community Based Enterprise, Inc. (C2BE)

Strategies for Community Wealth Building through Cooperation in Detroit

Center for Community-Based Enterprise231 E. Grand Blvd., Detroit, MI 48230

313-331-7821 www.c2be.org

New Work New Culture Conference, Oct. 19, 2014by

Deborah Groban Olson, Executive Director

Key Ideas• Best practices to build community wealth (asset ownership)

– Cooperatives – collectively controlling our own economic destiny –many varieties

– Worker ownership including Co-ops

– Locally-rooted, shared resources including patient capital

• Employee ownership, strong business succession tool, can anchor local business and jobs in a community

• Employee owners innovate rather than laying themselves off

• Local, national & international examples

• The long term major successes have:

– a support structure larger than the single firm

– regional gov’t. supporting business clusters and /or

– co-operation among co-operatives and

– a means to grow patient community capital

• Defining “community based enterprise” (CBE)

• How C2BE is using these strategies to help rebuild Detroit

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What is a Co-op?

Entity organized to jointly increase income, decrease cost or provide jobs

• for-profit business • jointly owned and democratically controlled• by its member owners• limited return on equity investment• operated on the Int’l Co-op Alliance Principles

• Types of Co-ops: consumer, producer, worker• Principles are the defining core of a co-op • Many different legal structures are used due to

business needs and state laws

International Co-op Alliance Principles (1996)

1. Voluntary and Open membership. 2. Democratic member control. 3. Member Contribution to Capital. 4. Autonomy and independence. 5. Education of members and public in cooperative principles. 6. Cooperation between cooperatives. 7. Concern for community.

Workshop focus on Worker Ownership & Co-op

Clusters• Workshop focus is worker ownership,

using co-ops and ESOPs

• Start-ups & conversions of existing businesses

• Organized Resource Sharing key to success

313-331-7821 www.esoplaw.com

Worker Ownership Saves & Grows Jobs

• 29% overall

• 1% Employee Owned NetworkOhio manufacturing job loss 2000-2008 Ohio ESOP Survey – Kent State University

• Reasons:

– Far less likely to outsource

– Have avg. 2x higher rates of capital investment

– More employee participation in making business decisions

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Worker Owners 3 to 4 times less likely to lay off workers

From 2010 General Social Survey – table used with permission from National Center for Employee Ownership Employee

Ownership Report p. 6 March-April 2012

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The Power of Ownership

Difference in Post-ESOP to Pre-ESOP Corporate Performance

• Annual sales growth +2.4% Annual• Employment growth +2.3% Annual

• Growth in sales per employee +2.3% Annual

• More likely to continue operating as independent companies over the course of several years.

Source: 2001 Study by Dr. Douglas L. Kruse and Dr. Joseph R. Blasi, School of Management and Labor Relations at Rutgers University

MONDRAGONHUMANITY AT WORK

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MondragonLarge, structured, community of co-operatives model

• 1941 Basque region of Spain - after capital bombed flat

• Priest arrives teaching about independence through mutual self-reliance, self-managed businesses& continuous education

• 1943 created a technical school for area youth to learn work skills

• 1956 first 5 graduates of the school borrowed $ from everyone in town to open the first business – making stoves. They purchased existing plant and equipment from a nearby town.

• 1959 created, Caja Laboral, co-op development bank with savings from co-ops and community members

• Bank created entrepreneurial division that provided R&D for all group businesses & hands-on lending

• 1993 group of cooperatives incorporate as Mondragon Corporacion Cooperativa (MCC) www.mcc.es

Participative employee ownership leads to successful job creation &

retentionMondragon: 50 years from 0 to 85,000 jobs and assets

of 38 billion euro

Emilia Romagna – 8,000 worker coops = 7% of Italy’s population; 12% of exports, 30% of patents; diverse partners

Maryland Brush – old, inner-city employee -owned company makes the leap to green economy product

EBO – diversification through active employee ownership – from mining equipment to recycling equipment & medical devices – tripled business in 5 years

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Ongoing support & co-op resource sharing leads to more successful start- ups

• Well funded & staffed support centers provide ongoing assistance with accounting, legal, business plans

• Much more support than our small business development centers

• Saiolan Start-up center at Mondragon University

– Started in 1980’s

– 89% of its start-ups are still in business 5 years later

– 83% are still in business 10 years later

• US system – 1 out of 5 start-ups is alive in 5 years

• C2BE seeks to create support cooperative for start-ups

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Planning & Development Three to Four Next Generation Businesses in Pipeline (launch 2 per year); goal in

five years: 10 business, 500 employee-owners

Launching in 2009-2010 1. Evergreen Cooperative Laundry (ECL)

2. Ohio Cooperative Solar (OCS)

3. Green City Growers Cooperative (GCGC)

4. GUC Neighborhood Voice

Secondary Cooperatives

1. Evergreen Business Services (EBS)

• AWG bought stores in 2002 bankruptcy & turned them around

• 2011 AWG created HAC to sell 100% ownership of s 76 stores + expansion stores to employees thru ESOP

• 80 stores in 2013

• Employer sought to terminate UFCW’s DB plan

• UFCW negotiated: – New DB plan

– ESOP participation for union members

– Significant role for union on company board of directors

– CBA covering any new stores opened by the company

UFCW & HAC Partnership to Increase Employee Owned & Unionized Stores

Old, inner-city EO companyleaps into new economy

• Maryland Brush Company started in 1851

• Specializes in custom designed power brushes

• Early 19th Century, was largest employer in Baltimore

• PPG Industries bought MBC in 1904

– Had 750 employees at peak with PPG

• 1990 became 100% employee owned ESOP – USW

union concessions + management investment

– Now has 30 employees. Majority of the 70

former employees retired or left on their own

accord

• 2007 after purchase debt repaid elected Subchapter S

status

• Its savings from election of Sub S status helped

finance

• 2010 MBC bought the IP and manufacturing rights for

new product “Skylouver

• New name MBC Ventures, Inc.

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MBC new Skylouver product

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Detroit• Center for Community Based Enterprise

(C2BE)

• Application of Employee Ownership and Community Wealth Building Strategies to Detroit

Community-based enterprise (CBE)Broad definition

– Sustainable

– Locally rooted

– Intentionally structured to provide community benefits; and

– Committed to paying living wages

Many Legal forms for CBE - Co-ops are CBEs

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Slows Bar BQ Courtyard

Center for Community Based Enterprise (C2BE)

Mission

To facilitate economic empowerment in Detroit through the development of shared assets and community-based enterprise (CBEs).

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Center for Community Based Enterprise (C2BE)

Vision• Information & business resource center

• Serves & made up of, community-based enterprises & neighborhood groups

• Using shared asset building strategies

• Enabling collaboration, sustained economic growth, development of patient capital for member businesses, good local jobs, and improved quality of neighborhood life.

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C2BE Current Projects

• Worker owner business succession in grocery & school services with unions

• Neighborhood CBE technical assistance

• Platforms & resources for education & collaboration

– Detroit Co-op Community

– Information & TA resource & clearinghouse

– Conferences, speakers, films

– Equitable Pioneers

Co-op Organizing in Detroit: Examples

Video from C2BE Workshop featuring Collective Courage and local co-op practice 8/17/14

• Collective Courage: a history of African American Cooperative Economic Thought & Practice – Prof. Jessica Gordon Nembhard at C2BE workshop

https://www.youtube.com/audio?v=1cf0DNGp1tU&video_referrer=watch

• Detroit Co-op Developers – consumer, worker & producer

https://www.youtube.com/watch?v=-f44ZuXeiwI

• Video from C2BE Workshop featuring Collective Courage and local co-op practice

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C2BE - 19 events 2009 CBE Week

Detroit Co-op Community (DCC)Network & Learning Community

Potluck at Motor City

Blight Busters 6/6/12

Mt. Elliot Makerspace at MessiahAt the Detroit eastside

Church of the Messiah

volunteers teach young

people & they teach

each other to:• Reuse

• Build & program

computers

• Electronics

• Woodworking

• Bicycle repair

• Screen printing

• Sewing

• Film, music & dance

Raven Holston-Turner is a Detroiter and has been making at Mt. Elliott Makerspace (MEM)

since 2010. She’s taught hundreds of people (youth and adults) how to solder basic electronic

ears working with other projects and actively dreams of realizing ideas that range from cars to

roller coasters, and of starting a business in the neighborhood.

Housing & CSA Garden Co-ops at

Church of the Messiah

Bike shop at Church of the

Messiah Makerspace

2014 Equitable PioneersCo-op Education for Detroiters at Circle Pines

IngenuityUS seeks rooted products• 2005 IUS conceived to save jobs in Delphi

bankruptcy

• 2009 Ingenuity US, L3C founded – & pre-feasibility study on Freeaire ™

• 2009 proposal to the Auto Task Force to get GM & Chrysler to license out their green technology to make more jobs in Michigan; may renew in 2010 re: GM IPO

• 2007 – 2012 pre-feasibility studies on 12 potential products

• 2012 IUS has 2 member-created products that meet criteria & is ramping up to develop and market them

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At scale, production will be by a worker co-op

Modern Furniture an IUS company

Zig Zag Chair

designed by Alan Kaniarz

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MöbellinkTM

Dif loungeIUS product designed by Alan Kaniarz

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For information, assistance or to get involved

ContactDeborah Groban Olson, Executive Director

Center for Community Based Enterprise, Inc.

231 E. Grand Blvd., Detroit, MI 48230

(313) 331-7821 ofc., (313) 300-6517 cell,

(313) 331-2567 fax, info@c2be.org or dgolson@c2be.org, www. c2be.org

Join us at our next

Detroit Co-o Community Potluck on Oct. 29, 6:30 p.m. at 3800 Puritan Ave., Detroit, MI 48238