, it's on the financial side. Not just the control. That was the question. Okay. 

[00:27:34] GB: Yeah, it's both sides. And I'll just add one other definition, which I think might be useful, is when people talk about “What are these patron members putting in?” The reason we use patron is they're patronizing the co-op through something other than capital. Maybe it's the host for Airbnb. Or maybe it's people cleaning the rooms. They're not putting in their dollars, right? 

And so, a few cool things about that. First of all, there's actually fewer security exemption problems because they're not investing. They're putting something else in. When you shop at REI, it's your purchasing. For the farmers of Cabot Cheese, it's how much they're selling through. But they're not investing just capital. It's an actual activity they're doing through. And that's how you determine how much they get back. If one farmer did 50% of all the dairy of Cabot Cheese, which wouldn't happen. But they would theoretically get 50% of all the shares distributed to farmers. But it's the patron’s activity that we're tracking. And that's what's different than the investor activity. 

[00:28:30] JS: Jessica, your point about “How do you craft these outcomes to incentivize certain behaviors?”  This is where the structural change of the economy actually resides is in these decisions around control and value distribution. 

[00:28:45] GB: I'll just make one other point. I mean I think there's also just a difference in intention, right? A lot of companies are created these days with an eye towards an exit. You're trying to sell the company, right? Whether you're trying to IPO it or get it acquired. 

And so, the companies that we work with and the entrepreneurs we work with, their goal is not just to sell the company. Their goal is actually to create long-term ownership within that community. And so, that's a different set of incentives. And it's going to attract a different kind of investors. And investors have to play a different role. 

[00:29:11] JS: Now, do you work at all with – I mean I guess you guys aren't doing an accelerator. But I'm curious about exiting to community. You start with a corporate structure that is more traditional. But once you reach escape velocity, you exit to the community and convert to something that ostensibly would be considered a co-op. Are you seeing that happen? 

[00:29:30] JM: We see a lot of that happening. I think just as we're seeing a huge surge in interest in cooperatives. In general, we're also seeing a surge of interest in exit to community partly fueled by the Silver Tsunami. A lot of folks are older adults who are thinking about what comes next. And let's say maybe they have a business that their kids don't want to take on. And it's not really a great candidate for private equity or to be acquired. And so, they say, "Now what? I don't want to see this business just fall apart because I retire. But how can I think about longer term sustainability of the business? And how can I reward my employees?" 

And so, in many instances, they come to an agreement where the employees are purchasing the business for an exit to community, right? The founder is exiting to their community. And so, we do see that. It's not something that we work with specifically. There are some really amazing organizations doing fantastic work in this space. But it does reflect a growing trend and surging interest in shared ownership broadly and thinking, “What does it mean to not grow your business exponentially to sell it? What does it mean to find a way out of your business when you decide the time's right for you, that is more sustainable, and that does write or does well by your community and not just the individual founder and investors?” 

[00:30:48] GB: We actually created this fund to invest in some of the graduates coming out of our program and some of the other cooperatives we're meeting that are looking for capital. And I'm sure we'll talk about the challenges of that. But I just wanted to say two of the investors I met along the way who want to participate in the fund founded companies. Recently sold those companies for a lot of money. 

When I talked to them, they said, "I've got a lot of money." And I'm sure everyone listening is like, "Oh, my God! That sounds amazing. I want to be in that role." But there is a question at some point of how much do you need to be happy? And I think these folks actually feel like the reason they're investing in the fund is I think they actually feel like they would have been happier if they had brought more of their employees along with them rather than just a few people getting very, very rich. 

I think that's why there's such an increased interest in "Yes, you want to do well. But there's something about your own personal happiness that when you see so much poverty and inequality in the US, it's actually hard to enjoy what you have." If you're conscious at all, you feel a little bit guilty sometimes.

[00:31:45] JS: Yeah. I mean, I think it's also really interesting to think about how the current model has a significant amount of capital getting extracted into the hands of the few and then recycling back to the commons in the form of philanthropy, right? I mean you can ask, where is the container? Where are the boundary conditions where that capital gets cycled back, right? 

In the co-op model, it happens within the entity as soon as it's created to those particular constituents who create that value. Or presumably, you could have stakeholders who may not be co-op members. But you could get creative as a co-op around how they might benefit from it. 

For example, I could imagine a co-op structure where you might have the community represented somehow in terms of outcomes, right? You could imagine co-op members all contributing some fraction of their ownership to a DAF that supported some philanthropic cause or the community that that entity operates. Correct? 

[00:32:45] JM: You know, I think a lot about the Bezos. I think about the Walton family, right? They've created these massive organizations. And they do great work in philanthropy. We, among others, are really grateful for the work they're doing in the space. But the question that comes across my mind is, what would it have looked like? How would things be different if small percentage – forget co-ops for a second. If just a small percentage of that company had been set aside for ownership by those who are creating the most value in those businesses? The folks who are stacking shelves in Walmart? The folks who are operating the cash registers in Walmart, right? 

In the case of Amazon, I mean, gosh, we could look all over the place for folks who deserve to be rewarded, who deserve to be appreciated for the work they do and the value they create for the company. And if even a small percentage of those companies had early on been set aside for these people, I think we would see this workforce in a really different place and potentially less needing of support philanthropically at this juncture because we would have stronger families, stronger communities and just generally a stronger society less in need of the kind of social safety nets from the government and from philanthropy. 

I'm all for philanthropy. And I think it's important. But as a percentage of the total impact that these families, and these individuals and these founders could have, it's minuscule. I think we have this opportunity to reimagine capitalism and see it as something else. 

We're seeing right now a movement and worker movement, right? Worker-led movement. And we're seeing employees across the country quitting low-paid jobs who had terrible working conditions. This is important. And we had the union fight for Amazon in Alabama. But what I think this fails to acknowledge is that there's actually a deeper, more structural solution here as we look at reimagining capitalism. And that is shared ownership yeah, right? 

I'm all for the push to unionize. But unions are about having a voice, right? But what about, instead of decoupling the governance from the economic state, what if we couple them back together and say unions are a phenomenal step along a path to something that we want that's even better. And frankly, that fits better potentially within the capital system as it is now? And yet, does a lot to change what we see in terms of outcomes. 

And so, yeah, we lived through Covid. And the rich get richer and richer. And inequality gets worse. And who does well in that moment? It's the folks who can not only protect themselves from Covid, but can actually accelerate their wealth because of the way in which they're able to take advantage of the situation. And our system right now isn't structured to help everyone take advantage of situations and do better for themselves, and their families and their communities. 

[00:35:26] JS: Yeah, Greg? 

[00:35:27] GB: Yeah. Just as, I think, in addition to the moral argument, there is also just an efficiency argument. This idea that we're going to wait till a very few people get rich. And then there's going to be all these tax consequences of how they give away the money. They're going to pay lawyers and accountants to make sure they maximize how they give back because they don't want it to go to the government, right? And then some people are like, "Why won't you go through the government?" 

And the reality is, what you're saying, is if you just bake it in from day one, right? And this is where we don't want to be purists about it. Maybe Amazon or Walmart could have been 5% percent, whatever the amount is. But if those people got carried along for the ride, then you're not paying later on to create these additional structures, right? How much wealth do you lose just passing it through the government to be redistributed? How much less – Even though I love unions, how much less efficient is it to have to pay for the creation of a union to battle against the management, right? If you actually just building the ownership in, then you're sharing the profits without all these extra layers and costs. 

[00:36:26] JS: And this is such an essential point, Jessica, that you made when we're talking about this moment. In our first conversation, literally, our first conversation on capitalism and inequality, we talked about how there was a distribution of power away from the workers towards investors and business managers slowly and steadily over the course of the last 40, 50 years. And happening at the micro level at the firm level and also at the macro level politically with the shift to identity politics instead of class-based political decision making. 

What's so interesting is that, right now, the obvious thing feels like to redistribute power back to the workers through the unions and not realizing that that's really just much more superficial. It doesn't really give control and power back to them because it's not baked into the decision making, right? But then the step even beyond that is to really bake in the economic value redistribution, as in the co-op model. 

And I just want to be sure that we're clear. I know we've said it a few times. But because so much of the governance questions around co-ops get into governance and the complexity of decision making, I think we've made it abundantly clear. But I just want to make sure we are clear. That, really, there is a tremendous amount of scope for deciding what it looks like to be a member of a co-op in terms of what decisions you adjudicate over, versus the board, versus the management team. True? Is that an accurate statement? 

[00:37:44] GB: Yeah. I think – look, if you're talking about a three-person worker owned coffee shop, it's going to be a direct democracy, right? And I think when you hear the word co-op, that's what you think about, is everyone's voting and it's got to be a consensus. And everyone's involved in every decision. 

I think as cooperatives scale and get bigger, just like any organization frankly, right? I think the decision making has to change. At the very opposite end of the spectrum, to think about being a member of REI, which I'm sure there are people on the call who are part of REI, you're not voting for what products to be on the shelf or what the pricing is. You may not even be aware it's a co-op, right? Some people would say it's maybe a less pure form of it. But it's still a co-op. And what you're voting for is the board in a representative democracy. You, as a member, would have the right to serve on the board or vote for the board. Or if there were big strategic decisions where the co-op felt the need to get the members together and talk about it, then that co-op would have the obligation to bring that to the full membership, the day-to-day activities. That they're not polling the members in every vote. 

One of the worker-owned companies I mentioned, the way they think about it is they still have a hierarchy of employees.  If you picture your typical pyramid, the CEO at the top. And there's still a kind of a management chain. Then above the CEO – the CEO reports the board, and the board reports to all the members who are all the employees. There's kind of a circular accountability to it. When we talk to the entrepreneurs, we try to break out day-to-day management of the company that's following the management chain. And then there’s this accountability loop and this governance loop of going back to the members. And to put it one other way, and then I'll kind of put a period on the sentence, is if you think about any public companies you own, you own a share of that company, right? But you're not making the day-to-day decisions. There are all different levels of how our teams decide these governance questions. But I would say, to recap, they vary from direct democracy all the way to very representative democracy and everything in between.

[00:39:44] JS: Totally. There's one really important thing we need to talk about, which is financing. You had mentioned that you've talked to over 100 entrepreneurs who have considered a co-op structure. They cited the largest single obstacle holding them back is access to financing. And find that, generally, there's an under capitalization of co-ops. I want to talk about that. What are the challenges that you're seeing? What are the interesting ways that co-ops are addressing that constraint? 

[00:40:10] JM: I can talk a little bit about the challenges. And, Greg, maybe you can talk to the ways that it's being addressed. We have this conversation with entrepreneurs all the time who are exploring cooperative ownership. And they'll say, "Tell us about the financing situation. Tell us what it's like to raise funds and what kind of investment you can get. And what does that look like? How does it compare to traditional businesses?" And we just have to be super honest and say, "Look, you are going to have an easier time raising funds as a traditionally-owned business." And that's depressing. That's just flat out depressing. Because it's not easy to raise funds as a traditionally-owned business especially if you're a woman or a person of color, right? It's kind of a bleak outlook in the beginning. And then it's even more bleak when you talk about cooperative ownership. 

The reason has to do – there are some structural reasons. The co-ops are structured differently, as we've been talking about, and are really geared for long-term increase in value. Not just this increase in stock price. And Greg can really get into the details there.

And also, we face the scenario where there aren't a lot of investors who understand what co-ops are. Let alone how to invest in co-ops. And so, not only are the mechanisms and the investment vehicles not right-sized and right fit for cooperatives. But the pool of investors is just inherently smaller. 

I think one of the things we're really excited about is that it's getting bigger. And we're doing a lot of work around expanding the pool of investors who are interested in and want to be investing in co-ops. But it is a massive hurdle. And there's a story I often come back to when we were interviewing for our second class in the accelerator. We had this incredibly promising startup that we were just so excited about. We really wanted them in the class. 

And we interviewed them, and we offered them a spot, and we had this conversation. And he said, "Look, I have an offer on the table from an investor for 500k. What do you think are the chances that I can go through your program and come out on the other side with 500K?" And we just have to say, "Really honestly, pretty slim. We can get you 500k. We can work with you to get 500k in financing over a long period of time. But there's no way you're going to get it in the next 16 weeks. We can't do that." And his investor was like, "I'm not going to invest if you're a co-op." 

He was forced with this decision of the money that was in front of him or a real uncertainty about being able to raise funds. And the environment that we're in with capital-intensive businesses, he made the decision to become a traditionally-owned business. And we're sad about that. I think on some level, he was sad about that. But it shows the real impact of how early stage the capital markets are around co-ops and where investors are. And I'll let Greg dig into the details because he's been the one who's been really focused on building solutions.

[00:42:47] GB: Yeah, I talked to this founder this past week who has 3,000 active users. And this is a really interesting online learning platform they've created. The guy would love to make it a co-op. And it's the exact same question of, "Can we get the money?" And it puts us in a really difficult position. Because, obviously, we want to see more shared ownership models. But we can't guarantee the same access to capital. 

And so, what we tell the entrepreneurs is, "You're going to have to think about actually repaying back your investors." right? A lot of traditional founders say, "If I get equity investors, I'm never actually paying them back." When they're getting paid back is when the company gets sold. That their stock price appreciates because someone else purchased their share of stock. 

Because, generally – and there are exceptions. We do have co-ops that are trying to exit at some point and create wealth for their community. But the majority of our entrepreneurs are trying to create long-term wealth for their community. It means that there is often not an exit event or at least it's hard to say to investors, "We're a co-op. And yet we want to exit." Like, it's a more complicated story. 

What we tell the entrepreneurs is that “You absolutely can bring investors on.” Almost all the teams in the program are bringing investors in some way, whether it's debt or equity. “But you should think about how to pay it back out of the actual company cash.”  It's not that it's some crazy thing, right? It's just that, all of a sudden, the entrepreneurs have to live more in the real world and act like 99% of business owners in America versus this narrative that we think is everyone but is actually only 1% percent of companies that take VC money.

[00:44:15] JS: Yeah. And I think that a lot of the creative financing, or things like revenue-based financing, or equity, like debt. There are lots of different creative ways to think about returning capital to your early investors without just having the traditional model. 

[00:44:33] GB: Yeah, that's right. 

[00:44:33] JS: But it also is interesting to think about, again, the spectrum of, "Okay, the bright line is that majority – control of majority of value creation goes to not investors." But then right on the other side of that line, you do start to get models that still have a lot more control across the relevant stakeholders that co-op models distribute control towards that don't cross that line but are still far superior to the extreme shareholder ownership model that we are largely accustomed to. 

And so, it is interesting I think to think about coming in with more progressive stakeholder models with an intention to exit to community, which is not a co-op model out of the gate. But it certainly is as close as you might be able to get or a way to thread the needle in the current environment.

[00:45:21] JM: Yeah, 100%. I mean, Greg said earlier. We're trying to create this big tent. And we want to bring everyone into this shared ownership journey. And there's a spectrum, right? And we want to start to push everyone, or pull, or attract, or incent, or whatever it is, everyone along that spectrum. And where people are comfortable landing today may be different than where they're comfortable landing 2, 5, 10 years from now. And that's part of the journey. And that's part of the work that we're all invested in doing.

[00:45:45] JS: Totally. I think a lot about how does cultural change happen? And you get the more progressive companies that start to shift what's accepted and what's known. And then increasingly, it's easier and easier. And you also talked a lot about – we didn't get into it as much. But, “What does a supportive ecosystem look like? Who are all the other service providers along the margins of that?” And that's what's really interesting about Zebras Unite, is that the co-op and community represents that suite of service providers around the business who are really supporting those models. Giving each other discounts. And it's fascinating how the Zebras Unite co-op, or Zebras Unite, excuse me, kind of looks like a little micro economy experiment in and of itself. 

[00:46:25] JM: Yeah. We're so excited about Zebras when they chose to be a co-op and they wanted to be part of a group of folks thinking about what this next generation of co-ops looks like. And how do we build that? And they are at the forefront of that work. And we're so thrilled to be in partnership with them doing this work together. 

[00:46:42] JS: Go ahead, Greg. 

[00:46:43] GB: I think we want to get to the point where, for people who care about wealth inequality, for founders who care about that, where they say, "By default." Rather than saying, "I'm going to be a Delaware LLC." I want to have some version of shared ownership. And through entrepreneurship, I want to bring other people along. And I think there's just a lot of people who, if they knew it was an option, would like to at least understand what that looks like. 

[00:47:06] JS: Let me ask you guys one more question. I love the way that you articulated, Greg, just thinking about the spectrum of potential constituents in a co-op is being up and down the supply chain. Who are all the constituents that are involved in the creation of the value of the product that's eventually consumed by the consumer? But there are all kinds of other stakeholders who may be affected by what happens across that supply chain and the consumption of that product and services who have a different set of interests. 

And part of my challenge or my struggle with co-op models, although they go a very long way in addressing inequality, they still don't fully address I think some of the other challenges that we face in looking at capitalism as we know it today. Particularly insofar as all those constituents are still interested in growing that business in order to distribute more and more value to themselves. And that business might come at the expense of the interest of other stakeholders, not least the planet, insofar as growth is the imperative. And so, I'm interested in what your thoughts are around that. Because to me, the co-op gets us a lot of the way there. But it's not quite all the way there.

[00:48:19] JM: I think one thing is that co-ops are governed by a set of principles. And one of those principles is concern for the community. When we talk about stakeholder engagement, stakeholder capitalism, and we talk about who are the stakeholders, I think there's a recognition about a broader base of stakeholders. Not just simply the member owners. But sort of a broader recognition of the way in which cooperative businesses impact those around them and their communities. And so, it's built into the very principles that govern cooperatives. I think that's kind of one piece of it. 

And then there's another piece about the way you can build that in that has to do with – you can also be a B Corp or a benefit corporation. It's not one at the exclusion of others. And so, I don't think cooperatives are the magic elixir. And I think it's important for us to say, "No one's here saying this is the elixir. It'll fix all of our problems." Right? 

Cooperatives in and of themselves are not going to fix systemic racism, right? It is something far greater and far deeper. Cooperatives, when they're designed well and they're executed well, they can begin to address some elements of systemic racism. But they alone are not going to fix it. And so, in a similar way, I don't think cooperatives are going to fix all the ills of capitalism. But I do think that it is the beginning of a conversation about a more equitable way of doing business. And cooperatives hold themselves, in many cases, to a different standard. Partly that's because there are just more people weighing in on how the business works and how it sort of engages with its stakeholders, be that within the business or outside. 

[00:49:47] JS: One question. Really, a key point I'm actually not clear on, I want to make sure that we are, is just what kind of an entity do you incorporate as a co-op? 

[00:49:57] GB: Well, okay, #notlegaladvice. It's a complicated landscape. There are a number of states that have co-op specific incorporation options. Massachusetts, Colorado, Wisconsin, Minnesota, California, where you can incorporate as a co-op and it means a particular thing. And then there's other ones that are limited in what kind of co-op you can incorporate. Some will say, "Look, in some states you can be a consumer co-op. But you can't incorporate as a farmer co-op." Weird things like that. 

And so, we have a number of co-ops that choose that option. But we have other co-ops that just incorporate as a plain vanilla LLC. And then functionally adopt these co-op principles and the separation of capital and voting rights within an LLC structure. There's a number of options.

[00:50:39] JS: Thank you so much for being with us. 

[00:50:41] JM: Oh, thank you, Jenny, for your leadership and for creating this space and this community. It's just great for both of us to be in community with new folks and sharing this story and learning from everyone else. Thank you for the opportunity.


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