Worker-Owned Industrial Conglomerate Makes First Acquisition – Next City
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Worker-Owned Industrial Conglomerate Makes First Acquisition

Worker-owners of CORE Staffing and Tribe Works meeting to discuss the formation of Obran, the first “industrial conglomerate” for worker-owned co-ops. (Photo courtesy Obran)

On Baltimore’s North Avenue, the former Centre Theatre building is one of those old art deco theater structures you can find in cities across the country. It now houses a coworking space, where an unlikely group of people met in December 2018 to talk about how to build not just one worker-owned cooperative, but a whole lot of them.

The worker-owners of CORE Staffing formed the backbone of the group. Also based in the former Centre Theatre building, it’s a worker-owned staffing cooperative, placing workers in temporary positions at businesses in and around Baltimore. It was established by and primarily for people returning from incarceration, who still face systemic discrimination in the job market because of their criminal records. In good economic conditions, unemployment rates for formerly incarcerated people hover around 27 percent.

CORE Staffing later inspired a group of local tech sector workers and freelancers to start their own digital creative services worker cooperative, called Tribe Works. While coming from generally more privileged backgrounds, the economy wasn’t quite working so great for them, either.

The two cooperatives wanted to figure out how to join forces and expand their businesses and the number of worker-owned cooperatives in Baltimore.

“The initial challenge was how do we get two very different businesses in different industries with different members from different backgrounds on the same page,” says Joseph Cureton, a Tribe Works co-founder who also had also been providing administrative and tech support for CORE Staffing.

They looked at other models of cooperatives joining forces and supporting each other’s work. The Mondragon Corporation, the world’s largest federation of cooperative businesses, in Spain. The Arizmendi Association of Cooperatives in the Bay Area. The Evergreen Cooperatives model in Cleveland. While inspiring, none of these models felt quite right, Cureton says.

They ended up taking a page from corporate America. They created a new holding company, Obran Cooperative. Each of the existing cooperatives became subsidiaries of the new cooperative. Instead of outside investors owning and controlling the parent company, the workers within each subsidiary business own and control the parent company. Each worker buys in with a $250 ownership share, which can be paid in installments of one percent of each paycheck, entitling them to a voice in operations, an equal vote in business decisions, and an equitable share of any profits. The result is essentially the early stages of an industrial conglomerate of worker-owned cooperatives.

The term industrial conglomerate is intentional. “We want to create a very big holding company that in some ways acts like a vulture capitalist holding company that makes a lot of profit, except of course that the profits would belong primarily to the employees of each subsidiary,” Cureton says.

The holding cooperative recently completed its first acquisition — of Appalachian Field Services, a home renovation and property management company that primarily employs people with lived experience of substance use disorder and treatment.

“Day one, I was a little skeptical, wasn’t sure I was going to like [being part of Obran],” says Brian Aleshire, a project manager at Appalachian Field Services. “But I’ve absolutely loved it. It’s added a sense of enthusiasm for me because I feel like we have more people on board now trying to help each other. Being part of Obran has raised my bar for what’s possible.”

After that first meeting of CORE Staffing and Tribe Works, back in December 2018, the group spent the next year working with advisors to research and workshop how to create something no one had ever created before, initially dubbed “The Staffing Cooperative.” They secured a $150,000 grant from The Workers Lab, and a $5,000 grant from the Abel Foundation, to support the research and legal work that went into structuring and establishing the holding cooperative. They also went through Start.coop, a 12-week accelerator program for cooperatively-owned businesses.

Legally, Obran incorporated in Colorado, to take advantage of that state’s flexible cooperative business entity law. Around 30 states have some kind of cooperative entity legislation on their books, according to the National Cooperative Business Association. Some have specific legislation for worker cooperatives or agricultural cooperatives.

Colorado’s cooperative business entity law covers multiple types of cooperatives, but most importantly for Obran, it allows the cooperative to sell partial ownership shares to outside investors while providing strong protection for the cooperative to limit the influence of outside investors over business decisions.

“We wanted to be able to raise capital from investors as we grow, and we welcome their voice, but we didn’t want their voice to dominate, we wanted investors to be subservient to the workers,” Cureton says.

At the parent company level, the workers across the entire portfolio of subsidiaries elect seven board members from among their ranks, while outside investors elect two board members. Each subsidiary maintains separate legal status and its own board and management structure, and can also sell up to 49 percent in ownership shares to outside investors if necessary to raise capital, with Obran Cooperative maintaining at least 51 percent ownership.

Each subsidiary runs itself day-to-day like an independent company, but, over time, company policies and major business decisions get filtered through the lens of the workers who sit on its board and represent a controlling ownership interest in the company. Meanwhile, the holding cooperative’s decisions, especially which companies to acquire, also get filtered through the lens of the worker-owner members.

“The members from CORE Staffing … wanted easier access to more stable employment, and they liked construction as an industry to work in,” Cureton says. “So we started to hunt for a construction business.”

Appalachian Field Services founder David Lidz heard Cureton speaking on a podcast about the holding company’s vision and desire to acquire a construction company. He reached out to Cureton and said he was interested in the model and possibly selling the business, but wasn’t sure his workers were ready to transition into being a worker cooperative just yet.

But that’s one of the strengths envisioned for the model — the holding cooperative can acquire the business when the owner is ready to sell the business, and the transition into running the business as a cooperative can happen at a pace that makes sense for each new set of workers. After Lidz sold his company to Obran, it hired him to serve as a management consultant to help run the business as it transitions into being a worker-run business.

The Appalachian Field Services acquisition also included three properties that the business happened to also own. Lidz also co-founded and leads a nonprofit, Ladders to Leaders, which leases and operates the properties as sober and transitional housing for people recovering from substance use disorder.

The whole transaction actually required Obran to take out two loans, one to acquire the business and one to acquire the properties. Both loans came from the Baltimore Roundtable for Economic Democracy, a loan fund for worker cooperatives run by other worker cooperatives in Baltimore. Both CORE Staffing and Tribe Works had previous early-stage loans from the lender, so there was an established relationship to call upon.

“It was fascinating to see how much thought was put into how do you create something that gives you the benefits of a holding company but something more intentional about how it creates wealth and who it creates wealth for,” says Kate Khatib, who coordinates the Baltimore Roundtable for Economic Democracy. “This property acquisition loan for Obran was the largest investment we’ve made so far in any worker cooperative.”

Future acquisitions, Cureton says, will most likely also reflect the specific needs of Obran’s worker-owners. Appalachian Field Services came with desired employment opportunities but also some transitional housing for current and future Obran members. Those properties in turn have the added bonus of serving as collateral for future loans.

“Every rent check members pay is going to an asset on our balance sheet to collateralize future acquisitions,” Cureton says.

Another motivation for acquiring a business would be growing in related skill sets, Cureton says. For example, Appalachian Field Services currently doesn’t provide heating, ventilation and air conditioning installation and repair services, so Cureton says they’ve talked about going out and acquiring an HVAC business both to increase the range of services Obran can offer homeowners and other property owners, as well as giving their workers a direct pathway into HVAC careers if that’s something they want to do.

“My five year vision would be for us to have our hands in every practical part of rehabbing a house, being able to do every single thing, having the manpower, licenses credentials for all that,” Aleshire says. “I hope Obran and all of us who are part of the cooperative can grow to a point where we’re impacting communities directly by buying homes that are pretty much on the borderline of being condemned, eyesores on so many blocks, to rehab them and have people living in them from those communities.”

Editor’s note: We’ve corrected the name of CORE Staffing.

This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi.

Oscar is Next City's senior economics correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha, and Fast Company.

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