Governing the Firm
Workers' Control in Theory and Practice

This book provides case studies of worker-controlled firms and surveys available evidence on their behavior.

Gregory K. Dow (Author)

9780521522212, Cambridge University Press

Paperback, published 17 February 2003

342 pages, 1 b/w illus. 6 tables
22.8 x 15.3 x 2 cm, 0.452 kg

'What difference does it make when workers rather than capital owners control firms, electing managers, and owning (for better or worse) the fruits of their labor? Greg Dow's Governing the Firm provides the economic analysis and empirical facts based on the experience production cooperatives around the world to answer this question. It's the best book on the subject.' Samuel Bowles, University of Massachusetts, Amherst

Most large firms are controlled by shareholders, who choose the board of directors and can replace the firm's management. In rare instances, however, control over the firm rests with the workforce. Many explanations for the rarity of workers' control have been offered, but there have been few attempts to assess these hypotheses in a systematic way. This book draws upon economic theory, statistical evidence, and case studies to frame an explanation. The fundamental idea is that labor is inalienable, while capital can be freely transferred from one person to another. This implies that worker-controlled firms typically face financing problems, encounter collective choice dilemmas, and have difficulty creating markets for control positions within the firm. Together these factors can account for much of what is known about the incidence, behavior, and design of worker-controlled firms. A policy proposal to encourage employee buyouts is developed in the concluding chapter.

1. Introduction: 1.1 Economic systems
1.2 The control dimension
1.3 Looking for clues
1.4 A projected synthesis
1.5 The plan of the book
2. Normative perspectives: 2.1 Why care about workers' control?
2.2 Equality
2.3 Democracy
2.4 Property
2.5 Dignity
2.6 Community
2.7 The author shows his cards
3. Workers' control in action (I): 3.1 Surveying the terrain
3.2 The Plywood cooperatives
3.3 The Mondragon cooperatives
4. Workers' control in action (II): 4.1 The Lega cooperatives
4.2 Employee stock ownership plans
4.3 Codetermination
5. Conceptual foundations: 5.1 The theory of the firm
5.2 The nature of authority
5.3 The locus of control
5.4 Why firms cannot be owned
5.5 Asset ownership
5.6 Residual claims
6. Explanatory strategies: 6.1 The symmetry principle
6.2 The replication principle
6.3 Transaction costs
6.4 Optimal contracting
6.5 Adverse selection
6.6 Repeated games
6.7 Path dependence
6.8 Cultural explanations
6.9 The strategy to be pursued
7. A question of objectives: 7.1 What do labor-managed firms maximize?
7.2 The Illyrian firm
7.3 Membership markets and labor markets
7.4 Membership markets and stock markets
7.5 Imperfect membership markets
7.6 What does the evidence say?
7.7 Some lessons
8. Views from economic theory I: 8.1 Explaining the rarity of workers' control
8.2 Asset ownership: incentives and information
8.3 Asset ownership: bargaining and information
8.4 Can asset specificity explain the rarity of workers' control?
8.5 Work incentives without risk aversion
8.6 Work incentives with risk aversion
8.7 Can work incentives explain the rarity of workers' control?
9. Views from economic theory (II): 9.1 Capital constraints
9.2 Debt financing
9.3 Equity financing
9.4 Can capital constraints explain the rarity of workers' control?
9.5 Portfolio diversification
9.6 Can portfolio diversification explain the rarity of workers' control?
9.7 Collective choice
9.8 Can collective choice explain the rarity of workers' control?
10. Transitions and clusters: 10.1 Organizational demography
10.2 Formation rates
10.3 Worker takeovers
10.4 Degeneration
10.5 Investor takeovers
10.6 Survival rates
10.7 Business cycles
10.8 Clusters
11. Toward a synthesis: 11.1 The causal tapestry
11.2 Credible commitment toward labor
11.3 Credible commitment toward capital
11.4 The composition of control groups
11.5 The commodification of control rights
11.6 Intellectual history and current debates
11.7 Is workers' control a unitary phenomenon?
12. Getting there from here: 12.1 Practical considerations
12.2 A modest proposal
12.3 Reassuring shareholders
12.4 Governing firms
12.5 Trading jobs
12.6 Sample calculations
12.7 The long and winding road.

Subject Areas: Business & management [KJ], Economics [KC], Political science & theory [JPA]