[Draft] Promoting Phoenix Cooperatives

[Heidgaudr]

Promoting Phoenix Cooperatives

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Category: Free Trade || Strength: Significant || Proposed by: Heidgaudr

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The General Assembly,

WHEREAS worker cooperatives have proven to be more resilient to economic recessions compared to traditional firms;

WHEREAS it is preferable for workers to retain their jobs rather than to become unemployed during times of crisis;

WHEREAS the World Assembly is uniquely poised to assist members and facilitate mutually-beneficial economic arrangements;

HEREBY enacts as follows:

1. Defines:
   
   1. “Worker cooperative” as a business owned in part or in whole by its workers, and which meets the following criteria:
      
      1. There is a clear, achievable path for a worker to become a worker-owner;
      2. All worker-owners have only one vote per person;
      3. The majority of the Board of Directors or other governing body is elected by the worker-owners;
      4. Profits or losses are allocated to worker-owners on the basis of patronage;
      5. Worker-owners democratically make business decisions, either through direct voting or by electing managers;
   2. “Company in crisis” as a privately-owned company that is undergoing bankruptcy proceedings, experiencing massive worker layoffs, whose owner has died and no direct inheritor can be found, or other similar situations wherein the immediate future of the company is threatened;
   3. “Worker buyout” as the process of workers collectively buying a company in crisis and converting it into a worker cooperative;
   4. “Unemployment benefits” as any form of welfare for workers who have been laid off or fired by their employers;
2. Workers for a company in crisis shall receive the right of first refusal for the purpose of organizing a worker buyout;
3. When negotiating a worker buyout, both workers and owners must act in good faith in an attempt to reach a fair and equitable arrangement;
4. When organizing a worker buyout, workers shall be allowed to withdraw, as a low-interest loan, a lump sum of their potential unemployment benefits for the sole purpose of buying out the company in crisis;
5. Establishes, as a sub-committee of the WA General Accounting Office (GAO), the Economic Advisory Council (EAC) and task it with the following:
   
   1. Provide legal counsel upon request for workers attempting a worker buyout;
   2. Create in cooperation with workers a business plan for recuperating companies in crisis;
   3. Determine whether a worker cooperative that would be formed from a buyout is likely to succeed;
   4. Approve or deny loan applications for workers attempting a buyout;
6. Workers attempting a buyout shall be able to apply for a low-interest loan from the EAC, so long as they meet the following criteria:
   
   1. Have formulated a business plan in cooperation with the EAC to recuperate the business;
   2. Have a high likelihood of succeeding, as determined by the EAC; and
   3. Request no more than the total combined unemployment benefits of all the workers, or for workers in nations without unemployment benefits, twice the amount of total combined unemployment benefits workers in a similar nation would receive;
7. RECOMMENDS members further support worker cooperatives within their borders;

This is heavily based on Italy's Marcora Law. Simply put, it provides a framework for workers to purchase struggling businesses and convert them into worker cooperatives. Through the granting of low-interest loans to businesses likely to succeed post-buyout, laws like these end up profiting the government long-term and allow workers to keep their jobs during recessions or other periods of economic turmoil.

[Heidgaudr]

-=Drafts in crisis=-

[Magecastle Embassy Building A5]

"Against. This is too burdensome on economic freedom."

~Spencer Hemming,
World Assembly Ambassador,
The Empire of The Ice States

[Kavagrad]

Full support.

[Heidgaudr]

"Against. This is too burdensome on economic freedom."

~Spencer Hemming,
World Assembly Ambassador,
The Empire of The Ice States

"How is this burdensome on economic freedom? If anything, it makes economies freer and more prosperous: workers gain the ability to purchase struggling businesses, owners of failing businesses now have an additional avenue of exiting without losing money, and the WA makes a small amount of money long-term through the issuance of low-interest loans. Everyone benefits."

[Magecastle Embassy Building A5]

"Against. This is too burdensome on economic freedom."

~Spencer Hemming,
World Assembly Ambassador,
The Empire of The Ice States

"How is this burdensome on economic freedom? If anything, it makes economies freer and more prosperous: workers gain the ability to purchase struggling businesses, owners of failing businesses now have an additional avenue of exiting without losing money, and the WA makes a small amount of money long-term through the issuance of low-interest loans. Everyone benefits."

"Section 3 restricts the economic activities of both businesses and workers. This is an undue infringement upon economic freedom."

~Spencer Hemming,
World Assembly Ambassador,
The Empire of The Ice States

[Heidgaudr]

"How is this burdensome on economic freedom? If anything, it makes economies freer and more prosperous: workers gain the ability to purchase struggling businesses, owners of failing businesses now have an additional avenue of exiting without losing money, and the WA makes a small amount of money long-term through the issuance of low-interest loans. Everyone benefits."

"Section 3 restricts the economic activities of both businesses and workers. This is an undue infringement upon economic freedom."

~Spencer Hemming,
World Assembly Ambassador,
The Empire of The Ice States

"Section 3 is a very mild requirement, Ambassador. Surely, the many other parts of the proposal more than outweigh this small restriction, do they not?"

[Magecastle Embassy Building A5]

"Section 3 is a very mild requirement, Ambassador. Surely, the many other parts of the proposal more than outweigh this small restriction, do they not?"

"Economic freedom is very important, and outweighs any other effects of the proposal."

~Spencer Hemming,
World Assembly Ambassador,
The Empire of The Ice States

[Heidgaudr]

"Section 3 is a very mild requirement, Ambassador. Surely, the many other parts of the proposal more than outweigh this small restriction, do they not?"

"Economic freedom is very important, and outweighs any other effects of the proposal."

~Spencer Hemming,
World Assembly Ambassador,
The Empire of The Ice States

"That view is incredibly short-sighted, Ambassador. It was pursuing economic freedom at all costs that ultimately lead to the downfall and utter obliteration of Alorn civilization. There comes a point in every nation's history where the disaffected working class takes up arms against their oppressors - just as my grandparents and great-grandparents did eight decades ago. I'd suggest your nation change things so that it doesn't happen to you."

[Tinhampton]

"RECOMMENDS" in Article 7 should not be in ALL-CAPS nor should that article end with a semicolon. And some of the clause openers would fit in more naturally with a "hereby" than a "enacts the following" structure. But notwithstanding these structural quibbles...

1. 1. Do all loans sought pursuant to Article 4 have to go through the EAC (via Articles 5d and 6), or can member states provide their own loan facilities (as Article 7 may or may not imply)?
      
      
   2. If a member state or employer offers no "unemployment benefits," EAC loans can be sought due to Article 6c. But can an Article 4 loan still be obtained outside of EAC mechanisms, or must funding from elsewhere be sought?
      
      
   3. Further to Article 6c: what is a similar nation? Who decides what a similar nation is? If Tinhampton's economy is similar to that of Heidgaudr and The Ice States and Tinhampton has no unemployment benefits, can a Tinhamptonian buyout effort cite UBs in either Heidgaudr or TIS, or will the EAC make that decision for them?
      
      
   4. Unemployment benefits are "any form of welfare for workers who have been laid off or fired by their employers." For the purposes of Articles 4 and 6c, how long must such benefits last? (Keeping in mind that many forms of unemployment benefit are time-limited, may involve work requirements, and/or pay much worse than the jobs the workers were removed from. And UBI, in nations with no direct unemployment benefit, does not count at all.)
      
      
   5. To whom must a "low-interest loan" be repaid to? And how low can low-interest be? (Keep in mind - for instance - that some member states operate under Islamic law and forbid interest on loans. The EAC, for obvious reasons, does not.)
   
   
2. Article 5b requires that EAC-co-created business plans act to "recuperate companies in crisis." What is recuperation and what does it entail?
   
   
3. If "workers for a company in crisis" cannot complete a worker buyout and exercise their "right of first refusal" - whether due to a collapse in negotiations, the buyout failing mid-takeover due to technical or other reasons, or simply refusing to buy the company out - who's next in line to complete a prospective buy-out?
   
   
4. Article 3 requires that "a fair and equitable arrangement" be sought. What kind of arrangement?
   
   
5. What happens when a new worker co-operative that is already running the company wishes to change its ownership structure?
   
   
6. And looking at the more fundamental basis for the resolution: Is it really in the interests of the WA to create a committee to basically handhold groups of workers through the process of buying out their boss, and why? You say that "worker cooperatives have proven to be more resilient to economic recessions compared to traditional firms," but by the time a recession comes and a worker buyout is proposed, the recession has probably already started.

[Simone Republic]

Not keen on this. Principally on political grounds at a personal level as I consider myself a conservative (small "c") in terms of economic policy.

[Heidgaudr]

Not keen on this. Principally on political grounds at a personal level as I consider myself a conservative (small "c") in terms of economic policy.

Disappointing but understandable.

Do all loans sought pursuant to Article 4 have to go through the EAC (via Articles 5d and 6), or can member states provide their own loan facilities (as Article 7 may or may not imply)?

No, Article 4 loans would go through individual members, not the EAC.

If a member state or employer offers no "unemployment benefits," EAC loans can be sought due to Article 6c. But can an Article 4 loan still be obtained outside of EAC mechanisms, or must funding from elsewhere be sought?

Since Article 4 loans are not done through the EAC, they would be funded by individual member nations.

For example (if Heidgaudr had private enterprise - which it doesn't), workers would apply first to Heidgaudr for an Article 4 loan, which would be taken out of Heidgaudr's treasury or other similar mechanism. If more funding is needed, they can apply to the EAC for an Article 6 loan which would be funded by the GAO.

Further to Article 6c: what is a similar nation? Who decides what a similar nation is? If Tinhampton's economy is similar to that of Heidgaudr and The Ice States and Tinhampton has no unemployment benefits, can a Tinhamptonian buyout effort cite UBs in either Heidgaudr or TIS, or will the EAC make that decision for them?

Good question. I intend for it to be decided by the EAC, which I'll add when I make an updated draft.

Unemployment benefits are "any form of welfare for workers who have been laid off or fired by their employers." For the purposes of Articles 4 and 6c, how long must such benefits last? (Keeping in mind that many forms of unemployment benefit are time-limited, may involve work requirements, and/or pay much worse than the jobs the workers were removed from. And UBI, in nations with no direct unemployment benefit, does not count at all.)

Universal Basic Income doesn't count as unemployment benefits. UB is specifically meant for welfare that is solely a result of becoming unemployed.

To whom must a "low-interest loan" be repaid to? And how low can low-interest be? (Keep in mind - for instance - that some member states operate under Islamic law and forbid interest on loans. The EAC, for obvious reasons, does not.)

The loans would be repaid to whoever is the lender. For Article 4 loans, that would be the member nation, and for Article 6 loans it would be the EAC/GAO.

I intentionally kept 'low-interest' vague, as getting into specifics often causes problems.

The other way it could be done is, instead of it being a loan, lenders are given a share of the cooperative which can then be bought a few years later. I'm still not sure which method would be preferable in the WA.

Article 5b requires that EAC-co-created business plans act to "recuperate companies in crisis." What is recuperation and what does it entail?

It's a reference to Recuperated/Recovered companies in South America.

If "workers for a company in crisis" cannot complete a worker buyout and exercise their "right of first refusal" - whether due to a collapse in negotiations, the buyout failing mid-takeover due to technical or other reasons, or simply refusing to buy the company out - who's next in line to complete a prospective buy-out?

Right of first refusal simply means the workers have the right to make an offer before anybody else can be considered. If workers and owners can't come to an agreement, the owner can look elsewhere to sell.

Article 3 requires that "a fair and equitable arrangement" be sought. What kind of arrangement?

The idea is to arrange a sale where the owner is given fair market value for their holdings.

What happens when a new worker co-operative that is already running the company wishes to change its ownership structure?

That's outside the scope of this proposal, but because they're a cooperative it would have to be settled democratically.

And looking at the more fundamental basis for the resolution: Is it really in the interests of the WA to create a committee to basically handhold groups of workers through the process of buying out their boss, and why? You say that "worker cooperatives have proven to be more resilient to economic recessions compared to traditional firms," but by the time a recession comes and a worker buyout is proposed, the recession has probably already started.

It's a socialist policy to turn private businesses into public ones. There is a massive gulf in power between capital owners and workers, so this seeks to remove some of that gulf.

The recovered factory movement shows that converting during recessions can work, as does the Marcora Law.

[Conklandi]

"How would you ensure that worker cooperatives don't simply revert back into for-profit companies? It would require a lot of regulations to ensure that less senior workers aren't vulnerable to coercion."

[Heidgaudr]

"How would you ensure that worker cooperatives don't simply revert back into for-profit companies? It would require a lot of regulations to ensure that less senior workers aren't vulnerable to coercion."

"That is beyond the scope of this proposal. I will note that most nations should already have regulatory mechanisms in place to prevent such outcomes (and which my delegation has considered also proposing to the World Assembly), and also that cooperatives are naturally more resilient to hostile takeovers on account of ownership being so widely dispersed."

[Simone Republic]

I am not saying that this cannot work in some specific cases, say in the presence of appropriate bankruptcy laws. I do agree that chapter 11 results in many chapter 7 liquidations in borderline cases, especially small businesses. Some kind of programme to encourage loans to workers as a bidder for bankrupt assets might work.

[Potted Plants United]

OOC: Why is there "phoenix" in the proposal name but nowhere in the text?

[Simone Republic]

OOC: Why is there "phoenix" in the proposal name but nowhere in the text?

The author is describing a concept of workers taking over factories and improving it to be better than the previous owners did. So it's just a term to encompass the resolution, as far as I can interpret it. Rarely do these things happen except in less sophisticated economies. I am not saying it can't work, just that it very rarely does.

[Brezzia]

Brezzia supports initiatives to hand over the means of production to workers. However, we express doubts about the current draft.
We believe a worker cooperative should be owned and managed only by all its worker, thus we consider necessary the deletion of some part of Art. 1a:

1. Defines:
   
   1. “Worker cooperative” as a business owned in part or in whole by its workers, and which meets the following criteria:
      
      1. There is a clear, achievable path for a worker to become a worker-owner;
      2. All worker-owners have only one vote per person;
      3. The majority of the Board of Directors or other governing body is elected by the worker-owners;
      4. Profits or losses are allocated to worker-owners on the basis of patronage;
      5. Worker-owners democratically make business decisions, either through direct voting or by electing managers;

We also ask for further explanation about Art. 1a(iv).
Our delegation also suggests these changes: making Art. 1a(v) the new Art. 1a(i) in order to highlight the importance of democracy in decision making; substituting "Determine" with "Evaluate" in Art. 5c and "for" with "to the EAC by" in Art. 5d in order to avoid EAC deciding about loans not demanded to EAC.

[Heidgaudr]

OOC:

I am not saying that this cannot work in some specific cases, say in the presence of appropriate bankruptcy laws. I do agree that chapter 11 results in many chapter 7 liquidations in borderline cases, especially small businesses. Some kind of programme to encourage loans to workers as a bidder for bankrupt assets might work.

That's something I've been grappling with since posting. Trying to make the proposal act too much like IRL counterparts ends up making it operate a bit too far beyond the scope of a GA resolution. Hence why I haven't posted a second draft.

OOC: Why is there "phoenix" in the proposal name but nowhere in the text?

"Phoenix cooperative" is used with some frequency in the literature. It's an allusion to how these cooperatives rise from the ashes of a dead business, like a phoenix rising up from its own ashes. It's a lot catchier than "Promoting Worker Cooperative Conversions".

OOC: Why is there "phoenix" in the proposal name but nowhere in the text?

The author is describing a concept of workers taking over factories and improving it to be better than the previous owners did. So it's just a term to encompass the resolution, as far as I can interpret it. Rarely do these things happen except in less sophisticated economies. I am not saying it can't work, just that it very rarely does.

While you're probably referencing recovered factories primarily in South America, the actual scheme I'm trying to implement is most similar to systems implemented by countries like Italy, France, and Spain. They've proven to be quite successful if a bit limited in scope.

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IC:

Brezzia supports initiatives to hand over the means of production to workers. However, we express doubts about the current draft.
We believe a worker cooperative should be owned and managed only by all its worker, thus we consider necessary the deletion of some part of Art. 1a:

1. Defines:
   
   1. “Worker cooperative” as a business owned in part or in whole by its workers, and which meets the following criteria:
      
      1. There is a clear, achievable path for a worker to become a worker-owner;
      2. All worker-owners have only one vote per person;
      3. The majority of the Board of Directors or other governing body is elected by the worker-owners;
      4. Profits or losses are allocated to worker-owners on the basis of patronage;
      5. Worker-owners democratically make business decisions, either through direct voting or by electing managers;

We also ask for further explanation about Art. 1a(iv).
Our delegation also suggests these changes: making Art. 1a(v) the new Art. 1a(i) in order to highlight the importance of democracy in decision making;

"The goal of this proposal is to help socialize capitalist societies. While I understand your perspective, it is our delegation's opinion that requiring even more from members would make this proposal more difficult to pass and more difficult for members to implement. If you want to think of it as a gradient, this proposal is more on the 'reform' end of the spectrum rather than the 'revolution' end.

"The purpose of 1(a)(i) is to allow cooperatives to set sensible requirements for who can and cannot be eligible to become a worker-owner. In the course of running the cooperative, it may at times be necessary to hire a temporary or part-time worker who has no interest in taking on the responsibilities of participating in workplace democracy.

"As for both the proposed revisions in 1(a) and 1(iii), there are some potential organizational schemas where other individuals or entities own some interest in the business. This is written to be quite permissive in order to be a bit more palatable to our less-enlightened colleagues. Afterall, here in the WA we socialist and communist nations are a small minority. We're besieged by neoliberals on one side and conservatives on the other.

"And 1(a)(iv) is a very important part of the cooperative model. Cooperatives intentionally run a small monetary surplus in order to be prepared for unexpected emergencies and costs. Many cooperatives, usually at the end of the fiscal or calendar year, distribute the unneeded surplus to worker-owners. This provision means that the surplus is divided equitably. And in the case where the cooperative is in debt, that responsibility is also shared equitably."

substituting "Determine" with "Evaluate" in Art. 5c and "for" with "to the EAC by" in Art. 5d in order to avoid EAC deciding about loans not demanded to EAC.

"These seem like sensible revisions that will likely be included in our next draft."