Co-operative Business Consultants

I am looking forward to see that code of governance. It would open some doors for some of us willing to have a business of this kind. Is this more like a "do it yourself" manual?
Sally at Trianz

Launch of the Code of Governance

The worker co-op code of governance is available, with other relevant resources at www.workercode.coop.

Democracy or Bust: the Worker Co-operative Code of Governance by Bob Cannell 

Democratic control of enterprise is the final frontier in the economic struggle. We have assumed democracy is the preferred option in politics and government for centuries and seek to spread it throughout the world, but we still have an economy based on the rule of autocratic, largely self-selected, executives and absent investor owners. We hope their interests are, more or less, in the long term, the same as ours.  But, as we enter an age where we so dominate the planet that we will either learn to co-operate or suffer severely as a species, this is a gamble that might be too risky.

The need to democratise enterprise, to gain popular control over the industries that bestride our planet and upon which we depend for our livelihoods is a pressing need.  Why have we not done it? Is it because we don’t know how?

Just as people fought for the right to choose their rulers, workers have long struggled to control their employment. Cooperative enterprises owned by their workers can be traced back to the 17th century in the UK (They were suppressed by Cromwell).

Many experiments took place. Working people invested everything they owned in their flour mills, leather tanners, textile factories, cutlery workshops and a host of other businesses.  Throughout the 19th century thousands of worker co-operatives were started across the UK.  Few survived into the 20th.  (see Benjamin Jones (1894)  - Cooperative Production, reprinted by Augustus M Kelly , New York 1968).

The reason for this puzzled co-operators. At the same time as this, consumer owned co-operatives were booming. By the 1890s, some 1500 co-operative retail societies dominated the consumer economy throughout the UK. The producer cooperatives were supposed to be supplying them with their goods.

Many of the retail societies had lent money and lost it in failed worker co-operative ventures. Indeed the situation was so bad that Beatrice Potter (not Beatrix) conducted a survey of producer co-operatives. Her findings resulted in a resolution at the 1880 Cooperative Congress to abandon producer co-operation as a failed method of co-operation and for retail societies to rely on directly owned factories and farms for their supplies.   (Beatrice married Sidney Webb, and via the Fabians, committed the Labour Party to state ownership. In her last book she pronounced the Soviet planned economy to be the answer.) 

All of the retail societies were based on the Rochdale principles. The Rochdale Pioneers did not invent consumer cooperatives. There had been many prior experiments but none had taken off. The Pioneers brought together the best practices of cooperative governance from these early attempts.  That mix of rules worked explosively and could easily be copied by other people for the price of a penny stamp. Consumer co-operatives went from zero to economic dominance in 30 years (a sort of 19th century uberTesco’s). ‘Viral growth’ to use a 21st century metaphor.

In the latter half of the 20th century two major worker co-operative success stories indicated that it was time to resurrect the idea of democratic control of enterprise.  

In the Basque country, the Mondragon worker co-operatives (www.mcc.es) founded in the mid 1950s, have grown into the 7th largest business group in Spain with a central research and development ‘headquarters’ and 250 business subsidiaries competing at the highest global level in high tech manufacturing, retail and services. Mondragon are 100% owned and controlled by their worker members and deliver some of the best and most secure employee benefits in Europe.

In Emilia Romagna, a totally different worker owned model exists. 8,000 independent producer co-operatives in a network of supportive commercial relationships account for 40% of the economic activity in this Italian region. Emilia Romagna is the tenth richest European region.  The economy is highly unusual in being skewed to small, locally owned businesses. It clearly works. 

In the UK we have about 400 worker co-operatives employing 2000 people in total.  Most of them were founded since the 1970s when hippies saw worker co-operatives as a utopian alternative to working for ‘the man’. Even the biggest have not grown as they should. UK worker co-operatives still suffer from what Beatrice Potter described as a ‘lack of administrative discipline’. 

What is this problem? In a normal business, the authority to give orders is taken for granted. Even in a consumer co-operative, members appoint a management team to run the business. In a worker co-operative, as in partnerships, there is no pre-ordained authority to manage. It has to be agreed collectively and democratically before progress can be made as a team. 

Democratic teamworking is such a novel way of behaving for most people that teamworking constantly breaks down and has to be repaired. People in worker co-operatives in the UK lack the belief and patience to permit democracy to prevail, and try to take over but then simply run into opposition from their peers. So the typical UK worker co-operative is disabled by unresolved disagreement.

By trial and error many of these UK cooperatives have found good ways to get out of this trap but none have the full package.  Hence in 2006, worker co-operative members and Co-operatives UK started writing down in one document the lessons which have been so painfully learned over the last 150 years. Our advantage is that we, unlike the Rochdale Pioneers, have the experience of the whole world to use.

We started by combining the best parts of private sector, voluntary sector and other cooperative codes of governance with the key parts of the International Cooperative Alliance CICOPA world definition of worker cooperatives (agreed only in 2004).  We then added our own decades of practical experience of managing worker co-operatives, and hung the whole from the seven ICA cooperative principles by which all co-operatives, regardless of type, should operate. 

The result is a short booklet that covers every aspect of good governance and management of a democratic worker owned business. It is a bit longer than the Rochdale principles but the problem of democratic employee control is much more complicated.

The document will be sent to every Cooperatives UK worker co-operative and will be made available to every individual member of those co-operatives. ‘This is what you should expect from your co-operative. This is what you should be doing,’ is the message. ‘How you do it is up to you, so long as you choose a democratic method.’ 

The Code, as it will be known, is the framework. No more ‘going it alone’.

Just as the 1844 Pioneers had the newly invented penny postage service (started 1840), so we have the Internet to communicate our principles. The Code will be the core of a dedicated website whereby worker co-operative members can assist each other in gaining the skills necessary to democratically govern their businesses. We will be using the huge potential of web2, social networking - the communication of choice for young people in the 21st century, to spread this message.

The Code will develop and change as co-op members contribute, just as the original Rochdale principles developed in use.  

For the first time, we have in one easily accessible place, the answers to that 150 year old puzzle. “How do you govern a commercial business democratically?”

If we can make this work, the potential is awesome. Will democratically owned and governed enterprises in the UK now grow in the same way as did consumer co-ops.   Will 2008 be our 1844?  

Notes

Is not John Lewis the UK Mondragon? 
They are similar sizes but the JLP is not a democratic worker co-operative. The business is owned by a trust the sole objective of which is to benefit the employees. The trustees appoint senior management to run the business, Employees or ‘partners’ have some say on the future of the business and enjoy a high level of consultation but do not have control. That is a privilege of the chief executive who is answerable to the trustees, not to the partners.

Similar arrangemenst exist in other UK Employee Ownerships such as Scott Bader, Tullis Russel, Ove Arup, Loch Fyne Oysters etc. This is the key difference between employee owned businesses and employee controlled businesses.

Won’t worker owners merely be as greedy and unethical as private plc investors?

Experience from around the world says not. Widening the ownership base but restricting it to those with a direct and non-transferable interest in the success of the business creates values driven enterprise.  Networking those worker co-operatives with other co-operatives produces an ethics based economy.

The experience of multi-stakeholder co-operatives (where workers, customers and others are members), where they can be made to work, leads to successful businesses with ethics at their heart, such as Greenwich Leisure.

How can small enterprises compete in a global economy dominated by giant corporations?

The fact is they do. In Emilia Romagna (compared to other Italian regions), in the smaller Mondragon co-operatives, in South Africa, South America and increasingly in China (where there is a current surge in worker co-operatives), small employee owned businesses, if networked together, prosper in hostile economic and political environments where the alternative is sweat shop labour at the mercy of mobile global capital.