ABSTRACT
Capital-based firms have a variety of tools for measuring the surplus they generate by directing free cash flows toward investor profit. This chapter argues that this approach is inappropriate for many types of enterprises, most notably cooperatives. Using the concept of a residual claimant, the patron who has the claim on all of an organization’s cash flows once all other expenses have been paid and who also bears the burden of the organization’s risk, this chapter argues that worker-, consumer-, and producer-ownership structures suggest that these patrons would have different uses for a firm’s free cash flows, as would a non-profit enterprise. This chapter advocates moving away from an exclusive reliance on investor-focused approaches to the development of various cooperative models for enterprise management.
