Flat organizations aren't really flat. Instead of written org chart you have an unwritten org chart and it might be harder to replace a bad informal manager than a bad formal manager. See: https://www.jofreeman.com/joreen/tyranny.htm

Democratic and flat is not the same (I was wondering if this confusion comes up). Flat doesn't necessarily prescribes what the power distribution is, but democracy does. On the other hand, democratic systems can have an organizational hierarchy too, as is a case with representative democracy.

I don't think anybody is rejecting the idea, it's just that it isn't considered as a default way to build a new organization. And it makes sense since, for a founder, you take on extra risk, put in extra work, and demand a lion's share of the rewards. It takes a special person to do the first two but not the latter.

If people were actively rejecting worker co-ops, you'd expect to see them failing in practice. But what actually seems to happen is, they're very difficult to start up, but once running, run effectively with little centralized leadership.