Researchers examine what is needed for successful business to cooperative conversions
By Karen Kahn
What strategies can we use to build an economy that puts people and planet first? Canada is asking this question and proposing answers that might be helpful to those in the U.S. driving efforts to grow mission-driven and employee-owned enterprises.
Like the U.S., Canada faces a business succession crisis that has been accelerated by COVID-19. The government would like to accelerate what the Canadians call “social acquisitions for business recovery”—i.e., relaunching local businesses that may be closing (as a result of the recession or retirement) as social purpose organizations: mission-driven organizations “aiming to achieve a social, cultural or environmental benefit.” A social purpose organization can take any number of forms: charities, non-profits, social enterprises, or cooperatives.
The Canadian government has committed $750 million over 10 years to build a stronger social enterprise system.
As part of this effort, the government has committed $750 million over 10 years to build a stronger social enterprise system. Among the projects that have been launched is the Legacy Leadership Lab (L3) at the Waterloo Institute for Social Innovation and Resilience at the University of Waterloo. L3 is leading a process to strengthen the ecosystem for social conversions. Over the last year, L3 has convened business advisors, cooperative developers, municipal and nonprofit leaders, and academics to look at the strengths and weaknesses of the current environment, and to identify and build the products and services needed to speed social acquisitions, says Project Manager Meg Ronson.
Among those participating in the Legacy Leadership Lab are the leaders of another government-funded project: The Conversions to Co-operatives Project, known as Co-opConvert. Co-opConvert is a three-year project led by researchers from three Canadian universities, University of Toronto, Université de Sherbrooke, and Cape Breton University; and cooperative sector and community partners, including Cooperatives and Mutuals Canada (CMC), the Canadian cooperative trade association, the Canadian Worker Cooperative Federation, and Cooperatives First, a non-profit promoting the cooperative model in rural and Indigenous communities across western Canada.
Business owners had little familiarity with cooperatives, misunderstanding them as cumbersome businesses and often perceiving them as “socialist,” said lead researcher Marcelo Vieta.
I spoke with the project’s lead researcher, Marcelo Vieta, associate professor in the Program in Adult Education and Community Development at the Ontario Institute for Studies in Education at the University of Toronto. Vieta, who is the author of the book Workers Self-Management in Argentina (2020), has researched cooperatives, conversion to co-ops, and worker-recuperated firms globally and has a particular interest in how communities transform enterprises from conventional, capitalist firms to enterprises managed by workers or communities.
With Co-opConvert, Vieta and his team are exploring the experience of Canadian provinces with business to cooperative conversions, with two primary objectives: 1) to identify the necessary enabling environments for business-to-cooperative conversions in Canada; and 2) to build capacity for conversions.
Through a worldwide literature review, a survey of owners of small- and medium-sized enterprises, interviews with key informants in the co-op sector, and case studies focused on past business to cooperative conversions, Co-opConvert is compiling a comprehensive understanding of the conversions landscape, what makes cooperative conversions successful, and what is needed to encourage more business-to-cooperative conversions.
Among the most important findings, said Vieta, business owners had little familiarity with cooperatives, misunderstanding them as cumbersome businesses and often perceived them as “socialist.” But when business owners were asked about succession planning and more deeply involving employees in the business, they were very favorable to the idea.
The case studies revealed a number of highly successful cooperative conversions, particularly in Quebec, that can serve as models for future conversions. For example, when ownership of ambulances was insufficiently profitable for private firms, the province encouraged cooperatives to takeover. In 1999, the Cooperative des Ambulanciers de la Mauricie acquired Ambulance de l’Estrie Inc, with financing that required a commitment to converting Ambulance de l’Estrie to cooperative ownership. That process began in 2005 and was completed over a five-year period. Today, according to the case study, “the cooperative has 160 members, including 147 paramedics, who perform more than 20,000 interventions in prehospital care and ambulance transport annually in the Estrie region.”
A more recent conversion involved Groupe Capitales Médias, which published six regional dailies across Quebec. In 2019, the firm filed notice that it would seek bankruptcy protections. Two weeks later, the employees asked their union to develop a business plan for a cooperative. They formed the National Cooperative of Independent Information, a producer’s cooperative, with six subsidiary multi-stakeholder cooperatives that include worker and consumer members. As multi-stakeholder co-ops, the subsidiaries were able to raise $2 million from their communities, and then received $12 million in financial assistance from the Quebec cooperative and union sectors. The newspapers began publishing as cooperatives in early 2020.
The research team is teasing out the lessons from the case studies and will soon launch the final phase of their project: knowledge mobilization. Vieta says the plan is to launch a public database of all business conversions to co-ops in Canada to date that will also house the case studies. In addition, the research team will work with community partners such as CMC and the Canadian Worker Cooperative Federation to disseminate the findings and create tools for the cooperative sector.
The synergy between social enterprises and employee ownership has been a growing topic of research and conversation in the U.S. as well. In 2019, research from Fifty by Fifty identified mission-driven employee-owned firms as “best of the best.” These firms—including such well-known brands as King Arthur Flour and EILEEN FISHER—valued employees and also took particular care to limit their environmental impact. More recently, British employee ownership expert Graeme Nuttall used his 2020 Gandhi Foundation lecture to call on employee-owned firms to embrace purpose-driven missions that would protect the planet from environmental catastrophe. And in his recently released book, Better Business, Chris Marquis finds that purpose-driven B Corporations have a natural affinity for employee ownership, which supports better quality jobs and offers an extra layer of protection for a mission-driven enterprise.
As Canada creates greater space for social enterprises in its economy and develops business succession models that promote employee and community ownership, perhaps U.S. advocates can draw on that experience to accelerate employee ownership conversions here as well.
Karen Kahn is a communications consultant and the editor of Employee Ownership News.