Patronage

The concept of Patronage is common to cooperatives, but each one does it a bit differently. Patronage is essentially the measure by which surplus generated by a co-op is distributed back to its members. Patronage can be calculated many ways:

• Number of dollars spent with a retailer cooperative, like REI
• Amount of products produced for a producer cooperative, like Ocean Spray
• Amount of services purchased, like in state-recognized healthcare co-ops
• Number of hours worked, such as in co-ops like ours

Patronage can be granted by a co-op for any number of activities that the co-op wishes to encourage, but primarily it is granted for efforts contributed to the coop.

Patronage for Dark Patterns

As a technical consulting co-op, our patronage allocations will be more complicated than “hours worked”. As of this writing, the relevant definitions include:

Tenure

Tenure is designed to give a measure of how long someone has worked for the cooperative while allowing a part-time worker to accumulate Tenure at a slower pace than full-time workers.

• The work-week is defined for Tenure as Sunday through Saturday so that a member who works overtime during a weekend can more easily reach maximum Tenure during both the preceding and the following week. (This will also be helpful for workers who are moonlighting for the coop, as working both Saturday and Sunday in the same weekend will count as two separate weeks.)
• Any amount of work for the Cooperative earns 1 point of Tenure, even if it is only 1 hour.
  • Once we start employing people regularly, 1 point of Tenure will be accumulated even during a week of PTO.
  • Board meetings and correct accounting are very important for a successful business; Tenure should be accumulated for that time, too, even when not employed.
• Tenure reaches its maximum with 32 hours per week. This should encourage us to not continually work 40 hour weeks, but encourage more frequent long weekends.

Patronage

Patronage is the number by which surplus (revenue generated by Members in excess of expenses) is distributed to the Members. Patronage is frequently used by coops as a way to encourage particular behaviors. As such, Patronage is defined with a few key points:

1. Encourage the same concepts as Tenure; as workers, our time is the most valuable resource we bring to the coop.
2. Scale up over time. A new Member to the coop will not receive as much Patronage as a Member who has accumulated Tenure in previous years; this is to reflect onboarding time and to encourage a constant stream of growth. (See the examples for how this encourages growth.)
3. Show appreciation for contracts brought to the coop. Especially in our initial phase, new contracts will likely earn a commission; instead, additional Patronage is earned.

We have the ability to redefine the Patronage Schedule without an amendment to the Bylaws so that we may add other non-labor incentives later. Some examples that have already been discussed:

• Volunteer work
• Tutoring for college students in the fields in which we work
• Participating in local meet-up groups

A note about Surplus

As a coop, just like in an LLC, tax reporting is the responsibility of the individual Members. Surplus is distinct from Profits because federal tax law says that only “patronage-sourced” income may be distributed as tax-deductible patronage refunds/patronage dividends. As a result, money paid as patronage dividends or advances on patronage dividends have a special tax class.

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