ABSTRACT
A worker cooperative, if structured according to the economic democracy principles , differs from a conventional corporation in that rights to profits and governance are personal rights tied to labor, rather than freely transferable property rights. This structure prevents the concentration of legal rights in the hands of a few, as seen in capitalist firms.However, cooperatives face challenges due to the lack of a standard gradual conversion mechanism,with most being established as new startups or by an all-at-once conversion of a conventional company to a cooperative. Cooperatives are notoriously rare; however, contrary to the conventional explanation, research indicates that this is not due to inherent inefficiencies . One of the main challenges seems to be sluggish growth throughstarting-from-scratch creations on one hand, and legal, financial, and organizational complexities related to cooperative conversions on the other. We claim that the potential for scaling the cooperative sector lies in the gradual cooperative conversion mechanism embodied in the concept of Cooperative ESOP.We argue that the Cooperative ESOP can, with the help of a strong supportive institutional environment, gradually createdemocratic ownership starting with existing capitalist firms without workers having to invest their assets.
