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content/wiki/cooperative-foundations/session-content/session-6-equitable-economics.md
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@ -6,7 +6,9 @@ parentDocument: Session Content
outlineId: 7d969dbb-eff0-43a1-a017-c80c470dac79
createdBy: Jennie R.F.
---
> **Peer Supports:** See [PS Guide: Session 6 — Equitable Economics](/doc/ps-guide-session-6-equitable-economics-2TJJWj4zWu) for your role during session and this week's studio support meeting.
# Session 6: Equitable economics
> Peer supports: See [PS Guide: Session 6 - Equitable Economics](/doc/ps-guide-session-6-equitable-economics-2TJJWj4zWu) for your role during session and this week's studio support meeting.
## Welcome
@ -15,46 +17,52 @@ Tag Yourself
---
## Intro – 5 min
## Intro - 3 min
Last session you designed governance structures. Now we test them on the hardest topic: Money.
Last session you designed governance structures. Now we test them on one of the most complicated topics: money.
In traditional studios, financial information is hoarded. If the boss says we can't afford raises, how do you know that's true if you don't have access to the books? If you've been the victim of the sudden shuttering of a studio, you probably didn't see it coming, because you never saw the real financial picture.
Most of us have complicated feelings about money. Gender, race, disability, class, and other factors related to our identities and experiences affect both your actual access to money and your comfort talking about it. If you've been excluded from financial education or generational wealth, that shapes how you engage with it with your team-mates.
Secrecy entrenches power. In a cooperative, we have the opportunity to bust this wide open.
Before we start: take a minute to notice what comes up when you think about your studio knowing your financial situation. Excitement? Dread? *You don't need to share it, just think about it.*
In traditional studios, financial information is hoarded. If the boss says we can't afford raises, how do you know that's true if you don't have access to the books? If you've lived through the sudden shuttering of a studio, you probably didn't see it coming, because you never saw the real financial picture.
Secrecy entrenches power. In a cooperative, we have the opportunity to reject that.
---
## Check-in – 10 min
## Check-in - 8 min
Last session's homework asked you to discuss: *What does financial sustainability look like for you personally? What would you need from this project?*
Last session's homework asked you to discuss:
1. What does financial sustainability look like for you personally?
2. What do you need financially to be able to continue to commit your time to the studio?
Anyone want to share what came up in that conversation?
*And think about what financial information have you never been allowed to see at work?*
*And: what financial information have you never been allowed to see at work?*
---
## Part 1: Where money comes from – 15 min
## Part 1: Where money comes from - 12 min
We're going to talk about transparency and sharing in a bit. But we want to start with the good stuff!
We're going to talk about transparency and sharing in a bit. But we want to start with the good stuff.
Where does money actually come from for game studios and creative cooperatives?
Most sustainable studios don't rely on a single revenue stream.
Where does money actually come from for game studios and creative cooperatives? Most sustainable studios don't rely on a single revenue stream.
### Member contributions
* Member shares – equity buy-in when you join
* Member loans – members lending to the co-op, sometimes with interest
* Sweat equity – labour contributed before there's money to pay wages
* Member shares: equity buy-in when you join
* Member loans: members lending to the co-op, sometimes with interest
* Sweat equity: labour contributed before there's money to pay wages
### Grants and public funding
* Arts councils – Ontario Arts Council, Canada Council
* Industry programs – Ontario Creates, Canada Media Fund, etc.
* Arts councils: Ontario Arts Council, Canada Council
* Industry programs: Ontario Creates, Canada Media Fund, etc.
* Municipal and regional funds
* Project-specific grants
@ -64,16 +72,17 @@ Grant funding can hide your real operating costs. If grants are covering everyth
:::
\
### Revenue from work
* Publisher advances and deals
* Platform funding – Epic MegaGrants, id@XBOX etc.
* Platform funding (Epic MegaGrants, id@XBOX, etc.)
* Client work and contracts
* Direct sales
* Crowdfunding
* Service/contract work – porting, QA, art assets, sound design for other studios
* Adjacent creative work – animation, writing, interactive installations
* Knowledge work – workshops, speaking, consulting, teaching
* Direct sales and crowdfunding
* Service/contract work: porting, QA, art assets, sound design for other studios
* Adjacent creative work: animation, writing, interactive installations
* Knowledge work: workshops, speaking, consulting, teaching
### Investment and loans
@ -85,62 +94,60 @@ Grant funding can hide your real operating costs. If grants are covering everyth
### Tax credits and incentives
* Provincial digital media credits
* SR&ED
* SR&ED
* Deductible patronage dividends (specific to co-ops)
These can be stacked!
These can be stacked.
:::info
**Ontario Adaptation:** [S6: Funding & Tax Landscape](/doc/491a3f7f-f423-4db6-a3fb-521895d2468c)
Ontario adaptation: [S6: Funding and Tax Landscape](/doc/491a3f7f-f423-4db6-a3fb-521895d2468c)
:::
*Some content above adapted from Effective Practices in Starting Co-ops*
---
### Credit unions and community lending aren't new ideas!
They come out of the same cooperative lineages we explored in Session 1: Black communities built mutual aid funds and credit unions when they were excluded from banks. Immigrant communities have practised rotating savings (tandas, susus, ROSCAs) for generations. The cooperative credit union movement itself grew from communities pooling resources because existing financial systems didn't work for them. When you're looking at these options, you're drawing on a long history of people building economic infrastructure for themselves.
### How do we choose what paths to pursue?
This needs to be a collective and intentional decision. Developing and maintaining these streams require time and effort that can eat into your actual game development.
*Coops have different capital options than traditional startups.* Venture capital doesn't work for us – VCs want big returns on their investment and eventually an "exit" (sale), which conflicts with worker ownership. On the other hand, we have access to funding streams that prioritize social impact over profit maximization.
Coops have different capital options than traditional startups. Venture capital doesn't work for us. VCs want big returns on their investment and eventually an "exit" (sale), which conflicts with worker ownership. On the other hand, we have access to funding streams that prioritize social impact over profit maximization.
Cooperation among cooperatives is one of the ICA cooperative principles we talked about a few weeks ago. When you do take on client or contract work, consider prioritizing work with other coops and solidarity economy organizations. This is a way we can build a "trade network" that helps everyone!
Cooperation among cooperatives is one of the ICA cooperative principles we talked about a few weeks ago. When you do take on client or contract work, consider prioritizing work with other coops and solidarity economy organizations. This builds a trade network that helps everyone.
So think about: What funding sources has your studio used or considered? What feels aligned with your values?
Credit unions and community lending aren't new ideas. They come out of the same cooperative lineages we explored in Session 1: Black communities built mutual aid funds and credit unions when they were excluded from banks. Immigrant communities have practised rotating savings (tandas, susus, ROSCAs) for generations. The cooperative credit union movement itself grew from communities pooling resources because existing financial systems didn't work for them. When you're looking at these options, you're drawing on a long history of people building economic infrastructure for themselves.
---
## Part 2: Financial transparency – 15 min
Every one of these revenue paths involves a relationship with someone: a funder, a client, a publisher, a collaborator. And every one of those relationships needs written terms. This is the thing that gets skipped most often, especially early on when everything feels friendly and low-stakes. But when there's no written agreement, the terms default to *whoever has more power or is willing to push harder*. Writing it down is how you make sure *everyone is protected, including you*. That's true for external relationships, and it's true inside your co-op too.
---
*Think about: What funding sources has your studio used or considered? What feels aligned with your values?*
## Part 2: Financial transparency - 10 min
### Why transparency?
* Financial secrecy is a tool of control
* Open books = shared power
* When everyone understands the money, everyone can participate in real decisions
Financial secrecy is a tool of control. Open books mean shared power. When everyone understands the money, everyone can participate in real decisions.
### Basic practices
* Share monthly financial summaries with all members
* Open-book policy (anyone can see the full accounts)
* Open-book policy: anyone can see the full accounts
* Make all compensation transparent (everyone knows what everyone earns)
* Plan budgets collectively – this practice is sometimes called *participatory budgeting*, where members have real decision-making power over how money is allocated
* Plan budgets collectively. This practice is sometimes called *participatory budgeting*, where members have real decision-making power over how money is allocated.
### Tips for accessibility
* Use plain language – not everyone speaks accounting.
* Use plain language. Not everyone speaks accounting.
* Summarize number-dense spreadsheets ("we have 8 months of operating costs in the bank")
* Create space for questions. There are no embarrassing questions about money – most of us were never taught this stuff.
* Visual dashboards can help. Tools like [CoBudget](https://cobudget.com/) or [OpenCollective](https://opencollective.com/) make finances visible, or even just a shared spreadsheet
* Create space for questions. There are no embarrassing questions about money. Most of us were never taught this stuff.
* Visual dashboards can help. Tools like [CoBudget](https://cobudget.com/) or [OpenCollective](https://opencollective.com/) make finances visible, or even just a shared spreadsheet.
### Tell the messy truth
@ -148,20 +155,18 @@ Transparency isn't just internal. When you're doing public-facing work like crow
### Common resistance
We have heard – what if competitors see our numbers?
We have heard: what if competitors see our numbers?
But for real – what's actually at risk versus what's just discomfort? Most studios aren't competing on secret financial information. Is this fear really about vulnerability?
For real, what's actually at risk versus what's just discomfort? Most studios aren't competing on secret financial information. Is this fear really about vulnerability?
*Resource:* [*Seeds for Change – Finance*](https://www.seedsforchange.org.uk/finance)
*Resource:* [*Seeds for Change: Finance*](https://www.seedsforchange.org.uk/finance)
---
## Part 3: Compensation models - 18 min
## Part 3: Compensation models – 20 min
How do cooperatives pay people? There's no single right answer, but whatever you choose should be transparent and collectively decided.
SO! How do cooperatives pay people? There's no single right answer, but whatever you choose should be transparent and collectively decided.
*we have tools to help you try out these models at* [*coop.love*](https://coop.love)
*We have tools to help you try out these models at* [*coop.love*](https://coop.love)
### Models to consider
@ -180,11 +185,13 @@ SO! How do cooperatives pay people? There's no single right answer, but whatever
* Pros: Familiar, can help attract specialized skills
* Cons: Can recreate the hierarchies you're trying to escape
*Hybrid approaches:* Base rate + adjustments, or equal base with different hours allocated
*Hybrid approaches:* Base rate plus adjustments, or equal base with different hours allocated.
Whatever model you choose, *think about: What do we collectively believe is fair, and can we talk openly about it?*
### Activity – 10 min
### Activity - 10 min
*\[Facilitator: by-studio breakout\]*
In studio groups, discuss:
@ -195,35 +202,36 @@ In studio groups, discuss:
Share back with the group.
:::tip
Funders like CMF have their own ideas about what roles are worth, and if your compensation model doesn't match their ranges, it can cost you the application. So you end up in this spot where an external funder is effectively setting your internal pay structure. How might your co-op handle that?
:::
---
## Part 4: Profit-sharing basics – 20 min
## Part 4: Profit-sharing and surplus - 14 min
### What is profit-sharing in a coop?
What is profit-sharing in a coop?
When the cooperative has surplus (revenue beyond expenses), how does it get distributed? This is fundamentally different from how corporations work.
When the cooperative has surplus (revenue beyond expenses), how does it get distributed? This works differently than in a standard corporation.
### Three types of money flowing to members
#### **1. Wages**
Payment for work performed. This is an expense, not profit-sharing.
1. Wages: Payment for work performed. This is an expense, not profit-sharing.
2. Patronage returns (or "dividends"): Distribution of surplus based on members' contribution to the coop, usually measured by hours worked. This is what makes coops different. Surplus flows to the people who created it, not to outside investors.
3. Member shares: Your stake in the coop. Usually a fixed amount you pay to join, returned when you leave.
#### 2. Patronage returns (or "dividends")
*Co-op shares are not corporate equity.* Co-op shares do not appreciate in value. When a member leaves, their shares are redeemed at par. Whatever they paid in is what they get back. Returns on share capital are capped by the co-op's own governing documents, and in most jurisdictions there's a statutory ceiling on top of that. You cannot attract investment by promising high returns the way a standard corporation can.
Distribution of surplus based on members' contribution to the coop – usually measured by hours worked. This is what makes coops different: surplus flows to the people who created it, not to outside investors.
The co-op model is built so that surplus flows back to members through patronage dividends, proportional to work, not capital. That's why patronage returns matter more than your share value, and why the distribution question is where the real design decisions live.
#### 3. Member shares
Your stake in the coop. Usually a fixed amount you pay to join, returned when you leave.
***Co-op shares are not corporate equity.*** This is worth thinking about carefully. Co-op shares do not appreciate in value. When a member leaves, their shares are redeemed at par. Whatever they paid in is what they get back. Returns on share capital are capped by the co-op's own governing documents, and in most jurisdictions there's a statutory ceiling on top of that. You cannot attract investment by promising high returns the way a standard corporation can.
The co-op model is built so that surplus flows back to members through patronage dividends, proportional to work, not capital. That's why patronage returns matter more than your share value, and why the next section is where the real design decisions live.
:::info
In **Ontario**, membership share dividends are capped at prime + 2% under the Co-operative Corporations Act. For the full Ontario funding and tax landscape, see [S6: Funding & Tax Landscape](/doc/491a3f7f-f423-4db6-a3fb-521895d2468c).
In Ontario, membership share dividends are capped at prime + 2% under the Co-operative Corporations Act. For the full Ontario funding and tax landscape, see [S6: Funding and Tax Landscape](/doc/491a3f7f-f423-4db6-a3fb-521895d2468c).
:::
@ -236,85 +244,50 @@ In **Ontario**, membership share dividends are capped at prime + 2% under the Co
### When to distribute versus when to reserve
This is a *values* conversation!
This is a *values* conversation.
* Build a reserve first. How many months of runway do you want before distributing anything? – there's no right answer.
* Distribute when you have genuine surplus, not just a good month
* Decide collectively if you want cash now or investment in the studio's future?
* Some coops allocate a percentage of surplus to a "collective account" for shared needs
* Build a reserve first. How many months of runway do you want before distributing anything? There's no right answer.
* Distribute when you have genuine surplus, not just a good month.
* Decide collectively: do you want cash now or investment in the studio's future?
* Some coops allocate a percentage of surplus to a "collective account" for shared needs.
### Incorporation context
Cooperative legislation is provincial in Canada, so the rules depend on where you incorporate.
*Ontario:* Worker coops can distribute patronage returns to members based on their labour contribution. There's flexibility in how you structure this – you decide the formula in your bylaws.
*Ontario:* Worker coops can distribute patronage returns to members based on their labour contribution. There's flexibility in how you structure this. You decide the formula in your bylaws.
*Federal:* You can also incorporate under the Canada Cooperatives Act, which has its own rules.
However you structure it, patronage returns flow to workers based on their labour – not to outside shareholders based on their investment. This is the legal mechanism that grounds worker ownership.
### Discussion
Any questions about how this would work for your studio?
---
## Part 5: Who owns what you make together? – 10 min
We've talked about how surplus flows to members. Buuuut, before you can share surplus you need to decide *who owns* what you're creating together!
In traditional studios, the company owns everything. Employees have no claim to their creative work. When the studio sells or shuts down, workers walk away with nothing.
Cooperatives can do this differently with explicit decisions!
### Questions to discuss as a studio
1. Who owns the game?\n– the cooperative as an entity? individual members jointly? a mix?\n– if the coop owns it, what happens to that ownership if someone leaves?
2. What about work created before the coop formed?\n– if someone brings existing assets, code, or designs into the project, do they retain individual ownership or contribute it to the collective?\n– how do you value those contributions?
3. What happens if someone leaves mid-project?\n– do they retain any ownership stake in work they contributed to?\n– can they take "their" assets (character designs, code they wrote) with them?\n– what's the difference between leaving voluntarily vs. being asked to leave?
4. What happens if the studio dissolves?\n– who controls the ip? can one member buy out others?\n– what if you can't agree?
*Not deciding* means you're going to default to whatever legal structure you eventually incorporate under. Worst case scenario is realizing too late that everyone's expectations were mismatched.
However you structure it, patronage returns flow to workers based on their labour, not to outside shareholders based on their investment. This is the legal mechanism that grounds worker ownership.
### A note on sweat equity
If you haven't started selling your game yet and members are contributing labour without pay, how does that translate to ownership?
If you haven't started selling your game yet and members are contributing labour without pay, how does that translate to ownership or future compensation?
"Sweat equity" is complicated. Some coops track hours and convert them to ownership stakes. Others treat all founding members as equal regardless of hours contributed. However you do it, everyone needs to understand and agree to the approach.
*Use your Peer Support session to start this conversation. You don't need answers yet – just notice where you're in agreement and where you're uncertain.*
---
## Closing – 5 min
## Closing - 7 min
Financial conversations can be really difficult. They reveal vulnerabilities, and tensions about values, fairness, and trust. There's so much space for conflict to show up here.
Financial conversations can be really difficult. They bring up vulnerabilities, and tensions about values, fairness, and trust. There's a lot of space for conflict to show up here.
In the next session, we'll build tools for navigating disagreement constructively.
In the next session, we'll build tools for navigating disagreement constructively. Money is often where conflict shows up first.
Think about: *Is there a financial conversation your team has been avoiding?*
### Solo reflection (2 min)
Take a minute to write down for yourself:
---
*Is there a financial conversation your team has been avoiding? What makes it hard?*
## Homework (with Peer Supports)
This is private. You don't need to share it. But hold onto it for your peer support meeting this week.
### Homework
1. **Discuss financial transparency**
Studio conversation (before your PS meeting): What financial information would feel vulnerable to share? What would you need to feel safe sharing it?
1. What financial information would feel vulnerable to share? What would you need to feel safe sharing it?
2. What have you never been allowed to see at a workplace, and what would have been different if you had?
2. **Discuss compensation models**
Studio + PS working session: Work through the compensation models with your peer supports. What feels fair? Where do you notice tension between "fair" and "comfortable"? What do you need to know about each other's situations to decide together? List the non-project labour that happened in the last month (admin, communication, emotional support, onboarding, documentation). How much of that showed up in anyone's compensation?
1. What feels fair to you?
2. Where do you notice tension between "fair" and "comfortable"?
3. What do you need to know about each other's situations to decide together?
4. List the non-project labour that happened in the last month (admin, communication, emotional support, onboarding, documentation). How much of that showed up in anyone's compensation?
---
Noticing task: Between now and next session, pay attention to when financial information comes up in your team. Who has it? Who asks for it? Who doesn't?