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Jo Ellen Green Kaiser

Feb 3 · 47 min read

Media Cooperatives: Challenges and Opportunities

@2019 Jo Ellen Green Kaiser. All Rights Reserved.
[For a pdf, email joellen.tmc@gmail.com]

Part I: Introduction

As news organizations seek to engage more deeply with their audiences — while also
seeking increased revenue from those audiences — some forward thinkers [1] have
begun examining the cooperative model for news media organizations. This report
looks deeply at the challenges and opportunities media companies face in adopting or
launching with a cooperative business model.

Cooperatives, or coops, are businesses that are owned by their members. There are
three main forms of cooperatives: businesses owned by workers, businesses owned by
consumers, and businesses owned by businesses. What distinguishes a cooperative
from other forms of stakeholder ownership is that members of a cooperative each
have only one vote no matter how large their stake. A cooperative is at heart a
radically democratic form of organizing.

Cooperatives also are unique in having a different business proposition from either
nonprofit or for profit businesses. For profit businesses offer a transactional
agreement with users — you give us money, and we will provide you with something
in exchange. Nonprofit businesses have a relationship with their donors that is about
belief and belonging: a nonprofit exchanges consumer money to promote a mission in
which the donor believes.

The relationship between a cooperative and its members instead is one of investment.
Members invest with a cooperative in order to realize a return. That return is not, as
with a nonprofit, an idealized achievement of mission. Rather, the ROI for a
cooperative must be measured in monetary terms — a literal payment of money at the
end of each year, a discount on goods or services for consumer or purchaser members,
or an increase in wages and benefits for worker members.

The truly democratic nature of cooperatives is especially appealing to many of us

working in the news media in an era when major tech platforms own most of the ways
we find information. We relish the potential of a news organization that is legally,
fiscally, and ethically responsible to its stakeholders.

A desire for democratic governance, however, is not a sufficient basis for an

organization to become a cooperative. To succeed as a cooperative, an organization
must be able to answer the question, what real return — valued in dollars — will
members be offered on their investment in this cooperative?

Unfortunately, most media cooperatives have not been successful in North America;
the main reason seems to be that, to date, media cooperatives have not been able to
offer members a real return. [For a look at media cooperatives elsewhere in the world,
see this great overview from CICOPA]

That may be because most media cooperatives have used a worker or consumer
cooperative model. The most successful media cooperative in North America, the
Associated Press, instead uses a shared services model. In a digital environment that
increasingly emphasizes collaboration, more media should look at business-centric
cooperative models like shared services.

We need not totally dismiss the opportunity for a consumer-based North American
media cooperative, however. Consumer-based media cooperatives have been
successful in Europe and elsewhere. Very few media cooperatives have been tried in
North America, and those have been under-resourced: the concept has not really been
thoroughly tested here. But to meet that opportunity, the value question must be posed
and answered.

This report provides a full overview of cooperative businesses to anyone interested in

starting a media cooperative in the United States. Part II defines what cooperative
businesses are — and are not. Part III details the different types of cooperatives,
organized by membership type, since their members define what a cooperative does
and how it is governed. Part IV looks at the business case for cooperatives, while Part
V provides an overview of recent media cooperatives in North America. Part VI
details alternatives to cooperatives, focusing on business models that embody some
but not all of the same criteria as cooperatives. Finally, Par VII offers a conclusion
with suggestions for potential media cooperatives that might fruitfully be tested.

Part II: What Cooperatives Are — and Are Not

2.1. Common Definition

Cooperatives are organizations that are owned, controlled and operated for the benefit
of their members.

According to a 2009 study by the University of Wisconsin Center for Cooperatives,

there were 72,993 cooperatives in the United States — excluding housing
cooperatives, bringing in $650M per year and employing 2.1 million people. In 2015,
the Center updated its data on the number of cooperatives, finding 64,112
cooperatives excluding housing cooperatives, employing over 840,000 people.

The most common types of cooperatives are in financial services (mainly credit
unions) comprising 75% of U.S. cooperatives and employing 68% of the people who
work in cooperatives. The financial services sector is followed by retail and
commercial cooperatives (like grocery stories), utilities and social and public services
(like childcare, healthcare and schools).
2.2 Cooperative Values

Although there are many different types of cooperatives, all cooperatives are based on
what are called the Seven Principles. Below, section 2.1 gives a bit of history and an
overview of the Rochdale Principles, the core from which all subsequent cooperative
values developed. Section 2.2 provides the Seven Principles. Section 2.3 develops
some of the values behind the principles at a bit more length.

2.2.1 Rochdale Principles

One of the first cooperatives (though not the first) was established by 28 skilled
artisans in Rochdale England in 1844. This society developed a set of principles and
practices specific to their businesses. These were later refined into a set of values and
a set of principles.

1 Self-Help.

In co-operatives, people help each other whilst helping themselves by working

together for mutual benefit.

2. Self Responsibility

Individuals within co-operatives act responsibly and play a full part in the
organisation.

3. Democracy

A Co-operative will be structured so that members have control over the organisation
— one member, one vote.

4. Equality

Each member will have equal rights and benefits (according to their contribution)

5. Equity

Members will be treated justly and fairly.

6. Solidarity

Members will support each other and other co-operatives.

The six values, above, are taken directly from the Rochdale Pioneers Museum
website, but they show up in different combinations on the websites as the “values” of
a number of contemporary cooperative associations. For example, cultivate.coop lists
the values of Equity, Equality, Self-Help, Democracy, and Solidarity. Stronger
Together, a cooperative association of food coops, lists values of Self-responsibility,
Democracy, Equality, Honesty and Social responsibility.

2.2.2 The Seven Principles

In 1994, members of cooperatives of all types from all over the world gathered
together to turn the Rochdale Principles — and the values that had emerged from
those principles — into a shared set of Cooperative Principles. These principles can
be found on the website of the International Cooperative Allliance,
https://www.ica.coop/en/cooperatives/cooperative-identity, and are stated briefly here:

1. Voluntary and Open Membership

Cooperatives are voluntary organisations, open to all persons able to use their services
and willing to accept the responsibilities of membership, without gender, social,
racial, political or religious discrimination.

2. Democratic Members Control (one member, one vote)

3. Member Economic Participation

Members contribute equitably to, and democratically control, the capital of their
cooperative. At least part of that capital is usually the common property of the
cooperative.

4. Autonomy and Independence

Cooperatives are autonomous, self-help organisations controlled by their members. If

they enter into agreements with other organisations, including governments, or raise
capital from external sources, they do so on terms that ensure democratic control by
their members and maintain their cooperative autonomy.

5. Education, Training and Information

Cooperatives provide training for members and inform the public about the benefits of
cooperation.

6. Cooperation among Cooperatives

7. Concern for Community

Co-operatives work for the sustainable development of their communities through

policies approved by their members

2.2.3. The Essence of Cooperative Values

Every cooperative seems to have a different iteration of the values and principles
above. No matter how cooperative values are framed, however, they always include
three basic requirements:

1. The raison d’etre of a cooperative is economic — the cooperative is a business that

enables its members to invest in and support themselves.

This essential fact — that the cooperative is a business — is often expressed through
the values of self-help or autonomy, self-responsibility, honesty and member
economic participation. The point is that cooperatives are not organized first and
foremost to make the world a better place. They are organized primarily to make life
better for the individual members of the cooperative. And that means that
cooperatives must be self-sufficient, able to build their own equity and support their
own members.

2. Every member has one single vote, no matter how much or how little that member
participates in the cooperative.

Almost always expressed as the value of “democracy,” what differentiates a

cooperative from any other type of economic structure is that governance is not
dependent on the amount a stakeholder invests or the benefit the stakeholder reaps.
Governance is radically democratic.

3. Each cooperative is part of a larger cooperative movement.

It is easy to get misled by such cooperative values as “solidarity.” It is important to

understand that solidarity, in the context of cooperatives, means simply a belief in the
cooperative business model.

In the United States, we tend to think of cooperatives as politically progressive

because our image of a cooperative is often an organic food coop founded in the
1960s. However, the largest cooperative sector in the United States are credit unions.
The largest individual cooperative, with over $30 billion dollars in revenue, is CHS
Inc, an agriculture producers cooperative. The farmers and bankers, hardware store
owners and grocers who own and run the largest cooperatives are just as likely to vote
Republican as Democrat. For them, the cooperative model is the best way to sustain
and grow their business.

2.3 Cooperative Law and Taxes — U.S. and State

Understanding the legal issues around cooperatives depends very much in what
country — and in the United States, what state — the cooperative is incorporated. In
the United States, laws and statutes around incorporation are governed by individual
states. Laws pertaining to tax matters are governed by both federal IRS rules and state
tax laws.

2.3.1. U.S. Law

A cooperative is a legal entity owned and democratically controlled by its members.

Members often have a close association with the enterprise as purchasers or
consumers of its products or services, or as its employees.

Under U.S. law, cooperatives may take the form of companies limited by shares or by
guarantee, partnerships or unincorporated associations. In some states, cooperatives
can be organized as unincorporated associations or business corporations such as
limited liability companies or partnerships.

2.3.2 State Law

Many states do not include cooperatives in their incorporation regulations. In fact,
only 18 states have passed Cooperative Association Acts. For a list of these states see:
https://ncba.coop/our-work/cooperative-statute.

In states that have passed Cooperative Association Acts, most lawyers advise business
not to use the term “cooperative” unless the business complies with the act. Colorado,
for example, once prohibited the use of the term “cooperative” for entities not
organized under Articles 55, 56 or 58 of its state constitution.

In all other states, organizations may call themselves cooperatives without being
incorporated as cooperatives. While for-profit cooperatives in states without
cooperative statutes may have a hard time obtaining tax relief from the federal
government under IRS subchapter T (see below), incorporation in such states does
potentially enable non-profits to claim cooperative status.

2.3.3. Federal and State Taxes

The IRS recognizes the unique position of cooperatives and has created a separate set
of tax rules precisely for cooperatives in the Internal Revenue Code, Subchapter T,
and its related regulations.

The main point of Subchapter T is that “net margins on business with or for patrons
are taxed only once, at either the cooperative or user level, but not both.” Of course,
only income related to patrons (coop members) is eligible for this single tax treatment.
Income from non-patronage sources is subject to tax at the cooperative level when
earned and at the recipient level when paid out to member or others.

An easy-to-read series of publications from the U.S. Department Agriculture provides

a complete analysis of Subchapter T, and the University of Wisconsin Cooperative
Center has generously turned these into a downloadable PDF (see
http://www.uwcc.wisc.edu/pdf/cir40.pdf and elsewhere).

Note that in states like Colorado, which specifies a type of cooperative called a
“public benefit cooperative,” cooperatives can look very similar to federal 501c3
nonprofits. Both 501c3s and Colorado public benefit cooperatives function for the
benefit of the larger public. However, a 501c3 non-profit may never distribute its
funds directly to any stakeholder, while the cooperative is mandated by Colorado law
to distribute any profits back to cooperative members. Attorney Linda Phillips, a
Colorado lawyer who handles both cooperatives and nonprofits, explained in an
interview that corporations registered as Colorado cooperatives can not be federal
501c3 non-profits.

Federal tax law for cooperative corporations also is very different from federal tax
law for 501c3s. A good resource on the differences is: http://cdi.coop/how-are-
nonprofits-and-co-ops-different/ .

The bottom line: cooperatives may be organized to benefit a public wider than their
membership, but they are not nonprofits and must pay federal taxes. The good news is
that Subchapter T mandates that cooperatives cannot be taxed twice on profits
distributed to members.
Part III. Types of Cooperatives by Stakeholders

Cooperatives are run by and for their stakeholders. Because any effort in social
economy can involve — and often does involve — many different groups of
stakeholders, cooperatives can be set up in a multitude of ways. Cooperatives are
organized by workers; by consumers; by businesses; or a hybrid of all of these. There
also are coops of coops — cooperatives organized to serve cooperatives.

3.1. Worker Cooperatives

Worker Cooperatives are for-profit businesses that are owned by some or all of the
workers of the business. The basic principle of worker cooperatives is that the
cooperative exists for the benefit of its worker-members.

3.1.1. Governance

In all cooperatives, each member has one vote. In worker cooperatives this means that
neither the role of the worker (manager vs salesclerk for example) nor the amount of
time worked (60 hr week vs 20 hr week for example) nor any other factor gives one
worker a greater say in the organization than another.

Small worker cooperatives are governed directly by worker-members, while larger

worker cooperatives are typically governed by a board of directors that is
democratically elected by worker-members. In states with Cooperative Association
statutes, annual meetings of all members are mandated by statute.

Worker cooperatives are usually “closed,” meaning they are open only to a particular
set of people. In a worker cooperative, membership is usually restricted to individuals
who work at that particular business or organization. Such cooperatives might have
strict rules on how long someone has to have worked at the cooperative — and
possibly in what capacity — in order to become a cooperative member. Most worker
cooperatives, for example, require a probationary period of 3–18 months before a new
worker at the business may become a cooperative member.

3.1.2. Benefits

In addition to receiving a salary, worker-members receive a dividend of any profits

made by the cooperative in a given year. The technical term for this dividend is
“patronage.” A recent study by the Democracy at Work Institute (DAWI) on the State
of the Worker Cooperative Sector found that on average 25% of worker cooperatives
are able to offer members such cash patronage. In such cooperatives, patronage
averaged $8,500 per year.

Even if they don’t receive cash patronage, members of a worker cooperative receive
other benefits. On average, their salaries are higher than salaries in comparable
businesses, with the mean worker cooperative salary across the country at
$17.74/hour.

Most of all, however, levels of job satisfaction are far higher. A yet unpublished study
by DAWI which shows that in 2017, 75% of respondents to a DAWI survey reported
higher job satisfaction than at their previous job. Fifty percent said it was “not at all
likely” that they would look for another job in the next year.

3.1.3 Types of Worker Cooperatives

Worker Cooperatives can be found in every sector of the economy. The largest
worker cooperative in the United States is a home health care worker cooperative
based in the Bronx. But worker cooperatives also include aerospace engineers, web
designers, coffee shop workers, and many others.

3.1.4 Relevance for Media

Worker cooperatives empower workers by giving workers not just ownership but
control of an organization. They are an alternative to unions, which function by
distinguishing their good from the good of the company’s owners, and ESOPS, which
provider workers an ownership stake but not a voice.

What we know about media in the twenty-first century is that it is rarely profitable.
This is one reason that media workers have sought to unionize but have not sought to
build worker cooperatives. Media workers well understand that investing in media is a
poor investment, dollar-wise.

3.2. Consumer Cooperatives

Consumer cooperatives are owned by the people who want to use the cooperative’s
products or services.

3.2.1 Governance

Consumer Cooperatives are governed by a board of directors that is comprised of a

majority of consumer-owners and is democratically elected by consumer-owners. The
day-to-day functioning of a consumer coop is usually dictated by the coop’s bylaws.
Some consumer cooperatives, like REI, are constructed so that consumer-owners have
very little say in the day-to-day running of the organization. At the other extreme, a
housing cooperative will probably be governed only by consumer-owners who will
vote for a board that manages day-to-day issues.

3.2.2 Benefits

While consumer cooperatives often can offer members goods or services at a

discounted price, consumers usually form a cooperative in order to provide
themselves with a good or service they cannot get otherwise. For example, in a food
desert, community members may organize to raise capital to bring in a grocery store
that they then own jointly. Credit unions — which are cooperatives — flourish by
providing consumer-members with loans and other banking services they are unable
to get from banks.

Most consumer cooperatives have “open” membership, as the business of a consumer

cooperative usually aims for growth. An example of a cooperative with an open
membership would be a bookstore that is owned cooperatively by its members. It
would be to this cooperative’s benefit to bring on as many members as possible.
Usually, you can become a member of an open cooperative by paying an annual fee
and agreeing to a set of rules. Open cooperatives often have governance rules with
different tiers of governance responsibilities (such as the ability to join the board)
based on how long one has been a member and/or whether the member volunteers
labor.

3.2.3 Types of Consumer Cooperatives

When most people think of cooperatives, they often think of retail stores, especially
small grocery stores. However, the largest and most common types of consumer
cooperatives provide services. Credit unions; electricity and other utility cooperatives;
and insurance cooperatives are some of the largest cooperatives in the country.
Housing cooperatives have so many of their own rules and their own history that data
scientists often do not include housing cooperatives when counting the number of
cooperative firms or members.

3.2.4 Relevance for Media

What makes consumer cooperatives appealing today — especially for news publishers
— is that member-owners of a consumer cooperative provide money to the
cooperative through the purchase of shares, but also are deeply engaged in the work
of the cooperative by virtue of their ownership.

Democratic governance, however, raises a problem inherent in the consumer

cooperative model for news publishers. In this model, the community literally owns
the news, which could make reporting on a rupture or crisis in the community
problematic. Any news organization looking at a cooperative model should assess
how editorial decisions will be made.

Another difficulty for consumer news cooperatives is the fact that efforts to build
them in North America have largely failed or stalled (see 5.2 below). The reasons for
these failures are not entirely clear, but one reason may well be return on investment
— investors may not be interested in a media property that is not making money. It’s
also possible that consumers have not wanted to be engaged in running a news
cooperative or have not felt a strong pull towards being personally involved in news
making, seeing it as a professional rather than a communal activity.

That resistance to deep engagement with news seems to be changing, however. Some
recent positive developments indicate that North America may finally be ready for
consumer news cooperatives, at least at the local or hyperlocal media level. These
positive developments include the success of Berkeleyside’s DPO (see 6.1.2);
donations increasing for local media through the INN News Match; and the work of
City Bureau, New Jersey News Commons, BINJ, PhillyCam and other efforts to bring
consumers into the newsroom. As local newsrooms build strong ties to members of
their own community, those community members may see a monetary and
governance investment in their local media as a worthwhile opportunity.

3.3 Purchaser/Shared Services Cooperatives

Purchaser and Shared Services cooperatives are businesses comprised of for-profit
businesses and/or nonprofit organizations that join together to purchase goods and
services in bulk at a lower cost. If the cooperative provides branding across all its
members, then it is a purchaser cooperative. Purchaser cooperatives can include
franchises, for example. If the members maintain their own unique identities, the
cooperative is called a shared services cooperative.

A special type of purchaser cooperative is agricultural. When farmers cooperate

around finding distribution for the goods they produce, their cooperatives are called
“producer” cooperatives. For example, Sunsweet, the marketer of prunes, is an
agricultural producer cooperative made up of independent farms.

Whether the term is “producer,” “purchaser,” or “shared services,” all these

cooperatives are about businesses joining together cooperatively.

3.3.1 Governance

As with other types of cooperatives, each member has just one vote. That means that
in an agricultural cooperative, a farmer-owner growing crops on 10,000 acres and a
farmer-owner growing crops on 10 acres each have just one vote.

Purchaser cooperatives are typically closed cooperatives, limited to a certain type of

producer (organic farmer, for example) or to producers in a certain area (Napa valley
grape growers), or to purchasers who run a certain type of business (Ace Hardware
stores, for example).

3.3.2. Benefits

The benefit of a purchaser cooperative is to lower business costs and increase

efficiencies for cooperative members.

3.3.3. Types of Purchaser Cooperatives

Purchaser cooperatives are B2B organizations, and so don’t fit the popular
imagination of what a coop is. For example, franchisees can be cooperative; one of
the best known cooperative franchises is Jiffy Lube (legally organized as the Regional
Advertising Cooperative).

Municipalities — towns — can band together to form cooperatives. A recent example

is Wired West, a cooperative of municipalities that joined together to build fiber optic
cable for their residents.

Farmers of all sizes, from mom-and-pops to corporate agriculture, often join together
to purchase seed, co-own processing plants, and distribute their product. These
agricultural cooperatives are often called producer cooperatives.

3.3.4 Relevance for Media

A great example of a media-based news cooperative is the Associated Press. The AP

is actually a cooperative of news businesses that have joined together to purchase the
services of pool reporters and national content. In this shared servcies cooperative, the
publishers retain their independent brands.

With the current need for more investigative reporting and emphasis on collaboration
in media, it would seem that the time is ripe for more news outlets to consider
building a cooperative structure to better tell complex stories. The theory behind this
kind of cooperative is that most independent media do not, on their own, have the
resources for investigative reporting or long-read features. Nor do they have the back-
office capability to market such stories successfully once produced. A reporting
cooperative could leverage philanthropic dollars flowing to its nonprofit members in
order to provide discounted marketing services and pooled reporting to its journalism-
producing members. The democratic structure of the cooperative would ensure that no
member — including the nonprofit — would be able to “take over” the project.

Another very interesting and different type of shared services cooperative is the
Movement Cooperative. Here’s their description: “By leveraging the collective
bargaining power of our members, The Movement Cooperative provides best-in-class
data and technology resources that match the needs of progressive organizations at the
cheapest possible price point.”

It would be easy to imagine a news publisher cooperative that provided publicity and
marketing support — or one that provided bookkeeping and backend services. So
many news organizations have money for editorial but struggle especially with
marketing/PR services. This kind of cooperative would provide these services to
members by requiring members to pay a membership fee, by bringing in philanthropic
dollars, and by selling such services for a profit to purchasers outside of the
cooperative.

3.4. Multi Stakeholder Cooperatives

Multistakeholder cooperatives are built of members who may be both workers and
consumers, purchasers and consumers, or some other mixture of members.

3.4.1 Governance

Often in these hybrid cooperatives different member classes have different roles and
rights. Membership fees may be different for different groups; membership in one
group (like workers or purchasers) might be closed, while it may be open for a
different group (like consumers); board seats may be held for a certain number of
members from each different class.

3.4.2 Benefits

Most organizations and businesses do have multiple stakeholders; this type of coop
recognizes those interests, as well as apportioning different roles to different types of
owners.

3.4.3 Types
A very common form of multistakeholder cooperative is the retail store, especially the
grocery store, comprised of worker-owners and consumer-owners. Often these
businesses begin as worker cooperatives that turn to member owners when they need
an infusion of capital.

A relatively new form of multistakeholder cooperative is the organic food box, which
brings together producers (the farmers) and consumers in a way that benefits both.

3.4.4 Relevance for Media

A multistakeholder cooperative might be of most interest to the freelance writers who

currently rely on Patreon and such to support themselves. One can imagine a
worker/member cooperative, with the member-owners supplying capital (money) in
exchange for content, and the worker-owners supplying labor (content) in exchange
for money. This would be like Medium, but owned by reporters and consumers rather
than a third party trying to make money off the arrangement.

Another interesting possibility could be a shared services multistakeholder

cooperative. For example, various news producers could band together to create a
distribution vehicle (like a progressive facebook) and consumer-owners would get
special access to that content.

3.5. Second Tier Cooperatives

When coops band together to support each other and choose a cooperative form of
governance, the association they form is called a second tier cooperative. Such a
second-tier organization is usually a trade association, organized as a 501c6, that runs
on cooperative values. One example is the Association of Cooperative Credit Unions.

However, it is also possible, for example, for worker coops to band together to create
a second-tier purchaser cooperative. One example is the National Coop Grocers,
which is a cooperative of natural food cooperatives that supports these coops in
lowering purchasing costs on bulk goods, distributing their goods via the website
“stronger together,” and providing a brand identity.

This kind of cooperative is not relevant for North American media right now, since
there are very few North American media cooperatives.

3.6 Hybrid Cooperatives

Multistakeholder cooperatives (for example, those owned by both workers and

consumers) are sometimes called hybrid cooperatives. However, the term “hybrid
cooperative” is used here to refer to a business that is a hybrid of a nonprofit 501c3
organization and a for-profit cooperative. In this kind of hybrid, the nonprofit (or
nonprofits) are members of the cooperative.

The hybrid 501c3/coop is a new idea, launched in part by the Democracy

Collaborative.

3.6.1 Governance
As with any cooperative, each member of the cooperative only has one vote. That
means that, while the non-profit may bring in a considerable portion of the
cooperative’s funding through philanthropic grants, the non-profit as a member only
has one vote.

3.6.2 Benefits

In a hybrid like this, the cooperative is able to leverage the nonprofit’s ability to bring
in philanthropic funding. The nonprofit gains from cooperative membership if the
cooperative is able to help the non-profit build capital towards its mission.

3.6.3 Case Study: Evergreen Cooperatives file://localhost/(http/::www.evgoh.com:)

Here is how Evergreen Cooperatives, based in Cleveland, explains what it is:

Partially modeled on Spain’s Mondragon Cooperatives network — which employs

nearly 100,000 people and generates about $20 billion in annual revenues — the
Evergreen cooperatives seek to empower community residents by replacing a cycle of
subsidy and dependence with jobs that build ownership equity. They accomplish that
through developing worker-owned businesses that pay living wages even as they build
an intricate regional supply chain for these anchor institutions, one rooted in the
local neighborhoods.

In essence, Evergreen is a shared services cooperative in which the partners — the

public sector, Northeast Ohio’s philanthropic community and University Circle’s
anchor institutions — have joined together to build businesses for the community.

Currently, Evergreen has developed three business: Evergreen Energy Solutions (a

company that installs solar panels), Green City Growers (a greenhouse farming
operation), and Evergreen Cooperative Laundry (serving the hotel industry).

3.6.4 Relevance for Media

Right now, most funding for innovation in journalism is coming from philanthropy. A
hybrid model, in which at least one member is a non-profit, enables philanthropic
support of a new cooperative. Such a direction seems critically important if any news
media cooperative is to succeed.

IV. The Business Case for Cooperatives

This section delves into the business of starting up a cooperative, and in particular,
how they can be financed. First, however, the report looks at cooperatives in a
business context, including their role in the U.S. economy and the business benefits of
starting a cooperative.

4.1. Number of Cooperatives

No matter how they are counted, there are a significant number of cooperatives in the
United States.
The University of Wisconsin was able to do a comprehensive study in 2014 which
showed 29,284 cooperative firms doing business via over 73,000 establishments,
excluding housing cooperatives. An earlier study in 2005 estimated there were 7500
housing cooperatives. The 2014 study shows that these cooperatives owned over $3
trillion dollars in assets and generated over $500 billion in revenue.

Unfortunately, there is no year to year study of the number of cooperatives in the

United States, and thus no reliable statistics on whether or how much the cooperative
sector is growing. One reason is that economists and governmental organizations have
not come to agreement on a common standard for measuring the number of
cooperatives.

The most significant issue for counting cooperatives is whether cooperatives are
measured by location (an establishment) or by business (a firm). As an example, a
cooperative credit union is a business, but it may have a five branches. That
organization would be counted as one firm, but five establishments. This is a
particular problem because the Census Bureau measures firms, while Dun &
Bradstreet, the primary counter of businesses in the United States, measures
establishments. Economist Brent Hueth is working on creating a single standard of
measurement.

A second major issue for measurement is how or whether to account for purchaser
cooperatives. True Value Hardware, for example, is a cooperative of independent
stores that share the same brand and purchasing agreements. Individual stores are not
cooperatives but should they be counted as establishments of the purchaser
cooperative? Or is there no establishment of this cooperative, only the one firm?

A third major issue is that some states do not have statutes defining cooperatives. In
such states, cooperatives are usually identified by having the word “cooperative” in
the business name. As a consequence, businesses that would not be considered
cooperatives in some states might be counted, while other businesses that do not have
“cooperative” in the name but could be considered cooperatives are not counted.
Hueth makes the case that all businesses that use cooperative governance should be
counted as cooperatives, since it is democratic governance, even more than financial
ownership, that defines a cooperative. Hueth’s position is controversial, but
demonstrates the lack of clarity around counting cooperatives.

4.2. Why Businesses Go Cooperative

Because cooperatives are often associated with progressive political movements,

ranging from Mondragon in Spain to hippie food coops in the United States, it is easy
to believe that the main reason for creating a cooperative is a political desire for non-
capitalist democratic governance.

However, most cooperatives, in the United States and elsewhere, emerged for the
same reason that any business emerges: an unmet need.

4.2.1 Market Demand

According to economist Brent Hueth, “cooperatives tend to emerge where there is no
market but there is a demand for a market.”

A great example are rural electric cooperatives, which came into being when
electricity companies decided it was too expensive for them to string lines to isolated
houses in rural areas; residents of those areas banded together to string those lines.
Rural electric coops actually tend to be found in red states and in right-wing
communities. Cooperatives work best when they are a business that fills a need, rather
than an economic manifestation of a dogma.

Nathan Schneider, one of the leading academic thinkers about cooperatives, adds that
some cooperatives emerge when there is a market incentive to raise the standards of a
good or product. Organic food cooperatives, for example, arose from a desire to
increase the quality of produce available. The very first coops, like Rochdale, were
formed to provide quality assurance guarantees to customers. One of the founding
principles of the True Value Hardware cooperative — besides the economic value of
shared services — was the ability to create a national brand guarantee of quality for
individual hardware stores.

4.2.2 Better Working Conditions

Cooperatives also can come into being when there is a vital market, but that market is
exploiting its workers or consumers. Taxi drivers in Denver, for example, are
currently cooping to create Green Taxi. Pushed out of the market by ride-sharing
services which exploit driver labor, the workers of Green Taxi are counting on
worker-ownership to lower overhead and thus make them competitive with Uber/Lyft
while providing good worker conditions and a living wage to worker-owners.

According to the National Center for Employee Ownership, employee-owned small

businesses see an average of 4–5% higher productivty levels and greater employment
stability. This is one reason that an increasing number of small businesses are
converting to employee-owned cooperatives.

4.2.3 Build Racial Equity — and Capital Equity

Cooperatives build economic equity through community. Most businesses in the

United States start up on the basis of an equity investment from a wealthy family, a
bank loan (usually to a person with wealth) or a venture capital investment.
Cooperatives usually use start-up capital from their own members — whether those
be workers, consumers, producers, or a mix of these — leveraged by loans from the
local credit union or community bank.

The cooperative model makes starting a business more accessible to people who are
not wealthy and who do not have family wealth. This is especially important for
Black Americans, who earn, on average at least 20 percent than whites, and whose
families hold on average just $5.04 in wealth for every $100 white families hold
(https/::www.nytimes.com:interactive:2017:09:18:upshot:black-white-wealth-gap-
perceptions.html)
According to the Democracy at Work Institute, “more than half of worker
cooperatives in the United States today were designed to improve low-wage jobs and
build wealth in communities most directly affected by inequality, helping vulnerable
workers build skills and earning potential, household income and assets.” Because
profit goes to cooperative members, wealth stays in communities. Because a core
principle of cooperatives is education and training, cooperatives tend to not only
create quality jobs but to train workers. And cooperatives are, on principle, dedicated
to the communities they serve.

4.3 Capital Access for Cooperatives

Ideally, cooperatives get all the capital they need from their members. The fact is,
however, that most cooperatives need more capital then members can provide,
whether it is start-up capital or capital to finance improvement and growth.

Even though the business case for cooperatives of all types is strong, gaining access to
start-up capital is difficult, as is explained in a detailed report from the Democracy at
Work Institute:
https://drive.google.com/file/d/18LqWCMrScHbD4gWFZfTBGF9xRCBO0vjM/view

Because cooperative structures are unusual in our economy, lenders are not optimized
for making loans to them. For example, most banks only give small business loans
based on personal guarantees. But in a cooperative, there is no single owner; the
business is owned by all the members. It is rare that one member is willing — and has
the personal wealth — to be the guarantor for the entire cooperative.

Some businesses get loans from private investors. Such investors, however, generally
want to control the business in which they invest. Because governance in a
cooperative is controlled democratically, cooperatives cannot provide special
governance privileges to an investor. An investor may be a cooperative member, but
that investor will only have one vote — they will not have a vote proportionate to
their investment.

It might appear that credit unions, which are themselves cooperatives, would
understand the governance structure of cooperatives and be more willing to make
loans to cooperatives. However, credit unions face a unique barrier to lending start-up
capital to other cooperatives.

As Nathan Schneider points out, cooperatives tend to be very conservative and risk-
averse with their money precisely because they answer to their members, not to some
anonymous set of investors. As a result, cooperatives rarely are able to get funding
from credit unions unless they have a very strong business plan and a track record of
success (for example, a recent House Bill, the Mainstreet Employee Ownership Act,
made it easier for businesses converting to cooperatives to get loans).

The bottom line is that new cooperatives can struggle to obtain initial financing from
traditional business lenders.

4.3.1 Member Capital: Direct Investment, Stock, and Discounted Products

Ideally, cooperatives are financed entirely by equity capital provided by their
members. In a classic example, ten workers who want to begin a worker cooperative
each put in $15,000, creating starting capital of $150,000.

Just as with any business, cooperatives may offer preferred stock or create direct
public offerings. Note that any stock offering in a cooperative must be in the form of
non-voting shares to keep with the principle of one member, one vote. In other words,
Member A may have bought 10 shares at $100, while Member B may have bought 50
shares at $100, but Member A and Member B each have just one vote. Dividends,
however, would be paid out on the basis of number of shares held.

Consumer cooperatives have another avenue to acquire member capital: discounted

products. REI, for example, sells memberships in its cooperative in exchange for
discounts on products it sells, an annual dividend (return on profit of the coop), and
other member benefits. As in any cooperative, REI members vote for the Board of
Directors and any by-laws changes.

4.3.2 Member Capital: Revolving Loan Fund

Multistakeholder and shared services/producer cooperatives often build capital

through revolving loan funds.

The American Historical Association gives a great example of how such a revolving
loan fund may work:

A simple example is that of an egg-marketing cooperative that makes a charge for

capital of one cent a dozen on all eggs marketed by it. If one million dozen eggs are
sold by the association each year, this would build up a fund of $10,000 in one year,
or $50,000 in five years. Suppose that the capital needs of this cooperative are
approximately $50,000. At the end of a five-year period it has the amount of capital
required for normal operations. In the sixth year, therefore, the $10,000 arising from
charges for capital can be used to pay off the deductions made for capital in the first
year. In each succeeding year, the amount collected in capital charges can be used to
pay off the amount of charges made five years earlier. In this simplified illustration,
the capital of the association is revolved every five years. In the case of a purchasing
association, deductions for capital can be withheld from savings and used until they
are replaced by later savings.

4.3.3 Non-Member Capital: Cooperative Funds and CDFIs

Understanding the difficulties cooperatives face in getting financing, a number of

funds have been created specifically to support cooperatives, such as the National
Cooperative Bank, the Northcountry Cooperative Development Fund and the
Working World.

These funds generally require collateral. The DAWI report , Investing in Worker
Ownership, has a useful chart of these funds.
Cooperatives based in specific communities may be able to obtain loans from local
Community Development Finance Institutions. As of 2015, there were over 950
CDFIs.

4.3.4 Non-Member Capital: Interest Free Loans and Royalty Models

As noted in section 4.2, cooperatives often serve a real market need that is not being
met by other businesses. In some cases, government or philanthropy may have a
vested interest in that need being met. In such cases, cooperatives may be offered
interest-free loans.

An excellent example are rural electric cooperatives. Utilities have no incentive to lay
electric lines several miles just to reach one house, but the owners of such properties
have a clear need for electricity — and the U.S. government has a vital stake in
making sure that need of its citizens is met. As a result, The U.S. Department of
Agriculture (USDA) Rural Utilities Service (RUS) last week periodically provides
millions of dollars in interest-free loans to rural electric co-ops to support member-
facing energy efficiency and other clean energy programs.

Philanthropists often are not allowed to make grants to businesses (see below), but
they can offer interest free loans. In the UK, a cooperative called “The Co-op” created
a charity, the Coop Foundation, specifically to provide low-interest loans to new
cooperatives providing social services.

Individual investors or funds often need to receive interest of some kind on their
investments — if only to keep up with the cost of inflation — but many are willing to
take significant risks in order to invest in companies that do well by doing good.

An emerging form of investment for these social justice investors is the royalty
model. The investor covers start-up or improvement costs, and only is paid back when
the cooperative begins making a profit. The investor is not a cooperative member, but
acts like a venture investor in the sense that they provide technical assistance and play
an active role in developing the business. This model was created by The Working
World, and has only been applied in limited circumstances.

4.3.5 Non-Member Capital: Philanthropy

Because cooperatives are for-profit in nature, and specifically must provide a return
for their members, philanthropy largely has steered away from the sector.

As noted above in 4.3.4, philanthropists have shown a willingness to provide interest-

free loans to businesses that are mission-aligned with the philanthropy. The field is
called “impact investing” and it’s growing — last March, the Nathan Cummings
Foundation pledged to invest a considerable portion of its endowment by making low
or no interest loans to for-profit businesses. So far, however, U.S. based
philanthropists have not invested in cooperatives.

A limited number of foundations, such as Arcus and the Cooperative Development

Foundation, have supported the cooperative sector by grant funding organizations that
provide technical assistance, leadership development and capacity building to
cooperatives. A list of these foundations as of 2014 can be found here:
https://www.nasco.coop/news/grant-funding-options-cooperatives-474 That list seems
fairly current, based on a 2017 blog post about cooperative funding:
https://acba.coop/blog/2017/10/2/cash-for-coops-funding-for-your-cooperative

While philanthropy has not been very supportive of cooperatives, there is one way to
develop philanthropic funding for equity. That is to create a hybrid cooperative. See
Section III,6 above.

V. Media Cooperatives

Cooperatives must be built on the foundation of viable businesses, and then to that
business they add additional governance. Given that media companies struggle not
only with sustainability in general but with adequately staffing of their
administrative/business needs in particular, it is perhaps not surprising that there are
so few media cooperatives. The media cooperatives that do exist, however, provide
instructive examples.

5.1 Are There Media Cooperatives?

Yes. Wikipedia as usual has a convenient list:

List of Media Cooperatives from Wikipedia, November 1, 2018

The U.S. media on this list are not healthy. The Daily Herald seems to have gone out
of business; Haverhill Matters (part of the Banyan project) has not actually launched;
and Wisconsin Citizens Media is run by unpaid volunteers.

In Canada, the New Brunswick cooperative is doing fine but the Media Co-op is
barely alive, living on the labor of unpaid volunteers.

The most robust media on this list are European. Taz.de, Alternativas economicas,
and the Ethical Consumer are doing quite well. Like Consumer Reports in the United
States, the Ethical Consumer offers members a clear financial return with their
recommendations for products and services. It would be worth digging deeper into
Taz.de to better understand why this very successful publication in Germany, with
13,500 paying members, hasn’t translated as well to the United States.

Wikipedia’s list is suspect for a few reasons. One, it doesn’t list any media
cooperatives outside of Europe/ North America other than Apache in Brazil.
However, there are media cooperatives in other areas of the world. One example is the
African Media Initiative, based in Kenya. Another is the Community Media Trust,
created by Dalit women in India. It is beyond the scope of this report to research
media coops around the world, but such a project would be worthwhile. One good
new resource is the CICOPA issue on media cooperatives, published in print January
2019.

This report did not find any other media cooperatives in North America that were
absent from the Wikipedia list except, ironically, for the absence of what is doubtless
the biggest media coop in the world — the Associated Press.
5.2. Case Studies of North American Media Cooperatives

The Associated Press has a long history as a purchaser/shared services media

cooperative. While small, the Wisconsin Citizens Media Cooperative is, essentially, a
worker cooperative (although it makes little money and the workers are not paid). A
better example is the Media Co-op in Canada, which launched as a multi-stakeholder
worker-consumer cooperative. There is as yet no real consumer-based media
cooperative in the United States; however, the Banyan Project has worked for several
years to develop such a cooperative and claims it will launch one any day now in
Haverhill MA.

5.2.1 The Associated Press

You would never know that the Associated Press is in fact a cooperative. AP seems to
go out of its way to bury this fact deep in its About Us section.

Founded in 1846 by a group of six print newspapers who decided to pool resources to
share the cost of wire services. The AP turned into a cooperative in 1900 so that
members could share news content as well as the cost of getting the news from
overseas. By 1946, there were over 1400 members papers, and the AP started adding
radio news stations as well. TV stations were added in the 1960s.

As AP bulked up, it gradually developed its own staff of reporters led by a

management team. That has led to a number of problems.

First, cooperative members now govern the AP only through a board of directors
elected annually. It is thus a much more vertical organization than most cooperatives.
Second, AP now competes with its own contributors. In 2008, Steve Boris wrote a
scathing attack on AP — while accusing it of disseminating only center-left content (a
questionable assertion), Boris pointed out that AP feeds to local papers have become
irrelevant as those feeds can be accessed directly online. Third, there is a distinct
sense among newsrooms that AP is controlled by the largest news chains even though,
as a cooperative, every member should have an equal vote. One reason for this view
may be the lack of transparency around AP’s governance mechanisms.

Relevance for today: The shared services model has been a big moneymaker for AP
for over 150 years. AP, however, never really lived up to cooperative values, and has
ended up hurting many of its members. It thus serves as a cautionary tale within the
shared services media space.

5.2.2 The Media Co-op

In 2003, a number of progressive reporters decided to start their own newspaper, The
Dominion, in order to provide news coverage that was unavailable from Canada’s
largest media — specifically, coverage of the more rural provinces, of low-income
Canadians, and of indigenous peoples living in Canada. The aim, according to co-
founder Dru Ola Jay, was to devise a news system “from the grassroots up instead of
from the top down.”
By 2008, however, it was clear that the business model for the Dominion — sales of
print subscriptions — was not working. That’s when a board member suggested
turning the paper into a multistakeholder cooperative with three categories of
members: consumers, journalists (workers) and editors (producers). The Media Co-op
was created with financial resources from 50 sustaining members and a governance
board comprised of three editor-members, one journalist-member and one consumer-
member.

This effort to gain financial resources through a cooperative structure did not work
either. The board believed that the problem was the national nature of the cooperative.
So the board decentralized in 2011 and created local cooperatives in specific
communities including Vancouver, Toronto, Montreal, and Halifax. Each of these
cooperatives were also multistakeholder organizations, including both journalists and
community members. The Media Co-op itself became a second tier “coop of coops,”
in addition to continuing to run The Dominion.

The various cooperatives within The Media Co-op published a tremendous amount of
content especially on topics that were underreported in the national press. Many of
their “citizen journalism” pieces fed into high-impact reporting on the tar sands, the
G20, mining issues and Canadian foreign policy. At its peak, the Media Co-op
boasted 700 members, each paying between $15 and $200 Canadian dollars.

However, despite some runway funding from the Canadian government, neither The
Media Co-op parent nor most of the local cooperatives made any money. Workers
were volunteers, which led to burnout.

In 2015, the Halifax cooperative split off from the main group. That led to the
collapse of the project. The Vancouver site retains the Media Co-op designation and
still syndicates content from stubs of the coops in Toronto, Montreal and Halifax, but
the coop no longer truly functions on a national level.

Relevance for today: The Media Coop example makes clear that the consumer coop
structure does not in itself create a business. Even in Canada, consumers don’t join a
media organization because of the opportunity to participate in governance.

Dru Ola Jay also offers this advice: the decisions made at the beginning of a
cooperative’s life, especially around governance and membership, turn into sacrosanct
principles. One problem Jay noted with the Media Coop was that the original
principles had not set quality standards for content, which led to professional
journalists leaving the organization, a diminishment of quality content, and a
subsequent lack of interest from consumers.

5.2.3 The Banyan Project

The most ambitious media cooperative project in the United States is still in
formation. It is Tom Stites’ Banyan Project, https://banyanproject.coop/

The Banyan Project aims to replace bankrupt local daily newspapers with vibrant
local online media cooperatives owned by members of the communities on which
they report. The idea is stated on the project’s website:
Each independent news co-op’s voting members will be hundreds of local readers —
thousands in larger communities. The co-ops will be led professionally and governed
democratically through one-member/one-vote election of directors, as are co-ops of
all kinds. The news co-op revenue structure is designed to make them thrive despite
ominous advertising trends. And their journalism will be free for all to read so they
can serve the broad public of the less-than-affluent everyday citizens we call the
Banyan public, not just the upscale people newspapers tend to cultivate.

The founder of the Banyan Project, Tom Stites, has spent a decade developing the
infrastructure necessary for these local cooperatives. He’s built a set of bylaws and
governance rules, a front-end website, a back-end database, and a set of tools to
optimize collaboration between community members and journalists. This package is
ready to go once a local media cooperative launches.

The problem is that no local cooperative has launched yet. Stites says that local
cooperatives will need 4,000 member households each paying $60 in order to be
financially sustainable. He believes a cooperative can begin with as few as 500
founding members paying $250 each. The rub is that no community has come close to
achieving those numbers yet.

The launch project for Banyan is the community of Haverhill MA. Stites has been
working to launch the cooperative there since 2016. He believes that this December
he might finally reach 100 paying members — still 80% below his threshold for a true
launch but enough to hire a community organizer to develop 400 more members.

Relevance for today: Stites has already done all the heavy lifting for anyone wishing
to start a local consumer media cooperative. However, as with The Media Co-op, the
Banyan Project’s difficulty in attracting paying members is troubling.

It is very instructive to compare the difficulty that the Banyan Project has had in
getting any funding with the success of the for-profit Berkeleyside’s $1 million dollar
DPO, and the success of the local 501c3 non-profit City Bureau in bringing in
foundation funding while still achieving deep community engagement. For a
discussion of these models, see Part VI, Alternatives to Cooperative Structures.

It is probably worthwhile for a few other local/hyperlocal news media to experiment

with a cooperative structure. Anyone wishing to do so should look outside of North
America for case studies.

5.3 Collaboration vs. Cooperation: The Climate Desk Case Study

Shared services seem like a strong model for media cooperatives, based both on the
nature of media and on the success of the AP. Because the main business of media is
making media, an obvious direction for a media cooperative would seem to be to pool
reporting, syndication, or otherwise working together to lessen the costs of content
creation and the costs of content distribution. This is, in fact, the AP model.

AP got going in a world in which news organizations were very competitive locally
but not very competitive nationally. Most consumers would subscribe to one local
paper and then might watch or listen to a national news broadcast. They
complemented each other. AP’s shared services provided a leg up for the local
newspaper that was a member.

Competition and collaboration look very different today. Competing for a consumer’s
sole attention is just about impossible in the digital space, whether it is local or
national. The competition news media face is not other news media but the platforms
— Facebook, Google News, Twitter. What matters most now is that news
organizations can simply be seen by new potential users, and the best way to do that is
to seed content in multiple places. As a consequence, news organizations increasingly
have been testing syndication and other forms of collaboration in order to market their
content as widely as possible.

Given that news organizations want to syndicate and even collaborate on content, how
interested are they in sharing governance and ownership of their business? If the
Climate Desk is any indication, the answer is “not very.”

The Climate Desk

The Climate Desk was begun in 2010 by 7 or so news organizations that were seeking
to synchronize the publication of their content in order to achieve more impact,
understood as more views to their websites coming via social media. The topic area
they chose was the environment, and specifically climate change, an issue the editors
felt had been underreported. They hoped to obtain foundation dollars and increased
donor support for working together to develop rich content on climate change.

That effort to synchronize publication did not last long. Editors essentially realized
they were working together to put out an all-new digital magazine that none of them
cared about and that had no loyal following from readers. And it was just too hard to
do — synchronizing publication schedules was crazily difficult.

So in 2011, the organizations tried a new approach. What if instead of co-creating

content and pushing it out, they joined together to hire a team of content producers to
develop multimedia content that all of the members of the Climate Desk could use?
The content produced from that effort was spectacular, but again, audiences didn’t
seem especially interested in supporting it, and none of the participating members felt
enough ownership to want to fundraise for it. Without a critical mass of support, that
effort fell through as well.

So in 2015 Climate Desk jettisoned the idea of creating new content, and instead
decided to focus only on syndication. It became wholly a Mother Jones project, with
editors based at Mother Jones editing content to be syndicated according to a style
sheet the members agreed upon. Now, the 16 participants in the project simply
contribute content to the Mother Jones Climate Desk editor when they have it, and
Mother Jones then sends out a set of stories daily that any of the members can
publish. An example of what this looks like is here (Grist publishes a MJ story) and
here (MJ publishes a Guardian story)

Relevance for today: For Steve Katz, the publisher at Mother Jones and the originator
of the Climate Desk, the project taught him two things:
1. Media outlets require a low threshold to enter into a project. Asking media outlets
to adjust their publication timetable or co-fundraise was too high a bar. Outlets are
more likely to work together if there is no financial or editorial obligation.

2. Media outlets look for the opportunity to gain market share. There is an advantage
to them of syndicating their content if it brings new readers to their site.

3. Media outlets look for an opportunity to create more benefits for their most loyal
users. If they can offer core users better content, they get higher satisfaction, which
leads to more donations.

While the Climate Desk example calls into question the possibility of building a
shared services cooperative around content creation and distribution, there still remain
many opportunities to build shared services around marketing and other backend
functions. And, as with local consumer-based cooperative efforts, the first failure does
not necessarily mean that a shared services cooperative around editorial collaboration
cannot be built.

VI. Alternatives to Cooperatives

Why form a cooperative? A cooperative is the right business model if the potential
founders believe passionately in both democratic governance and democratic
ownership. If, however, the goal of the foudners is more straightforwardly to reward
workers or bring in money from the public, there are better models, including stock
ownership and non-profit democratic governance.

6.1 Stock Ownership

Cooperatives fundamentally are defined by two elements:

a. Ownership by cooperative members

b. One vote per owner

In some cases, businesses may want to provide ownership opportunities to various

stakeholders, but may not want these stakeholders to have a majority vote in the
governance of the business. In such cases, ownership via stock is a better solution
than cooperative ownership.

6.1.1. ESOPs: Worker Owners

An Employee Stock Ownership Plan (ESOP) is a means to provide employees with an

ownership stake in the company without providing an equal governance stake.
Usually, companies with ESOPs create one seat on the board for employees, so there
is governance, but limited.

6.1.2 DPOs: Consumer Owners

With a Direct Public Offering (DPO), a company makes its stock available directly to
the public, without any need for members of the public to go through a broker. For the
company making the offering, the DPO saves money by cutting out all the middlemen
required for a regular stock listing. It also enables the company to market its stock to
the stakeholders who care most about the company. As with any other stock offering,
the person holding the most stock has the largest vote.

6.2 Cooperative Governance in 501c3 Non-Profits

Many people and organizations want to form a cooperative because they value both
democratic governance and the public good. In such cases, a democratically governed
501c3 may be a better choice than a cooperative. Fortunately, just as the Democracy
Collaborative has developed an innovative model for cooperatives to include non-
profit members, organizations like the Cooperative Law Center are developing
innovative models for non-profits to include democratic governance.

6.2.1 Why be a Non-Profit?

Unlike a cooperative, a 501c3 non-profit cannot be owned by its members. It is,

fundamentally, owned by the public. For example, if a non-profit shuts down, its
assets must flow to another non-profit. For that reason, a 501c3 cannot really be a
cooperative in the true sense of that business model.

There are many reasons organizations might prefer the 501c3 model instead of the
cooperative business model.

For one, most philanthropists and major donors will only provide grant money to a
501c3. A significant number of organizations — including many independent media
organizations — would simply not be viable without some philanthropic support.

For another, many organizations really do exist for the public and would not want
their assets to go to individuals. Cooperatives that turn a profit often pay members
dividends that in a non-profit must be plowed back into the organization. When
individual members leave a cooperative, the cooperative “buys out” their shares.
When a cooperative shuts down, or “de-mutualizes,” the assets of the cooperative
revert to the cooperative’s members. For an organization whose mission is to feed the
hungry or serve as the voice of the community, such self-serving would be
contraindicated.

Finally, if an organization already is a non-profit, it can’t go backwards. A non-profit

can never turn into any other form of organization. At most, it can spawn a sister
organization, but even when it does so, that sister organization must have a
completely separate board, separate management, and a separate set of books. In
short, if an organization already is nonprofit, the only way it can be cooperative in any
sense is to adopt cooperative forms of governance.

6.2.2. Models of Nonprofits with Democratic Worker Governance

The Cooperative Law Center is a project of the Sustainable Economies Law Center, a
501c3 non-profit, with a mission of “providing essential legal tools — education,
research, advice, and advocacy — so communities everywhere can develop their own
sustainable sources of food, housing, energy, jobs, and other vital aspects of a thriving
community.” However, the SELC realized a few years ago that they wanted to live
their values, which meant that they wanted to adopt a democratic form of governance
for themselves as a staff.

What they created they call a “worker self-directed nonprofit.” In this model,
decision-making is distributed, workers change their job descriptions based on what
the organization and they themselves need and want to do, and pay is based on living
wage standards rather than job position or experience. Accountability and decision-
making are regulated through semi-autonomous worker circles, For more, see here.

Organizations adopting the SELC worker self-directed nonprofit rules include the
New Economy Coalition, Democracy at Work Institute, and Slow Money Northern
California. Chris Tittle, at SELC, has tasked himself with being a lead on governance
issues. He notes that in addition to the SELC self-directed worker partnership, a New
Zealand group has developed a platform, Loomio, dedicated to participatory decision
making within workplaces.

6.2.3. Models of Nonprofits with Democratic Community Governance

Community Development and Investment projects are beginning to adopt democratic

community governance structures. These projects, like the Boston Ujima Project or
the Richmond Community-owned Development Enterprise, want to be non-profit
because their role is to gather philanthropic capital and government money to invest
in communities.

However, the people behind these projects really heard activists who demanded
“nothing about us without us.” It is not equitable for a small group of people — often
not representative of a community — to make the decisions about how to invest in
and grow that community. So these organizations began experimenting with
democratic forms of governance.

The best developed non-profit example of community governance is One DC, an

organization committed to preserving racial and economic equity in the District of
Columbia. Here is how One DC describes their journey:

In 2010 we continued our tradition of transformation [from regular nonprofit

governance]. In order to walk the talk we needed to shift from a traditional
community development corporation into a community organizing collective that lives
and practices our values of grassroots organizing; democratic leadership; caring
community; human dignity; collective sharing of power and resources; and “hell-
raising for justice” in order to achieve meaningful, systemic change.

After a year of study and years of informally practicing shared leadership, in

September 2010 we implemented a non-hierarchical management structure to reflect
our participatory democracy goals and principles (as taught by Ella Baker). This
includes involving grassroots people in the decisions that affect their lives;
minimizing hierarchy and professionalism in organizations working for social
change; and engaging in direct action to resolve social problems. We have now
successfully transitioned into a non-hierarchical collective non-profit.
One DC manages to decentralize governance by holding leadership meetings; using
strategies like appreciative inquiry to ensure all voices in meetings are heard;
practiciing consensus building and participatory democracy, and ensuring that each
person has a chance to express themselves.

6.2.4. Models of Media NonProfits with Democratic Governance Structures

Pacifica and its stations are the best known example within the media world of
democratic governance within a non-profit structure.

KPFA, the flagship Pacifica station, has a board of directors composed of 18 members
elected from the general listernership, plus 6 members elected from the paid and
volunteer staff of the station. One of the main duties of this board is to conduct “town
hall” style meetings at least twice a year, “devoted to hearing listener’s views, needs
and concerns.” In addition, KPFA has a number of committees which are open to
members of the community.

While anyone who has served on a civic board — like that of a church or school —
may find these rules unremarkable, they are remarkable because the “listenership” of
these stations is literally the public — anyone can turn on the radio and listen to these
shows. That means that board service is literally open to any member of the public.
This openness is a radical form of democratic participation.

Despite a formal governance that is supposed to be radically participatory, Pacifica

and its stations have notoriously fallen far short of their ideals. A post earlier this year
at KFCF, for example, mentions in passing the “breathless ranting, factionalism,
secrecy and problems at Pacifica.” A 2015 piece by Matthew Lasar in The Nation
asked “Is Pacifica Radio Worth Saving?” Lasar characterizes Pacifica radio as
“widely regarded as something akin to the late Ottoman Empire of public
broadcasting. Haven to conspiracy theorists, HIV skeptics and dubious health-cure
infomercials.”

What had happened, according to Lasar and others, was too much democracy without
any processes or procedures to ensure the mission of the organization was put first.
The Pacifica example has discouraged almost everyone in media from looking to
democratic governance.

Opening up governance to the public through an electoral system modeled on

Pacifica’s is probably a mistake. However, the painstaking efforts of SELC and One
DC to build participatory democracy demonstrate that there are ways to balance the
mission of a non-profit and the values of democratic governance.

VII. Conclusion

In recent years, very few attempts at news media cooperatives have been made in
North America, and the ones that have been tried have been largely unsuccessful.
That does not, however, mean that cooperatives as an approach to news media
sustainability and engagement should be off the table.
What follows is a summary of the opportunities that seem most in reach at this
moment.

7.1. Shared Back-End Services for News Publishers

Tech Services. There is significant untapped potential to build a shared services

cooperative around tech services. So far, efforts in this direction have only been made
within a non-profit context, either through associations like INN, AAN or
philanthropically supported nonprofits like the News Revenue Hub. However, the fact
that news organizations are starting to share common platforms, such as ARC and
Clay, indicates that there may in fact be an opportunity to build a profitable shared
services cooperative around such platforms.

Marketing. While news organizations have made progress around engagement with
their core audiences, most except for the very largest have not put resources into
public relations and marketing — essential to finding new audiences. From gaming
the Facebook algorithm to getting on major TV and YouTube shows, news makers
need this kind of access to new markets. A cooperative — particularly a regional
cooperative or one focused around a topical issue — might be a great way to leverage
marketing assets.

Content. The explosive growth in editorial collaboration over the past five years,
sparked in large part through efforts like the New Jersey News Commons, likewise
indicate that opportunities for a shared services cooperative around editorial should be
tried again. Another opportunity might be a cooperative around data-based
investigations, such as those ProPublica has been running.

Aside from news outlets, individual news producers may want to try building a shared
services cooperative to share tech services (especially useful for podcasters), expand
audience,and possibly do collaborative editorial.

7.2 A Consumer News Cooperative?

The public’s growing interest in supporting journalism suggests that a consumer-

owned media cooperative, especially at the hyperlocal level, might gain traction. The
Berkeleyside’s successful direct public offering demonstrates that members of a
wealthy community are willing to own shares of their local media, even with the
understanding that they may never see a true financial return on their investment.
What needs testing is whether such community members would also want the
governance responsibilities inherent in a cooperative — and also whether a less-
wealthy community would be willing to make such an investement. While the
difficulties faced by the Banyan Project in marketing a hyperlocal news cooperative
raise some red flags, the success of City Bureau’s Documenters program indicates
that members of the public are excited to participate in the newsmaking process. A
hyperlocal news organization rooted in community engagement might well be able to
launch a consumer-based cooperative.

7.3 Multistakeholder Cooperative for Workers and Consumers

Individual news producers might be in an even better position to build a
multistakeholder cooperative with consumers. Currently, a number of freelance
journalists rely on Patreon or similar platforms to raise money for their reporting
through crowdfunding. Instead of using such a third party platform, groups of
producers could build a multistakeholder worker/consumer cooperative. Such a
cooperative would have a “closed” tier for workers — who would be freelance
journalists, photographers, podcasters, etc, and an “open” tier for consumers who
would support them. Together they would build a platform for content that could
make additional money through advertising, sponsorship, etc. Even if no additional
money came in, consumers might feel that getting regular free content from their
fellow worker journalist members was return enough.

7.4 What’s Next?

The potential of cooperatives to radically engage communities is tantalizing. So are

the opportunities cooperatives offer to build efficiencies for slim-margin news
businesses. In a news system that requires more trust, cooperatives offer a business
model built on core values of democracy, equity and solidarity. The cooperative
model deserves renewed attention by all those in the news sector.

Resources

People with stars by their names were consulted in preparing this report.

Attorneys

California:

*Ricardo Nunez, The Sustainable Economies Law Center

Colorado:

*Linda Phillips, Senior of Counsel, Josh Weiner LPC

Consultants

*John Duda, Democracy Collaborative

Jim Johnson, Grassroots Economic Organization

*Chris Tittle, The Sustainable Economies Law Center

Media Coops

*Dru Ola Jay, founder, The Media Co-op (Canada)

*Tom Stites, The Banyan Project (media coop project, U.S.)

*Steve Katz, founder, The Climate Desk (vigorously not a coop)

Researchers

*Nathan Schneider, University of Colorado, Boulder

*Brent Hueth, University of Wisconsin Madison

*Tim Palmer, Democracy at Work Institute

Laura Hansen Schlacter, University of Wisconsin Madison

[1] Outside of North America, see http://www.cicopa.coop/news/may-the-

cooperative-model-save-the-local-media-industry/. In North America, see work by
Nathan Schneider, Ours to Hack and to Own: The Rise of Platform Cooperativism, a
New Vision for the Future of Work and a Fairer Internet, edited with Trebor Scholz
(OR Books, 2016). See also the projects discussed at the end of this report.

 Journalism
 Cooperatives
 Media

Written by

Jo Ellen Green Kaiser

Editor, Publisher, Cat-Herder: I’ve worked just about every job in independent
media —

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AboutHelpLegal

The challenge of co-operative governance

By way of the equality principle, of the constitution of a fully empowered general
assembly, of the periodic election of administrators, the democratic powers and duties
of the cooperative are firmly established on the members. These features define the
good governance structure of the cooperative. Good managerial practices for this
challenge are practices of information dissemination by way of internal bulletins,
Internet sites, or information meetings. To these dissemination practices are added
practices of transparency, whereby management displays an open attitude towards
cooperative members. Practices of representativeness are also noted, which ensure
that all categories of members are represented by an administrator on the board of
directors. Lastly, consultation activities encompassing all members, such as internal
surveys, information meetings, and the like bear witness to practices of broader
participation in certain cooperatives.
The challenge of inter-cooperation
The principle of cooperation among cooperatives bears witness to the dynamic nature
of cooperative groupings (mainly into federations or confederations), maintaining a
process whereby member cooperatives retain ownership of the federations. Within
this challenge, researchers identified federative practices, such as sharing not only
labor, expertise, and office space, but also risk, joint purchasing, and promotion. A
subcategory surfaced during the study, the practice of non-federative alliances
including the development of partnerships with cooperatives from other areas of
activity and with non cooperative businesses. In terms of strategic results, all these
practices contribute very decisively to the development of superior managerial and
developmental abilities. For members, the practices of the inter-cooperation challenge
result in a better offer of higher quality products and services.
The challenge of capitalization and investment
Through the cooperative principles of limited return on invested capital, of un
assignable reserves, and of the requirement to be a user-member in order to assume a
position on the board of directors, the processes of investment and capitalization offer
a challenge, especially as regards sourcing. Well-known practices are listed for this
challenge, such as the practices of surplus return and share levels. Generally speaking,
the more often a cooperative does not habitually return the entire amount of its
capitalization surplus, and the more important its various means of financing, the
greater the cooperative’s strategic results in terms of this particular challenge. Another
practice identified is that of information popularization, whereby cooperative
managers develop tools that more clearly explain the workings of finance to members
whose grasp of the subject reputedly falls short. Concerning treatment of surplus,
practices of cooperative financial diagnostics are noted, whereby cooperatives set
their own financial ratio targets. Lastly, investment practices regarding annual return
and various member shares complete the capitalization activities of the cooperative.
When cooperatives develop sound practices for the investment and capitalization
challenge, they obtain strategic results that impact managerial autonomy, such as the
ability to make decisions with consideration given to members. This further enhances
their ability to ensure their own development, providing them with the required means
to do so. It has further been observed that this instills members with a greater sense of
ownership of and responsibility to the cooperative.
The challenge of cooperative values
The basic premise of the cooperative is to bring together people who share a common
need. This done, the individuals formed into a cooperative want to build a project
according to specific values, the cooperative values. This starting point requires the
cooperative to develop in a way that will avoid creating discrepancies and apply
cooperative values in all its dealings with interested parties. The practices identified
for this challenge extend from marketing practices that reflect cooperative values (in
purchasing policies, for example, where suppliers sharing similar values are selected)
to establishing a code of ethics for all parties involved with the cooperative, to
practices of announcing its values to involved parties and to the public at large.
Moreover, some cooperatives exercise practices of participation that extend beyond
its membership and educational practices aiming to propagate cooperative values.
The challenge of community development
The prime objective of a cooperative is to offer its members better services and
products. Yet, along with striving to attain this objective individually and collectively,
contributing to better development of the community is inherent to the nature of the
cooperative. Through its membership, the cooperative belongs to the community and
traditionally returns a “social dividend” to the community. This particular challenge
gives rise to relatively advanced and widely adopted practices within the cooperatives
studied. Practices of community donations are observed, as well as practices of
partnership with local organizations in need of logistical support or intervention. Also,
practices of policy development regarding involvement and support are created within
cooperatives in order to better direct possible cooperative action.
The challenge of cooperative education
Surrounded by traditional businesses whose management tools and level of success
are measured in terms of return on investment, cooperatives must substantiate their
success in regard to their values and principles. As all management tools reflect the
philosophy from which they originate, cooperative managers and administrators must
acquire the tools for analysis, decision-making, and implementation that mirror the
cooperative identity in a broader sense than traditionally defined as cooperative
education. In this particular context, the challenge exceeds the traditional scope of
cooperative educational principles, becoming a prism through which are developed
managerial practices. Educational practices, mainly targeting members and
administrators but also employees (especially in consumers’ and producers’
cooperatives) and the general public, are the most frequently observed practices in the
cooperatives taking part in the study.
The challenge of products and services
Cooperatives are formed to address needs by the offer of products and services within
the framework of cooperative development. Therefore, cooperative products and
services must reach beyond the traditional price-to quality equation. Although this
equation remains an unavoidable element of its service delivery, the cooperative must
also tender cooperative added value: each of the model’s challenges must tender
tangible added value in the products and services of its cooperative offer.
Strategically, the cooperative must offer products and services of competitive quality,
at competitive rates, along with unique elements of cooperative added value.