The worker cooperative corporation law recently enacted’ in Massachusetts presents a democratic corporate form new to American law. On a practical level, the law adopts the legal structure of the successful industrial cooperatives of Mondragon, Spain and adapts it to the American context. On a theoretical level, the law brings into the workplace two related normative principles which are absent in the conventional corporate form: the democratic principle of self-government and the principle of basing property acquisition on the fruits of one’s labor.

In the short run, the law facilitates the emerging worker ownership movement in the United States. Worker ownership has emerged as a stopgap job preservation tactic in potential plant closings and as a structural form of local ownership which can play a strategic role in the reindustrialization of America. Given the destructive effects of the hypermobility of capital in today’s economy, worker ownership is a much needed alternative form of organization.

From a broader perspective, the new law illustrates one possibility for restructuring the modern business corporation. Rare are the times in human history when the major institutional form in a society has been bereft of conventional legitimation. With the separation of ownership and control in large corporations, corporate management largely governs its dominion without even the traditional basis of property ownership. With the rapid growth of the modern corporate conglomerate, there is a widening gap between the exercise of corporate power and conventional institutional legitimation, as owners become ever more removed from management. Even where ownership and control are united in the modern corporation, its authoritarian structure lacks legitimation by the democratic ideals of self government. In contrast, these ideals serve to give the worker-owned cooperative or self-managed firm its inherent legitimacy as a social organization.

This Article addresses these problems– the absence of legitimacy and democracy– by demonstrating how the concept of democracy can be applied directly to the corporation. The Article proceeds upon the assumption that the democratic structure is an inherently legitimate ideal. The new law and the theory behind it demonstrate one way of reconstituting a corporation as a democratic social institution-wherein people receive the fruits of their labor and retain democratic control over their work lives.

In order to set this out most clearly, the Article begins with a description of the mechanics of the recently enacted Massachusetts law and the Mondragon model upon which it is based. After explaining the industrial cooperative model, the Article then articulates the theoretical justifications underlying the industrial democracy model of corporate organization as a viable and inherently legitimate alternative to the prevailing corporate form.