Marco Lomuscio is a PhD student in Development Economics and Local Systems at the University of Trento, and Gianluca Salvatori is the Secretary General of the Fondazione Italia Sociale and member of the European Commission Expert Group on Social Economy and Social Enterprises. They are expert on Italy’s Marcora Law, which supports the transition of companies at risk of closure into worker-owned co-operatives.
Worker-recovered enterprises – henceforth WREs – are business takeovers cooperatively managed by workers of former investor-owned firms in distress, whose crisis is most often due to conjunctural reasons or inheritance and succession issues. In these cases, either in presence of conflicting actions or through negotiated agreements, the company is transferred to the employees – all or part of it – and converted into a worker-owned and worker-managed enterprise1. Commonly in the form of worker buyouts, ESOPs or employee ownership trusts, WREs provide effective solutions to business crises and business transfer issues, by granting fair workplace conditions and prospects of economic and financial sustainability. WREs also play an important role in contributing to local-scale economic development since they mobilise endogenous resources within the specific territorial communities in which they operate 2–4. Well-known examples of WREs are Italian worker buyouts and Argentinian Empresas Recuperadas por sus Trabajadores.
WREs have existed in mature capitalist economies since the 1950s, as in the case of Italian worker cooperatives and worker buyouts. In response to the harsh consequences of WWII, inspired by socialist experiences – first and foremost, self-management in former Yugoslavia – and by regional cooperative traditions, workers drew on cooperatives to fulfil unmet social needs. Besides the establishment of de novo cooperative enterprises, workers found in the cooperative form a suitable organizational structure to manage business takeovers in firms threatened by poor management or inheritance issues. There, workers created democratic governance schemes based on the one person/one vote rule, implementing equal profit-distribution practices and participatory workplace conditions.
More recently, the WRE phenomenon drew international attention and media coverage due to the 2001 Argentinian economic crisis. In the late 1990s, Argentina experienced a long economic downturn, culminated in the 2001 Argentina’s financial default 5. Through collective engagement, community meetings and assemblies, dismissed workers and their families reacted to the ongoing crisis by taking over and restarting business activities. At least 13,500 workers forced open firms’ gates and successfully restarted more than 300 economic activities as WREs, by achieving recoveries and conversions in absence of managers and owners, and by enduring labour conflicts and occupations 4. Similarly, the number of WREs exponentially grew in Western countries throughout the 2008-10 economic crisis, albeit in ways not as conflicting as those experienced in Argentina and, indeed, often with the support of public authorities. In Italy, 99 new WREs out of 329 arose from 2011 to 2020 – 66 of them from 2014 to 2020 6. In Britain, 227 out of 369 employee-owned firms had been established in a period that ranges from 2014 to June 2019, nearly 60% of the total number of registered employee-owned firms 7.
The Marcora Law and its legislative framework
The first-ever recorded Italian WRE of the post-WWII era dates to 1952, a glassmaking plant in Tuscany. However, before the late 1970s, the employment of worker cooperatives to solve business crises was marginal. With the late 1970s Italian manufacturing crisis getting worst and the related increasing socio-political tensions, the adoption of WRE solutions to business crisis began spreading all over the country. On the one hand, workers were attracted by employee ownership solutions since they could safeguard jobs and productive know-how, and leverage more democratic, open and human-centric economic organizations than traditional organizational forms. On the other, trade unions, political parties and institutional investors saw in WREs the possibility to mitigate the rising unemployment and social tensions, and to preserve national industrial assets in face of globalizing forces.
On the 27th of February 1985, the Italian parliament issued the law 49/1985, also known as Legge Marcora or Marcora Law, aiming at providing legal and financial support to WRE projects all over the country. The law was named after the Christian Democrat industry minister Giovanni Marcora, who inspired the parliamentary debate on WREs 8. The law has granted workers committed to WREs projects both low-interest debt capital and/or direct financial participation to new cooperatives’ share capital. The Marcora Law has allowed workers to invest their unemployment benefit and severance indemnity in recovering the firm in which they had been employed and converting it into a cooperative. The financial resources gathered by former employees could benefit from additional funds, supplied by institutional investors such as Cooperazione Finanza Impresa (CFI) and Foncooper – whose competencies have been assigned to regional subsidiary agencies from 2001 onwards – in a workers/state 1:3 ratio.
The Marcora Law has applied only to those firms that, by explicitly leveraging the concept of mutuality, have been converted into cooperatives and recorded in the General Registry of Cooperatives 1. The Marcora Law was reformed in 2001 (law 57/2001), after an infringement procedure issued by the European Commission based on non-compliance with the State Aid Directive. According to prosecutors, the provisions the law granted to cooperatives were too distortive, “too excessive and prejudicial to market competition” 1. The legal controversy caused CFI and Foncooper to stop funding new cooperatives from 1995 to 2000, and it was finally resolved with a correction of the contribution ratio to 1:1 – the ratio that regulates the maximum amount of resources invested by public agencies into each WRE project compared to resources brought by workers. Additionally, the reform modified the maximum lifetime of investments granted by CFI to WREs, whose duration cannot exceed 10 years nowadays 1,9.
As properly emphasised by Vieta and co-authors in their 2017 report 1, the Italian legislative framework that rules WRE conversions is complexified by fragmentation and stratification of rules and by an intertwining of responsibilities that is not always clear. Apart from the Marcora Law, several other legislative measures apply to the establishment and funding of a new WRE. The Civil Code norms duties and functioning of cooperative firms and federations of cooperatives, their governance structures and tax rules. Bankruptcy and insolvency laws apply to former investor-owned enterprises and regulate firm assets’ dispossession – unless workers obtain firms’ ownership before insolvency procedures, a rare event. The provision of unemployment benefits and their conversion into new cooperatives’ share capital pertains to the social security domain and its laws. Additional financial support is assured via traditional credit lines, issued by economic development agencies and private credit banks at national, regional and even local levels – which are not always in compliance with the application of the principle of subsidiarity.
Italian WREs and worker buyouts
Besides its financial aspects, the Marcora Law provides a facilitated route to business restorations and takeovers through worker cooperatives. However, the path defined by the Marcora Law is not the only one accessible for transformation and takeover operations: historical evidence shows there are other options for worker-led business takeovers. On the one hand, it is not mandatory for worker cooperatives to take over a closed business by applying to the Marcora Law, its legal framework and funds. Workers can accomplish business takeovers even without any support from institutional investors and their resources, as successfully done by worker co-ops before the Marcora Law had been issued. On the other hand, worker-led business takeovers do not necessarily adopt a cooperative legal form, as in the case of limited and public liability companies. Indeed, in marginal cases, business takeovers can take conflicting paths due to occupations or other forms of non-negotiated intervention, at least in their transition-to-WRE phase. WREs that opt for negotiated, non-conflictual transition are known as worker buyouts 1. In these cases, workers rely on resources and legal support offered by the Marcora Law to purchase or rent the assets of former investor-owned firms through the establishment of a new cooperative. In Italy, the application of the Marcora law is by far the most frequent and common solution adopted by workers in recovering and converting firms, and in statistical terms, these non-conflicting worker buyouts are clearly prevalent 1.
At the time Vieta and co-authors edited the EURICSE report, 202 out of 257 registered Italian WREs had been financed by CFI and Foncooper as negotiated workers buyouts – nearly 80% of the total WRE population. These firms mainly located in historically cooperative regions, such as Tuscany, Emilia-Romagna and Veneto. In 2014, 131 out of 257 WREs were active firms and 69% of them concentrated in manufacturing sectors. These firms employed on average 36 employees, and their average lifespan was approximately 14 years 1. As of 2021, the active WRE population is made up of 125 firms, 82 of which were already active in 2014. 66 new WREs arose between 2014 and 2020, but only 43 of them are currently active firms. For further details about territorial, demographic and organizational dimensions of Italian WREs, please check the EURICSE report.
The Marcora Law in numbers
The management of Marcora Law measures is mainly entrusted to CFI and regional agencies, which offer financial and counselling solutions to WREs in the form of worker buyouts. From 1986 to 2001, the Italian state provided 355 million euro to 796 cooperatives through its agencies, where 80 million euro directly managed by CFI and invested in 159 worker buyouts’ share capital in support of 5,964 workers 10. As of December 2014, Vieta and co-authors estimated a direct involvement of CFI in 80% of Italian WREs on behalf of 12,700 workers: “as a second tier cooperative and financing institution, CFI is financially sound, enjoying 84 million euro of its own share capital, net assets of 98 million euro, total loans to cooperatives of 106 million euro, and current capital reserves of 15 million euro” 1. In February 2021, the CEO of CFI stated that his agency has supported 329 worker buyouts from 1985 onwards; 99 of them, established between 2011 and 2020, have been granted a 35.2 million euro public investment 6.
In a period that ranges from 2007 and 2015, CFI invested 84 million euro in Italian worker buyouts. A parliamentary-commission report issued in 2017 documented that this 84-million-euro investment generated over 576 million euro in tax revenues, 6.8 times the invested capital. Besides the measures implemented exclusively by CFI, the overall investments granted by the Marcora Law from 1985 amount to 240 million euro, 35 of them to be invested from 2021 onwards 8. Since its inception, the Marcora Law has granted financial resources that can be translated into an investment of 14,000 euro ca. per worker 10. This is striking evidence in favour of WREs and worker buyouts: in Italy, unemployment benefits on average require a 40,000 euro of public contribution per worker and even so they do not generate as high tax revenues as WREs do 1.
As a final note, we would like to point out that the richness of data on Italian worker buyouts is not adequately counterbalanced by the same amount and quality of data on Italian WREs as a whole. Indeed, CFI and other agencies data refer only to negotiated worker buyouts which were granted by their resources. However, Vieta and co-authors estimated that about twenty per cent of Italian WREs have not made use of resources and support of the Marcora Law 1, and risk remaining untraced.
Italian WREs are:
- Democratic and cooperative organizations, which safeguard employment and grant fair workplace conditions
- Sustainable enterprises, whose economic and financial performances are comparable or even superior to traditional firms
- Viable solutions against business closures and unemployment throughout economic crises
- Collective and multi-stakeholder experiences that boost and support local-scale economic development
- Remunerative investments for public agencies, since they reduce expenditure in unemployment benefits while providing returns of investment in the form of tax revenues
- Vieta, M., Depedri, S. & Carrano, A. The Italian Road to Recuperating Enterprises and The Legge Marcora Framework. Euricse Research Report 15/17, (2017).
- CECOP-CICOPA. Business transfers to employees under the form of a cooperative in Europe: Opportunities and challenges. (2013).
- Pendleton, A. & Robinson, A. Employee Ownership in Britain Today. vol. 1 (Oxford University Press, 2017).
- Ruggeri, A. & Vieta, M. Argentina’s Worker-Recuperated Enterprises, 2010- 2013: A Synthesis of Recent Empirical Findings. JEOD 4, 75–103 (2015).
- Vuotto, M. Organizational dynamics of worker cooperatives in Argentina. Serv Bus 6, 85–97 (2012).
- Riva, P. Mi licenzi? E io ti compro. Come funzionano i Workers Buyout. (2021).
- Robinson, A. & Pendleton, A. Employee Ownership In Britain: Size and Character. (2019).
- Rete Italiana Imprese Recuperate. Una politica attiva per il lavoro. Misure operative per il rilancio, l’ampliamento, il consolidamento delle Imprese Recuperate. (2021).
- Pagani, E. Il Workers Buyout Quale Possibile Strumento di Risoluzione della Crisi della Piccola e Media Impresa Italiana. Crisi d’Impresa e Insolvenza (2020).
- Osservatorio Regionale Toscano sulla Cooperazione. L’impatto Economico dei finanziamenti pubblici sui principali settori del sistema toscano delle cooperative: evoluzione e valutazione. https://www.regione.toscana.it/documents/10180/70188/Impatto%20economico%20finanziamenti%20pubblici_78668/dce7c0b8-8ff6-4a16-814a-2e6887d939ee (2004).