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UN International Year of Co-operatives

Launch Event - Regather

What do long-lasting co-operatives do differently?
Dr Rory Ridley-Duff, Sheffield Business School (email r.ridley-duff@shu.ac.uk) Course Leader - MSc Co-operative and Social Enterprise Management UnLtd/HEFCE Ambassador for Social Enterprise

An orientation for this talk…

“Anyone unable to learn from history is living in the dark ages.”

What is mutuality?
“The essential characteristic of a mutual [co-operative] business is that those who contribute to a common fund as part of a scheme for their mutual benefit must be the same persons as those who are entitled to participate in any surplus that arises from the operation of the scheme.”
HM Revenue and Customs: http://www.hmrc.gov.uk/manuals/gimanual/gim9010.htm

“Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.”
ICA, Third Cooperative Principle
Source: http://www.scottish.parliament.uk/s3/committees/eet/inquiries/banking/CooperationandMutualityScotland.pdf

The history of mutuality in the UK
• Profit-sharing cooperatives started in 1769 (in Scotland) and from the 1790s in the US. • The first journal for cooperatives was established in 1824 (20 years before the „first‟ set of cooperative principles at Rochdale). • In 1834, the UK Government passed the Poor Laws Amendment Act to cut welfare payments by 50%. • The Poor Laws started to distinguish between the „deserving poor‟ and the „undeserving poor‟. • Charities supported the „deserving poor‟ while the „undeserving poor‟ formed a network of Friendly Societies.

Ridley-Duff and Bull (2011), Chapter 1

The history of mutuality in the UK
• By 1905, the „vast majority‟ of working families (estimated at 80% in Australia) obtained welfare and medical help through co-operatives. • The government nationalised welfare provision in 1911 (National Insurance Act). • Co-operative retail societies used to account for 54% of the national grocery market (nearly twice Tescos market share today).
Source: http://home.wlv.ac.uk/~in6086/2007conf.html

• All parts of the UK co-operative economy have grown in the last 5 years (health, housing, consumer retailing, banking, engineering) • Current government expects 1 million workers to transfer to a cooperative in the next 5 years. • Co-operative Group aiming to grow consumer membership from 6 to 20 million.

The Take
• Documentary about the „recovered company movement‟ in South America (unavailable in the UK). • Documents the „expropriation‟ of factories, schools, clinics and other enterprises by co-operative members who secure the right to manage organisations using the cooperative legal form. • Symptomatic of a large scale changes affecting South America, particularly in Brazil and Venezuela where tens of thousands of cooperatives have been formed in the last decade. • Also symptomatic of large scale growth of the co-operative form in Asia where tens of thousands of cooperatives have been formed.
http://topdocumentaryfilms.com/the-take/

Consumer co-operatives and private enterprise
Source: Conn, 2006

Barcelona

Arsenal

Shareholders
Leadership

4 major shareholders own 87% 142,000 members (“socios”), one of voting shares. member, one vote.
President elected by members for No meaningful elections. Chair four-year term (maximum two of the Board decided by major terms). shareholders. £69 £579 £885 £1,825

Cheapest adult season ticket Most expensive adult season ticket

1. There is no reason a co-operative may not be large or successful.
2. There are different long term outcomes from adopting the co-operative form.

Cooperative Values at Mondragon

Source: http://www.mondragon-corporation.com/mcc_dotnetnuke/Portals/0/documentos/eng/management-model/mgc.swf

Worker co-operatives and private enterprise
Mondragon Cooperative Corporation Shareholders
Capital owners must be workers and/or consumers. Supporting organisations may have a voice in ‘secondary’ cooperatives. Open membership system (not limited by ability to pay as contribution is linked to starting salary, and ‘people’s bank’ provides loan finance). President elected by members for four-year term (maximum two terms). Governing council comprised of 7, 9 or 12 workers/consumers. Social council(s) elected from the workforce in each department. Typically 5:1 (maximum 9:1) – stable (highest to lowest paid worker).

US Multinational Corporations
Capital owners typically managers and/or institutional investors (limited only by ability to pay). Special arrangements may exist in employee-owned / controlled corporations.

Leadership

Elections rare (if at all). CEO appointed by directors. Directors appointed/elected by shareholders. Rarely includes consumer, or worker, representatives. No leadership role for trade unions. Increased from 85:1 to 419:1 throughout the 1990s (highest to average employee).

Ratio of highest to lowest paid

Source: “Wage Regulation”, Source: Aslam (1999), US Labor Statistics. http://en.wikipedia.org/wiki/Mondragon_Corporati on, accessed 1st December 2010.

What do long-lasting co-operatives do?
• Some characteristics:
– Skilled at creating financial, social, intellectual and human capital that is shared for individual and community benefit.

– Equitable and inclusive forms of governance and management (one-person, one vote / elected leaders / delegated powers).
– Decision-making processes that put people and the community before money-making (money as means, not ends). – Prioritise self-help and mutuality, instead of „charity‟. (charitable aims, but not „charity‟ thinking) – Provide education and development opportunities for all members.

What do long-lasting co-operatives do?
• Some characteristics:
– Contribute to „fair trade‟ by creating co-operative supply chains that generate funds for community investment.

– In short, they develop co-operatives to supply their co-operative.
– Trade successfully, either creating or contributing to markets in „real‟ (rather than „fictitious‟) goods and services. – Generate financial surpluses that are allocated to both reserves and member accounts (through dividends and/or lower prices). – Members‟ share of surplus (workers, customers, suppliers) based on their contribution to the well-being of the co-operative.

What can SBS do to help?
• Cooperative and Social Enterprise Summer School
– 18th-20th July 2012 (Wednesday – Friday). – Two day taught course, one day Open Space event. – No pre-requisites.

• Part-time, post-graduate courses in Co-operative and Social Enterprise Management
– – – – Certificate (4 modules – typically 1 year) Diploma (8 modules – typically 2 years) Masters (8 modules + dissertation 2 - 3 years) Recruiting now for June 2012 start.

• Research into co-operatives and social enterprise

References and Useful Reading
Aslam, A. (1999) “U.S. Wage Gap Widens”, Global Policy Forum, http://www.globalpolicy.org/component/content/article/218-injustice-and-inequality/46639.html, accessed 14 December 2009. The claim is based on data from the US Bureau of Labor Statistics. Conn, D. (2006) “Barcelona‟s Model of Integrity Show Rights is Might”, The Guardian, 17th May, http://www.guardian.co.uk/football/2006/may/17/championsleague.europeanfootball, accessed 20th January 2010. Cornforth, C. J., Thomas, A., Spear, R. G. and Lewis, J. M. (1988) Developing Successful Worker Co-ops, London: Sage Publications. Ellerman, D. (1997) The Democratic Corporation, Beijing: Xinhua Publishing House. First published as „The Democratic Firm‟ in 1990. Erdal, D. (2011) Beyond the Corporation, Humanity Working: London: The Bodley Head Ridley-Duff, R. J. and Bull, M. (2011) Understanding Social Enterprise: Theory and Practice, London: Sage Publications, (in press). Weinbren, D. (2008) Families and Friendly Societies, Friendly Society Research Group.