Property Rights, Efficiency and Labor‐managed Firms

Solving the Underinvestment and Degeneration Problems of Workers' Cooperatives

“…98-100, Bartlett et al 1992, p. 113, Bonin et al 1993, but see Uvalic 1986, who defends common ownership and blames capital maintenance requirements for underinvestment in this type of cooperative -workers cannot recover the principal of a reinvestment if they are not allowed by the cooperative's rules to pay themselves the depreciation charges). A predicted consequence would be that these cooperatives should have shorter time horizons than capitalist firms (see discussions in Ellerman 1986, Minkler 1989. There are, however, reports that some cooperatives predominantly of the commonownership type use similar payback periods to size-and sectormatched capitalist firms if they actually do reinvest (e.g.…”

A feasibility study of swine producer management cooperatives

“…Members of a LMF are also able to enjoy the usufruct of the assets. The LMF goes one step farther than the participatory firm in that members of the LMF share in the residual income (Minkler, 1989). This is a similar practice that is followed in a cooperative business where the members share in any residual income through the distribution of retained earnings.…”

“…Variations in practices make a concise definition extremely difficult to state. However, due to the modern legal and tax structure and the standards which have been set forth in the (Minkler, 1989). The participatory firm is related to a cooperative because the employees of the firm are actively involved in the decision making process and in an agricultural cooperative the members can influence decision making through their vote of who serves on the board of directors.…”

“…Members are less alienated due to their involvement in decision making. Minkler (1989) pointed out that this involvement in decision making is a benefit to the members because they set their own level of monitoring and incentives to work.…”

“…The horizon problem increases difficulties in raising capital because members are reluctant to invest their earnings from cooperative profits in long-term investments. Another reason for the difficulty in raising capital is due to the common property problem whereby new members acquire the same claims on cash flows as those members already in a cooperative (Jensen and Meckling, 1979;Minkler, 1989). The common property problem causes a disincentive to undertake projects with future benefits because those benefits have to be shared with new members who didn't initially contribute to the project.…”