The Cooperative Conversion Option

Dr. Sean Geobey is an Assistant Professor in the School of Environment, Enterprise and Development at the University of Waterloo. His research collaborator, Meg Ronson, has a Masters of Economic Development and Innovation from the University of Waterloo. Meg is currently the Member Success Specialist at SuccessionMatching, an online community of business buyers, sellers, and succession planning professionals.

With the support of the Atkinson Foundation, Meg Ronson and I published a new paper called The Co-operative Opportunity: A Strategy for Small Business Succession in Ontario this fall. Our research pursued signs of massive generational change in this sector. As the Baby Boom’s small business owners retire, they have many options to consider. There is no easy way to balance their own interests with the interests of their workers, customers and others. We wanted to examine the consequences of this change as well as related issues and tensions.

Currently, 41 percent of Ontario’s small business owners will require succession plans over the next five years. Only three in five have them. With a glut of retirees looking to sell their businesses and far fewer buyers, many of these companies will be sold on the cheap, some simply to be stripped of their assets and closed down. Some will simply be abandoned altogether.

This presents a significant challenge for rural areas and for workers. In rural areas, aging business owners are the only providers of critical goods and services their communities need. They also provide jobs more than a third of private sector employment is found in Ontario’s small businesses.

It also presents an opportunity to consider the co-operative conversion option. Canada’s co-operatives are viable enterprises owned outright by their workers like La Siembra Co-operative (the producers of Camino Foods), consumers like Mountain Equipment Co-op, producers like Gay Lea Foods, or a combination of stakeholders like West End Food Co-op.

Co-operative conversions do more than save jobs co-operatives create decent work. Their democratic governance structure gives workers a real stake in their companies. They invest in personal and professional development for their members. They generally pay higher wages. And it’s been proven that they are able to weather economic downturns better than conventional firms. That’s because they prioritize long-term success and viability over short-term financial gains. Workers can expect stable, long-term employment and a mutually beneficial relationship with customers and the community.

In recent years, we’ve watched a number of small business convert to co-operatives: the worker buyouts of the Prince Albert Daily Herald in Saskatchewan and Nanaimo Forest Products in British Columbia to multi-stakeholder buyouts of Careforce Health Services in Nova Scotia and the Aron Theatre in Campbellford Ontario. Across Canada, co-operatives already employ almost 90,000 workers and generate more than $34 billion in annual revenue.

Local economic development strategies have always included public policies and programs to nurture small businesses. But small businesses have not been understood for their full potential as an individual and collective endeavour in how these policies and programs are designed. It’s time to expand our definition to include collective entrepreneurship and to build out a set of supports to encourage this option.

This is what we conclude in our report:

  1. We need more awareness of the co-operative model among both sellers and potential buyers of small enterprises.
  2. At the level of the individual business, we should invest in developing an entrepreneurial mindset, management skills and business acumen amongst workers, consumers and community members. This includes cultivating a workplace culture conducive to taking on new roles in the business.
  3. Finally, creative financing tools must be developed so that co-operative members can purchase enterprises. Fortunately, we can look to other jurisdictions for lessons. Spain’s Labour Societies and Italy’s Legge Marcora show us what enabling legislation looks like. The United Kingdom’s opening of co-operative share issues to non-member investors is instructive. Closer to home, there is the strong network of co-operative-supporting institutions in Quėbec such as the Centre for the Transfer of Enterprises of Québec and The Solidarity Fund of the Federation of Workers of Québec.

All transitions are tough but some are more purposeful than others. The transition to a green economy is experienced by many as chaotic and having a disproportionate negative impact on workers, their families and lower-income communities. There is, however, a positive alternative. We can choose a “just transition” one managed to produce good outcomes for the planet and people.

Similarly, the Atkinson Foundation thinks of co-operative conversion as a strategy for a “just succession”. They’d also like to know what you think. So would Meg and I. Please read this report. Share it with your networks. Send us your comments and questions. But most importantly, let this be the start of a purposeful conversation about a practical option for these transition times.

Photo Credit: Russ Christianson/Aron Theatre: When the previous owner decided to retire in 2010, community members in Campbellford, Ontario rallied to convert the Aron Theatre into a member co-operative.