In the Netherlands, the cooperative model is mainly known in the agricultural sector. However, the context for using this model is broadening as more and more companies use the cooperative as an investment vehicle and participation entity. This also makes this model of employee participation popular in the start-up scene. In short, the time when the cooperative was exclusively associated with a farmer’s entity is now behind us.
Through my ongoing research into employee participation and capital distribution, it is becoming increasingly clear to me how simple the participation market is. In the Netherlands, for example, there are only three participation models that work well to really turn an employee into a co-owner. And then we are explicitly not talking about bonuses, profit rights or other ‘salary variants’ (that is profit participation, but certainly not owner participation). Instead, we’re talking about:
- Economic ownership of shares;
- Depositary receipts of shares via a STAK;
- Membership of a cooperative.
According to Wikipedia the cooperative ‘[…] is a form of self-organization of producers or consumers, aimed at increasing economic power and achieving economies of scale. The laws in Belgium, the Netherlands and other countries allow the existence of a ‘cooperative association’. Cooperatives have also played an important role in the economic empowerment of large population groups, especially around the transition from the 19th to the 20th century. Producers and consumers were able to unite through the cooperative. This allowed them to collectively achieve goals that would have been unattainable for an individual – especially in the area of investment. Many cooperatives are active worldwide.’ The largest cooperatives in the Netherlands are well-known companies such as FrieslandCampina and Rabobank. This seems to be an indication of the fact that the cooperative is a very serious legal entity in addition to the BV, NV or foundation (Wet & Recht). Interesting is the fact that a cooperative is actually an association. In the Netherlands we are even officially talking about a cooperative association. This is simply due to the way in which the cooperative is incorporated into the law in the Netherlands. According to the legislator, it is literally an association of members, with aspirations to make money, or to trade.
Cooperative also paterfamilias
In another article the STAK (Stichting Administratiekantoor) was discussed as a model for employee participation. I indicated that the STAK functions as a kind of paterfamilias, which holds shares in a company and issues certificates for this to the employees who participate via this paterfamilias. The interesting thing about this is that the cooperative can also take this position of the paterfamilias. However, where in a foundation the board has control over the ultimate ‘opinion’ of these paterfamilias, in a cooperative everyone has a seat ‘in the head of this man’. Where the foundation only hears a single voice shouting out loud as ‘voice of the people’, in the head of the cooperative a lot of voices shout very loudly where they hope that this paterfamilias will come out. This is not to say that the foundation is better than the cooperative or vice versa, but that this difference must be taken into account.
It is important that the paterfamilias can make sense of all the opinions of the members of the cooperative. To support him in this, the articles of association or the membership regulations of the cooperative must clearly state who is allowed to express which opinion/vote. This is ultimately an advantage of the cooperative. This legal form is not very strictly laid down in the law, and has many possibilities for adjustment in the articles of association and the regulations. Do you want to set up a partnership of several large institutions as investors, where you want every investor to participate in several projects – but not every investor in all projects? Then you can record this with a cooperative. In other words: the free form of the cooperative offers the possibility to set up quite complicated constructions.
Interesting for ‘the little man’
It is not surprising that the cooperative is used as a way to facilitate employee participation. The first cooperatives to be set up were flour mills in Woolwich and Chatham, UK, in the early 1800s. The workers became owners of the factory and could buy from the factory not only flour, but also bread, butter and even tea and sugar. As Wikipedia calls it, the model is “aimed at increasing economic power and achieving economies of scale.” It is therefore not surprising that especially ‘the little man’ has interest in it and can be the owner. This makes it interesting to choose a cooperative, especially with large groups of employees who all want to have a say, to be able to distribute profits as they see fit and to be able to make investments.
Whether you actually uses a cooperative, STAK or simply economic ownership of shares as a means to get employees to participate, ultimately depends entirely on:
- the initial budget to set up participations (with/without notarial costs);
- what is the purpose of the participation; and
- how the ‘votes’ should be distributed
No need to drop out
On our platform Share Council you can easily set up and use all three forms of employee participation. Anyone who comes into contact with the subject of employee participation for the first time can easily be surprised by the amount of information, choice stress and uncertainties. Many companies therefore give up early, as soon as it becomes clear what will happen to them if they want to set up employee participation. Exactly this is our raison d’être. We think it is incredibly important for our society to have every company use some form of employee participation. That is why we make it really simple, so that ‘dropping out’ will simply no longer exist.
Would you like to learn more about a cooperation and the possibilities it provides? You can! Go to our website and discover the Share Academy. Here you will not only find more blogs, but also the knowledge base where you will find even more information. Any questions after this article that can’t be found on the website, or just want to talk to us? Do not hesitate to contact us, we are happy to help.
Quintus Willemse – Team Hero 🦸♂️and participation specialist
founder Share Council