Fostering Worker Cooperatives with Blockchain Technology

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* Article: Mannan, Morshed, Fostering Worker Cooperatives with Blockchain Technology: Lessons from the Colony Project (December 1, 2018). Erasmus Law Review, Vol. 11, No. 3, 2018,

Available at SSRN:


" In recent years, there has been growing policy support for expanding worker ownership of businesses in the European Union. Debates on stimulating worker ownership are a regular feature of discussions on the collaborative economy and the future of work, given anxieties regarding the reconfiguration of the nature of work and the decline of standardised employment contracts. Yet, worker ownership, in the form of labour-managed firms such as worker cooperatives, remains marginal. This article explains the appeal of worker cooperatives and examines the reasons why they continue to be relatively scarce. Taking its cue from Henry Hansmann’s hypothesis that organisational innovations can make worker ownership of firms viable in previously untenable circumstances, this article explores how organisational innovations, such as those embodied in the capital and governance structure of Decentralised (Autonomous) Organisations (D(A)Os), can potentially facilitate the growth of LMFs. It does so by undertaking a case study of a blockchain project, Colony, which seeks to create decentralised, self-organising companies where decision-making power derives from highquality work. For worker cooperatives, seeking to connect globally dispersed workers through an online workplace, Colony’s proposed capital and governance structure, based on technological and game theoretic insight may offer useful lessons. Drawing from this pre-figurative structure, selfimposed institutional rules may be deployed by worker cooperatives in their by-laws to avoid some of the main pitfalls associated with labour management and thereby, potentially, vitalise the formation of the cooperative form."


From the Conclusion

"Colony is one of a handful of blockchain projects currently exploring how to design organisations that work in the interest of its multi-stakeholder organisations. These decentralised organisations reconfigure ownership within firms, enabling greater rights to the residual profits of the firm and control rights. In doing so, they bear a remarkable resemblance in the crypto-space to the early pioneers of worker cooperativism. Undoubtedly, such projects (including Colony) entail risks and proactive cooperators should be wary of them when experimenting with blockchain technology. The regulatory status of crypto-tokens is still in flux178 and sudden classification as a security can have deeply unpleasant, costly securities liability consequences for members.179 This article has concentrated on the capital and governance structures of cooperatives, but it is still unsettled which legal structure would be most suitable for the goals of DOs while still providing the benefits of limited liability.180 It is therefore important to be open to the idea of also using technologies other than blockchain in creating the governance and capital structure recommended in this article. Moreover, for the promoters of such businesses, as well as interested participants, it is necessary to challenge and grapple with the complexity of these governance structures in which corporate governance-by-design is sought, as it potentially embeds power structures in new and unexpected ways. Decades of research into cooperative degeneration and regeneration highlight the importance of being alive to the possibility of oligarchy emerging. 202 On a more optimistic note, blockchain projects such as Colony provide considerable insight into the technological and theoretical possibilities (and limitations) of decentralised governance. The proposed capital and governance structure of colonies may hold lessons for LMFs, such as worker cooperatives, in the process of being formed and those confronted with cross-border coordination problems as they expand overseas. These decentralised governance structures allow us to imagine self-employed persons or small businesses in Bangladesh, Uzbekistan and the Netherlands collaborating together in a joint venture, where power is not distributed according to capital or bargaining power, but reputation tied to the quality of their non-capital contributions. As blockchain technology is adopted more widely, this may be a part of a broader movement to achieve a more engaged, more effective participatory democracy across nation states.181 By providing the contours of how worker cooperatives may draw lessons from these blockchain projects, this article has sought to contribute to the realisation of alternative economies182 in which there is greater scope for worker ownership."

Caste Sudy

See: Colony