Case Study - Some thoughts on a Co-op Development Strategy · largest grocer, and have subsequently dropped down the league table, they are still the fifth largest grocer in the UK

SomethoughtsonaCo-opDevelopmentStrategyPaper Page1of30

casestudies……

SomethoughtsonaCo-opDevelopmentStrategy

Oneofaseriesofcasestudiesby

AlexBirdApril2015

www.alex-bird.com


casestudies…….

I’vewrittenmanypapersovertheyears,fewofwhichseethelightofdaythroughpublication,soI’mputtingtogetherafewoftheminaninformalseries,andpublishingthemonmywebsite.

TheycoverarangeofsubjectsthatIhopewillbeofinterest.

Someareofhistoricalinterest,somearetopicsfordiscussion.

Somehavealreadybeenpublishedsomewhere,inwholeorinpart.

Mosthaven’tmadeit.

Havingputinsomuchthoughtandeffort,seeingthemlieinadigitalvaultsomewhereonmylaptopseemslikeawaste–hencethissmall-scalepublicationeffort.

Allarefreetodownloadfrommywebsiteat:-http://www.alex-bird.com/download-publications/

Hopeyoufindthemofinterest.ThisworkislicensedundertheCreativeCommonsAttribution-NonCommercial4.0InternationalLicense.Toviewacopyofthislicense,visithttp://creativecommons.org/licenses/by-nc/4.0/AlexBird2015www.alex-bird.com


SomethoughtsonaCo-opDevelopmentStrategyAthinkpiecebyAlexBird1

[email protected]

@coopalex3

ContentsPreamble:TheChallengeandtheContext............................................................4

ThePolicyContext................................................................................................6

Whyssofewworkerco-ops-HavewegottheCo-opModelrightintheUK?.......9

CommonvsCollectiveOwnership.........................................................................9

RebuildingtheCo-opBrandtomakeitapopularchoiceforstart-ups................11

BuildingfundsthroughProfitsharing..................................................................14

Raisingfinancefrommembersorthepublic.......................................................18

TheneedfordedicatedLoanandInvestmentFinance........................................19

BuildinganetworkofBusinessAdvice................................................................26

Co-operativeManagementandDevelopmentTraining.......................................28

OverallThoughtsandConclusions......................................................................29

1WiththankstomycolleaguePatConatyforhiscontributions


Preamble:TheChallengeandtheContextANationalCo-operativeDevelopmentStrategyisaboutmorethanjusthowanyDevelopmentAgencieswilloperateinthefuture;itisaboutthecontextthatwillleadtothegrowthanddevelopmentoftheCo-operativesector.

Thispaperisanattempttolookatthebiggerpictureofwhatisneededtobringthatabout.Itisnaturallyverypersonal,insomebitscontroversial,anditleapsaroundthesubjectinadisjointedway.

Idonotexpecteverybitofittobeacceptedbyeveryone.Itisintendedtostimulatethoughtratherthanhavetheanswertoeverything.ButwedoneedtohonestandcriticalaboutthemovementintheUK.

We’vebeengreatatsomethings,butwhereohwherearetheworkerco-opsandfinancialco-ops.Ourmovementisverylop-sidedandweneedtoaddressthat.

Wherearewenow?

Theco-operativemovementintheUKisinastateofflux.TheimpactoftheeconomiccrisisintheUKisaffectingthewaypeopleorganisesocialsolidarityThechangesanddownsizingwithintheCo-operativeGrouphasaffectednotjustthefundingavailabletosupportco-opdevelopment,butadversepublicityhasdowngradedtheco-operativebrandinmanypeople’sminds.

Therehavebeencutsof37%inLocalGovernmentbudgetssince2010.AsaresultmoreandmoreservicespreviouslyprovidedbytheStateareeitherfailingandclosing,orbeingtakenonbymutual/co-operativeorganisations.Thisisprovingafundamentalshiftinpeople’sperceptionsofwhataco-operativeisandcando.Therapidgrowthsince2008yearonyearofcommunityshareissueshighlightsarebirthofmutualityandthisphenomenonisgrowingrightacrossEurope.Moreoverinmanycountries,non-profitservicesinFranceandothercountriesarebeingmovedintotheexpandingsocialco-operativesector.

Co-operativeDevelopmentisacomplexsetofchallenges.Itismorethananetworkofsupporttonewandgrowingco-opbusinesses.Itisaboutcreatingaclimateandacultureforco-operativebirthandgrowth,aswellassupplyingthetoolstosupportthatgrowth.

Someobservationsaboutthechallengeareworthhighlightingupfront:-

1. WeshouldlooktoEuropeandAmericatotrytounpickthereasonsforthepaucityofworkerco-opsintheUK.Whilstwehavesomelargeandsuccessfulemployeeownerships,thepureco-operativemodelisnotsucceedinghere,whereasinSpain,25%ofallnewjobscreatedlastyearwereinworkerco-ops.

3. TherearetransformativemethodsinItalyandJapanfordevelopingbothsocialandsolidarityco-operativesthatcouldbeequallysuccessfulhere.Theclusteringofco-opsandamutualaidculturecouldbeharnessedbydeployingtheItalian‘strawberrypatch’systemsowelldevelopedforsocialco-operativestherethatnownumberover14,000,andwhichhavecreatedover350,000jobs.


4. Financeisanessentialtool,andneedstobeatthecoreofanydevelopmentstrategy.Themoneyofco-operativemembersismostlydepositedincapitalistorganisations.Weneedtolookathowtobringitbackintothemovement.CapturingourownmoneywasalessonlearnedbytheRochdalePioneersandbyJoséMaríaArizmendiarrietaatMondragon.Weneedtolookathowthiscanbereplicatedhere.Newapproachesandupdatedtraditionalmethodsarekey.

5. WithincreasingdevolutionandthepolicyinterestinCity-regionsandgrowinglocalgovernmentinterestinCo-operativecityideas,amoredistributednetworksmodeliscrucialforanationalstrategytoberesponsiveandproactivetothesetrends.Howevertheretail/consumerco-operativemovementhasmovedfromafederalstructuretoacentralisedcorporatestructureoverthelast50years.Thereisastrategicneedtoexaminewhatcouldbegainedforthemovementbyreversingthistrendtocentraliseandhowtodothismosteffectively.ExamplesandbestpracticeoutsidetheUKneedtobeexamined.

6. Recentlythere'sbeenaconsolidationofsomeregionalsocialenterprisenetworksintoSocialEnterpriseUK,inrecognitionthatthey'restrugglingtocontinuetoofferameaningfulserviceaftertheremovaloftheRDAs.Interestingly,itwasCo-operativesUK,whichformedthefirstregionalresponsestoRDAsbyformingtheRegionalCo-opCouncils,whichactedasasubsequentdeliverytemplatefortheCo-operativeEnterpriseHub.TherecentlyformedDevelopmentCo-operativeasaconsortiumoflocalCDBsalsoindicatespossiblewayforwardtodeliveraUKwideservicethroughafederaladvicestructure.

7. Newmethodsfordeliveryofadvicethatcanmovefromself-helpeffortstodynamicself-helpandmutualaidsystemsneedtobeconsidered.Theseinclude“SeeingisBelieving”visits,actionlearning,peer-to-peerknowledgetransferandmutualaidnetworksatregionallevel.OneofthestrengthsoftheexistingCDBs,andalsoofmanyco-opadvicesystemselsewhereistheuseof“barefootco-operators”–thosewhohavebeenanddoneit–inconjunctionwithspecialistprofessionalbusinessadvisers.


ThePolicyContextHistory

Theco-operativemodelusedintheUKdifferssignificantlyfromthoseusedinotherjurisdictions.Itispartlysetbyhistory,partlybylegislation.

IntheUKourpreferredmodelistheSociety,ratherthantheCompany.Thesewereespeciallycreatedin1856/62bytheIndustrialSocietyActspromotedbyEdwardNeale.Theyweredesignedforconsumerco-operatives,ratherthanworkerco-operatives,andintroducedtheconceptofcommonownership.Sincethenthemajorityofco-operativesocietieshavebeenconsumerownedsocieties,andtheUKhasapaucityofworkerco-operativeswhencomparedwithothercountries.

ThegrowthoftheconsumermovementintheUKhasbeenstrong,andatonetimeincludedaconsiderableamountofindustrialproduction,althoughstillwithinaconsumerownedsetting.

ThemajorgrowthinemployeeownedbusinesseshasbeenontheJohnLewispartnershipmodel,whichwasestablishedin19292.ThishasbeenpartlyencouragedbytaxadvantagesgrantedtoESOPs,AESOPsandnowSIPsandEMIs.

ConsumerCo-ops

Whilstthecombinedconsumerco-operativesocietiesatonepointweretheUK’slargestgrocer,andhavesubsequentlydroppeddowntheleaguetable,theyarestillthefifthlargestgrocerintheUKandtheworld’slargestretailco-operative.Howevertheirfundingmodelnowreliesalmostentirelyonnon-memberfunds,andtheyaremorevulnerabletomarketforcesasaresult.ThisisstillaconsiderableachievementonwhichtheUKmovementcanbuild.

WorkerCo-ops

Wehaveapaucityofworkerco-opsintheUK.Thelargesttrueworkerco-opintheUKisSUMAWholefoodswitharound150employees.ForcomparisontheMondragonco-operativesinSpainemployaround85,000peoplein110co-operatives.

TheJohnLewismodelofaquasico-operativeusingacomplexcompanyandtrustmodelgivesthebenefitofequityownershiptotheworkforcewithoutanyrealordirectcontroloractualownershipofhecapital,andprovidesaveryeffectiveequitylock.Thisaloneemploysover90,000people,morethantheentireworkerco-operativesectorintheUK.

Co-operativeConsortia

Theseareaformofco-operativewithcorporatebusinessesasmembers,ratherthanindividuals.Theyenablealargermarketpresenceandcommensuratelylargerbuyingandsellingpower,andcanalsoprovidespecificservicestotheirmemberssuchasbackofficeortechnicalservices.

2http://www.johnlewispartnership.co.uk/about/our-history/our-history-text-version.html


Thereare89co-operativeconsortiatradingintheUKandtheyarefoundinthefishing,food,artisan,creativeindustry,tourism,markettrading,healthandcare,educationandresearchsectors.3

Thelargesthaveturnoversexceeding£0.5billionp.a.andareanimportantcomponentoftheUKeconomy.

DeliveringPublicServiceviaco-ops

Ascoveredonlaterpages,thereishugeopportunitytodevelopaco-operativemodelofpublicservicedeliverybasedlargelyontheItalianmodel.

TheNHSstartedastheTredegarMedicalAidSocietyin1890,4andAneurinBevan,thelocalMP,onlaunchingtheNHSin1948describedtheprocessasthe“Tredegarisation”ofBritain.Thus,areturntoamutualmodelforanyformofpublicserviceisnotthatradical.

However,oneofthemajorconstraintstotheexpansionofco-operativesintothepublicserviceareaisthelackofanassetlockforco-operatives.ThisiscurrentlyonlyavailableforCommunityBenefitSocieties(BenComsakaMutuals).

Governmentatalllevelswillrightlyalwaysbecautiousaboutanassettransferfromanypartofthepublicrealmtoanotherbody.Thisisappropriateinordertoensurethatassetsbuiltupinthepublicsectorshouldnotfallintoprivatehandsotherthanbytransferatfullmarketvalue.

Itisappropriateformanyformsofco-operativenottohaveanassetlock–thosethathavebuilttheirownassetbasesuchasworkerorconsumerco-operativesshouldbeabletodisposeofitastheywish.

However,atpresentonlyBenComscanhavethislock.Thismeansthatanyassetstransferredhavetobemanagedunderthisgovernancesystemthatpreventsthepaymentofanyformofdividend(“divi”)basedonworkersperformanceorconsumersparticipation.Thisremovesanotherwiseusefulandeffectiveincentivetofullmemberparticipationandtheeconomiesandefficienciesthatcanproduce(aka“theJohnLewiseffect”).Achangetolegislationthatallowedforamodelofco-operativewithanassetlockthatpreventedthedisposalofassetstransferredfromthepublicsectorbutallowedparticipationintheday-to-dayprofitswouldbebeneficialtotheexpansionofthispotentialco-operativesector.

Housingco-operativescouldinmanycasesalsobenefitfromanassetlocktoprevent“carpet-bagging”bycurrentmembersoftheassetsbuiltupbypreviousgenerations.Thisisparticularlyimportantinfullymutualhousingco-ops,betheyfundedbymembersownfunds,loans,mortgagesorthroughsocialhousingfunds.

RecognisingthatCo-operativesUKdoesnothavethepowertochangethis,Iwouldnonethelesswelcomeavigorouscampaigntochangethelaw.

3Co-operativesUK(2009)TradingforMutualBenefit–aGuidetoCo-operativeConsortia.4http://en.wikipedia.org/wiki/Tredegar_Medical_Aid_Society


Thoughts

Whilstthelawhasbeenupdatedinrecentyears,wenowneedaradicaloverhaultointroducebestpracticefromothercountries.Thismustbeaimedatcreatingtheclimateforgrowthofallco-ops,butprioritisingworkerco-opswherewehaveneversucceededtostimulategrowthintheUK,andconsortiumco-ops.Theseareadominantforce,particularlyinagricultureinmanyothercountries.

Weneedtoworkoutwhatisneededtokick-startthesortofgrowthweseeelsewhereintheworldandlobbythenextgovernmentforit.ThismustincludeanassetlockoptionforCo-operativeSocietiestoenableanyassettransferfromGovernmenttobemadewithconfidenceitwon’tbehivedofftotheprivatesector.Ifwecannotsecurethis,thenpublicserviceswillcontinuetobevulnerabletoprivatisationintheconventionalsense.


Whyssofewworkerco-ops-HavewegottheCo-opModelrightintheUK?

CommonvsCollectiveOwnershipUKSocietylawallowsthecreationofaccruedequitytobeheldincommonownership.ItdoesthissimplyandneatlybecauseallsharecapitalinaSocietyisat“parvalue”ratherthanthe“jointstock”holdingwithinthecompanymodel.Therefore,unlessarrangementsaremadeotherwise,allequitycreatedthroughre-investedprofitsendsupincommonownership,ratherthanbeingthepropertyoftheshareholders.ThusanewSocietymaybe100%memberownedatlaunch,butaftersuccessfultradingforaperiod,anincreasingproportionmovesintocommonownership.

Whilstthisworkswellforco-operativesthatmembersconceiveasbeing“forthegreatergood”,itdoesnotsitwellwithmostpeoplewishingtobecomeworkerco-operators,whoseeitasajointenterpriseratherthanaquasisocial/publicproject.Thisisparticularlyimportantwhenconsidering“sweatequity”,whichwhendonatedbyconsumerco-operatorsisusuallyseenasagifttothecommongood,butforworkerco-operatorsisoftendonewithanunspokenunderstandingthatthey’llgetthebenefitofitsomehowatsomepointinthefuture.Specificarrangementscanbemadetoquantifyandmonetisethis“sweatequity”,butmyexperienceisthatthisisrarelydone,andwhentheyrealisethisisnotthecasetheworkerscanfeelcheated.

However,whilstthiscommonownershipoperatesfortheco-op’scapital(andsoonlyactuallyoperatesonliquidationormerger)itdoesnotapplytorevenue(i.e.profits).

TheresultisthatweintheUKhaveatheoreticalamassingofcommonwealththatwecan’tseeoraccessonaday-to-daybasis,butnobuildingofdevelopmentorloanfundsonaday-to-daybasis.

Isitreallyaco-opifthestaffaren’tinvolved?

TheJohnLewiseffectisoftentalkedabout.Theirstaffarenoticeablymoreengagedwiththecustomersthaninother(includingmostCo-operative)stores.

Insomecountriesastronglyheldviewisthatwithoutworkerownershipaco-opisn’taco-op.AtMondragonforexample,theydon’trecognisetheownershipmodelofCo-operativeGroupasaco-op.

Inapracticalsense,workerownershipmakessenseasitisproventoimproveengagementandproductivity,butisn’titalsoanappropriateformofdemocracy.Shouldn’tweworktowardsmulti-stakeholderownershipmoreactively.

Thoughts

Weshouldconsiderabandoningcommonownershipofcapitalasthepreferredoptionforworkerco-ops,andmarketthemasaformofdemocraticpartnershipbusiness.


ShouldCo-operativesUKalsoimposeaprofitsharingregimeforallco-opsasaconditionofmembership?Thiswouldprovidecommonlyownedfundsintheshortterm,andwouldbuildovertimetoastrategicallylargeresource.


RebuildingtheCo-opBrandtomakeitapopularchoiceforstart-upsWhenpeopleconsiderabusiness,howandwhydotheydecidetoformaco-op(ornot)?

Despitetherecession,peoplearestillstartingupbusinesses.Mostarefindingsomesortofassistance,butallaremakingachoiceastowhatformofbusinesstoform,whetherelladvised/informedornot.

Weneedtolookatthesechoicespoints,andanalysewhytheygoforaconventionalcommercialbusinessoptionsuchasacompanyorpartnership,andwhytheyotherwisechooseaCICorsocialenterprise.Weneedtopositionco-opsasamodelofchoice.

Todothatwehavetomakeitseemachoicethat’sgoodforthestart-upentrepreneur(s)andnotjustachoicethat’sgoodforothers.

Asalarycapforco-ops?

Theco-opmodelhasbeenreducedinvalueinthemindsofmanyintheUKfollowingthedifficultiesintheCo-operativeGroupandtheBank.Weneedtoreinforcethebrand,andinparticularemphasiseitsdifference,itsputtingpeoplebeforeprofit.

Todoso,doweneedtopromoteasalarycapforco-ops?

Principle3states:-“Membersusuallyreceivelimitedcompensation,ifany,oncapitalsubscribedasaconditionofmembership.”Whilstthisdoesn’tdirectlycoversalariesthisideaofalimitoncompensationdoesnotfitwellwithsalaryratiossuchasEuanSutherlands330:1duringhis10monthstayasCEOatCo-operativeGroup.

RochdalePioneers

Whilsttheyforesawthemissionofco-operativesasbeingpartlytoenableconsumerstoescapetheexploitationoftheownersoftheretailindustry,theyalsosawincomeequalityaspartoftheco-opmission“bythismeansgivinghimachanceofparticipatingintheprofitsofhisownlabour,andremovingitfartheroutofthereachofmenwithalittlecapitaltorealiseprincelyfortunesoutoftheenergyandindustryofthepeople”.5

Spain-Mondragon

Mondragonoperatesitsownco-operativeprinciples:-

1. OpenAdmission2. DemocraticOrganization3. SovereigntyofLabour4. InstrumentalandSubordinateNatureofCapital5. ParticipatoryManagement6. WageSolidarity7. INTERCO-OPERATION8. SocialTransformation

5RochdaleCo-operatorsAlmanac1860http://gerald-massey.org.uk/holyoake/c_rochdale_3.htm


9. Universality10. Education

WhilstthesearenotradicallydifferenttotheICAPrinciples,theydoincludeanimportantadditionof“WageSolidarity”.Theysharetheincomesequitably.Thetopsalaryratioiscappedinmostoftheco-opsat6:1(TopPay:LowestPay),althoughthisisstretchedinsomeofthelargerco-opsto8:16totrytoreducethepoachingoftopmanagementbyotherbusinesses.ThiscomparestotheFTSE100averageof143:1(TopPay:AveragePay)7whichhastripledsince1998.

Switzerland

Cappingsalariesisalreadyaverypopularpolicyhereamongstthegeneralpublic.OverathirdofthenormallyconservativeSwissvoterssupportedanoverallsalarycapof12:1(TopPay:LowestPay),forallbusinessesinSwitzerlandonNov23rd2014.8ThecampaignwasbackedbytheSwissTUCandothersocialorganisations.

Others

TheUSChurchInvestor’sGrouprecommendsthattheratiobetweentheChiefExecutiveandtheaveragepayofthelowest10%ofemployeesshouldneverbehigherthan75:1(TopPay:Lowest10%Pay),

AmuchsmallerratiohasbeenadoptedbytheGLA,whichhascommitteditselftoaratioof20:1(TopPay:LowestPay)–withalong-termgoalofmakingthisevensmallerat10:1(TopPay:LowestPay).

ThebankerJPMorganisquotedassayingthatnooneatthetopofacompanyshouldearnmorethan20timesthoseatthebottom.9

UnitedKingdom

IntheUK,recentyearshaveseentopsalariestakeoff,andarenowamongstthehighestintheworld.Thisisinpartduetoreductionsinthetoprateoftax.

UKtoprateofIncomeTax10

1939 1945 1971 1974 1979 1985 1988 2010 2012

EarnedIncome%

99.25 90 75 83 60 60 40 50 45

UnearnedIncome%

99.25 90 90 98 75 60 40 50 45

IncomeThreshold

£20k £150k

@todaysvalue £240k £163k

6Somereportssetthisashighas15:1onoccasionsinthepast,butthisisofficiallydenied,andisnotcurrentpractice7http://highpaycentre.org/blog/ftse-100-bosses-now-paid-an-average-143-times-as-much-as-their-employeesNBthisisadifferentratiobasistothatusedatMondragon,andgivesalowerfigure.8http://www.theguardian.com/world/2013/nov/24/switzerland-votes-against-cap-executive-pay9http://www.ethicalconsumer.org/commentanalysis/ethicaleconomics/payratios.aspx10DatafromWikipedia


Asthechartshows,itwasnotuntil1979thatthetopratefellbelow75%,andstayedat60%forthefirst9yearsoftheThatchergovernment.Withoutthistaxratereductionthereisnopointinhighratesofpayforsocalled“toppeople”.

TheUKTUChascampaignedinrecentyearsforasalaryratioof20:1(TopPay:LowestPay),butsofarwithnosuccess.

Agreateremphasisonmemberbenefits

CurrentpolicysuggestionscomingoutoftheFCAforconsultationwouldputthecurrentbusinessmodelofCo-operativeGroupoutsideoftheco-operativemodelasitprovidesanidenticalservicetomembersandnon-membersalike.

Whilstweneedtoresistsomethingsorestrictive,andindeedalreadyhaveinresponsestotheFCAconsultation,westillneedtoconsidertheelementofmemberbenefit.

Inworkerco-opsthisisusuallyselfevident–thememberbenefitisadecentjob.Thatmaybeaboutpayandconditions,anditmayalsobeaboutnon-exploitationofpeopleandtheplanet.

Inconsumerco-opsitmaybelessclear.Mostsmallerretailco-opsofferclearbenefitstomembersinordertoencouragecustomerstojoinup,butevensotheyarenotalwaysverylarge.ThedividendistypicallyalotlessthanthebonuspaidoutbyJohnLewistoitsstaff11.

Additionally,thefeetojoinisoftensosmallthatthepotentialmemberfeelsnorealengagement.WeshouldrememberthatoncorrectingfortheRetailPricesIndex,theRochdalePioneersdemanded£110eachformemberstojoin12

Thoughts

Co-opsneedtobeseenasnotforexcessiveprofit,butafairreturn.Thatmeansfairwagesandadecentreturntomembersintheformofdividendand/orbonus.

Memberengagementneedstobebetter,andarealinvestmentinaco-op,coupledwithagoodreturn,wouldassistthis.

Asalarycapforallco-opsof12:1(TopPay:LowestPay),wouldre-establishco-opsinthepublic’smindasadifferentandbetterformofbusiness.

Whilstsomeindividualswouldleavethemovement,Ipersonallydoubtthemotivationofthosewhocan’tscapebyon£250,000p.a.

1115.9%averageoverlast10yearshttp://en.wikipedia.org/wiki/John_Lewis_Partnership12http://safalra.com/other/historical-uk-inflation-price-conversion/


BuildingfundsthroughProfitsharingOtherjurisdictions

ManyEuropeancountries,notablyFrance,ItalyandSpainhavespecificco-operativelegislationwhichplaceresponsibilitiesonco-operativestoputaproportionofprofitstoacommonfund,andalsograntstaxadvantagestotheminexchange.

Italy

OneexamplewouldbetheItalianSocialCo-operatives,whicharegovernedbyalawpassedin1991.

“Thelawregardingsocialcooperativesgaveimpetustotheirexpansion.Whatarethesalientprovisionsofthislaw?Severalhavealreadybeenreferredto:firstofall,re-orientingthepurposeoftheco-operative,frommutualbenefitformemberstoprimarybenefittothelocalcommunity.Thelawfurtherclarifiestwobasicforms:

(a) socialservice,intheareasofhealthcare,careoftheelderly,andeducation;and

(b) thecreationofemploymentforcertaindisadvantagedgroups:namely,physicalormentalinvalids,presentorformerpsychiatricpatients,drugaddicts,alcoholics,youngworkersfromtroubledfamilies,andcriminalssubjecttoalternativestodetention.

Inaddition,thelawregulatesandrestrictstheroleofvolunteers,whomustcompriselessthan50%oftheworkforce,whoseworkshouldbeonlycomplementarytothatofpaidworkers,andwhomaybereimbursedonlypocketexpenses(althoughtheydoreceivehealthinsurance).

EmploymentstandardsandbenefitsarebasicallythoseoftheItalianstate,butwithcertainadvantagestothecooperatives.Forhandicappedmembers,thecooperativeneednotmakewelfarecontributionstothestate,anditmayalsocompensatethematlowerthanstandardpayrates(whicharenowconformedtothoseoftheEuropeanUnion),presumablybasedontheirlowerproductivity.Socialcooperativesalsoreceivea25%reductiononlandandmortgagetaxes.

Beyondtheseregulationsatthenationallevel,governanceoftheindividualsocialcooperativeoroftheregionalconsortiawhichlinkthemtogetherisdisaggregatedtotheprovincesandregions.Thustheregulationofworkintendedtobenefitlocalcommunitiesishandledonalocalormorenearlylocallevel.Alsoforeseeninthe1991law,andsignificantinthegrowthofthesocialcooperatives,hasbeenthelinkagetoorgansofgovernmentwhichineffecthavebeenthecooperatives’leadingcustomers.Thisconnectionholdsforboththesocialserviceandtheemploymentcooperatives.Governmentfundingforprogramscontractedwiththecooperativeshasbeenandisamajorportionoftheirbudgets.13

13ExtractedfromItalianSocialCooperatives,WildaM.Vanek


Spain

InSpain,thelawapplyingtoallco-operativescompelsaproportionofco-operativeprofitstobedistributedtosocialcauses,andMondragonhasitsownadditionalrules.

Mondragon

Theysharethegoodtimes.Theyhaveestablishedacommondevelopmentfundfromwhichmemberco-opscandrawfinanceforstart-uporgrowth.Everyco-opcommitsatleast10%ofprofitstothis.

Theyalsosharethehardtimes.Tothisdaythereareinter-co-oploansofbothcashandsurplusworkersviaasystemorganisedbytheMCCcentrallytosupportanyco-opthatstruggles.Asaresultveryfewhavefailed.Evenduringtherecessionoftheearly1980swhentheBasqueregionlost150,000jobs,theMCCcreatedanadditional4,200jobs.Thefinalresult-only104ofitsworkers(0.6%)endedupunemployeduntilthedemiseofFagorElectrodomesticos,whenbankruptcyforceditssale,resultinginthelossofaroundhalfitsjobs.

DistributionofprofitsatMondragon

EveryMondragonco-operative,asMCCmembers,hastogive10%ofitsprofitstotheMCC.Thisisessentiallyapay-backforthesupportgivenonstart-upandthecontinuingservicesprovidedoflaboursolidarityandfinancialsolidaritywhichensurestabilitywhendifficultiesoccurandlabourissurplusandcashisinsufficient.14

AdditionallyBasque(andSpanish)co-operativelawrequires20%ofprofitstobegiventosocialcauses,andinexchange,co-operativesarechargedareducedrateofCorporationTax.InMondragon,mostofthis20%willbeprovidedtolocalprojectswithintheMCCsuchasschools,theUniversity,socialcare,etc.Additionallysomeco-operativesmaychoosetogivemorethan20%.

Asdemocraticstructures,eachco-operativedecideseachyearonhowtoallocateanyremainingprofits.Thiswillbesharedbetweenthe(capitalised)sharedividendandre-investmentintheco-operative.

Bolivia

TheCo-operativeLawof2001isanexcellentpieceoflegislationthatwaswrittenbyco-operativeexperts;itsetstheminimumnumberofmembersatfiveandrequiresthegovernmenttogivepreferencetoco-operativeswhenawardingcontracts.AfterthefailedcoupinApril2002,PresidentChávezbegantoemphasizeco-operativesinabigwayinordertotransformpropertyintocollectiveformsofownershipandmanagement.Hesetupanationaljob-trainingprogram,MissionVuelvanCaras(“AboutFace”)thatpaidtheminimumwagetotheunemployedwhiletheylearnedbasicoccupationalskills;thetrainerstaughtaboutco-operativesineverycourse,andtheyencouragedthegraduatestoform

14However,itshouldbenotedthatthisdividendis“capitalised”,i.e.itisaddedtothemember’sshareaccount,whichisnotwithdrawableuntiltheyleaveorretire.Thishastheeffectofgivingthemanincreasingshareinthevalueoftheco-op.


one.Co-opregistrationwasmadefreeofcharge,co-opswereexemptedfromincometax,andmicro-creditwasmadeavailabletothem.

AsecondreasonthatnewcooperativesarebeingregisteredisthatthevastmajorityofpoorandmiddleclassVenezuelanshave,atonetimeoranother,participatedinaSAN,aBOLSAoraSUSU.Thesearethreenamesforthesamething,asystemoftrustwherebytenfriendsagreetoeachcontributeacertainamountweeklyfortenweeks,andthetotalisgiventooneofthemembersinrotation.Thiscollectivesavingssystemhelpspoorfamiliestobestrictandself-disciplinedto“save”themoneyandnotspendit,untiltheyeventuallyreceivealargesumthattheycanthenusetobuyanexpensiveitemtheynormallycouldnotafford.Nocontractiseversigned,andtheorganizeroftheSANisalwaysthelastmembertoreceiveit.MillionsofVenezuelanshaveparticipatedinthissimplecommunitycooperativeventure,sotheyhaveapositiveideathatcooperativescanworkevenwithoutfinancialsupport.

Thoughts

Weneedtoreconsiderwhenandwherecommonownershipofthecapitalisappropriateforworkerco-operatives.

Currentlywehaverulesthatprovideforco-ownershipinworkerco-opandconsortiumco-operatives,buttheyarenotattheforefront,andhavebeenlookeddownoninthepast.Weneedtomakethisaclearerchoiceforthosestartingco-operativebusinesses,andensurethatthereisnostigmaattachedtotheco-ownershipmodel.Tofacilitatethiswell,weneedtodevelopamodelwhereeachmember’sshareholdingrepresentsnotjusttheirinitialinvestmentbutalsotheincreaseinvaluethattheyhavecontributedto.

Todothiswemayneedtolobbyfortheintroductionofa“jointstock”formofSocietywithnon-tradeable,withdrawableshares,sothatmembersautomaticallygainfromtheincreasedvalueoftheco-operativeovertime.Alternativelywecoulddevelopamodelthatsharessomeoftheprofitsintothemovement,andthenaddsanyremainingprofit(thebonus)totheindividualmember’sshareholding,sotheyhaveanincreasingvaluetotheirshareholdingthatrepresentstheincreaseinvaluethehavecontributedto.

WhilstrecognisingthismaynothavethesupportoftheoverallUKmovement,whomustbethefinaldeciders,itisnonethelessworthyofdebate.

Wealsoneedtointroduceasystemofcommonownershipofaproportionofrevenue,withallco-opsdonatingatleast5%ofprofitstoadevelopmentinitiativeplusafurther5%toacommonloanfund.

Thisagainisaradicalmove,butweneedtorememberthatco-opsareself-helporganisationsandcannotexpecttobefundedfromthegeneralpopulationviatheGovernment.Atotaltakeof10%tothemovementisthesameproportionasthechurchoncetookasatithe,andfitswiththestrongMethodistandCatholicinfluencesinthemovement.


WeneedtorememberthatiftheRochdalePioneershadwaitedforaGovernmentgrantbeforestarting,we’dhavenoCo-operativeGrouptoday.

Weneedtocaptureourownmoneyinapainlessway,anduseittosupportthemovement.Wecandothisbyinvestinginourselves,andbysharingapartofourprofitsoncewemakethem.


RaisingfinancefrommembersorthepublicCommunitysharesissueshavebecomeverypopularoflate,butstillraiserelativelysmallamountsofcash(£34millionin2014)astheyareonlybeingappliedtosmallstart-ups.

Weneedtolookatraisingmoneyfrommembersagain.Iftheapprox.6millionmembersofCo-operativeGroupcontributed£110each,itscapitalwouldbe£660million,whichwouldalmosthalveits£1.4billiondebt,andsohalveits£100millionplusinterestcharges.15

Thelatestfiguresfortotalco-operativeprofitsintheUKarenothelpfulasCo-operativeGrouppostedalosslastyear,andtheJohnLewisPartnership(whoareunlikelytojoinin)dominatetheworkerownedprofitfigures.However,combinedUKco-operativeprofitsareclearlyin£100smillions,so10%ofco-operativeprofitswouldproduce£10smillionseachyear,ifco-opscouldbepersuadedtocontribute.

Insomeothercountriestheyhaveasophisticatedsystemofmemberandnon-membersharesintheirequivalentofco-opsocieties.Doweneedtolookagainathowequityfundsareraisedinawaythatpreservesmemberdemocracybutallowseasyinvestment?

FinancialIntermediary

Ifwearetoraisefundsweneedtoputthemsomewhere.OnepossibilityiswithinCo-opsUKitself,butasmemberownedCo-operativeSocietyitselfthatmightproducedifficulties.Firstlyifnotallco-opscanbepersuadedtocontribute,thendemocracydoesn’tmatchownershipofthefund.Secondly,theFCAviewexpressedtomelastautumn,isthatinvestinginotherco-opsisnotavalidreasonforaco-opsocietytoexistasthisdoesnotdirectlybenefititsmembers,andtheywouldnotregisteroneassuch.

Thoughts

WemayneedtoconsidersomesortofPLCstructure,orgetachangeinthelaw.

15http://www.thenews.coop/90225/news/general/borrowing-member-capital-ideas-from-us-food-co-ops/


TheneedfordedicatedLoanandInvestmentFinanceThereareanumberofexamplesbelowofsuchschemesalreadyinexistence,bothinUKandelsewhere.

I’vedeliberatelyleftoutmoreobviousones,suchasCo-opandCommunityFinance(ICOF),UnityTrustBank,BlackCountryReinvestmentSociety,EcologyBuildingSociety,CharityBank,etcbecausetheywillbewellknowntoreaders.

Mondragon

TheroleoffinanceiskeytotheMondragonmethodologyofbusinessdevelopment,andistoalargepartthereasonfortheirsuccess.Mondragonstartedinadirt-poorarea.WhenIfirstvisitedtheBasquecountryin1962Iwashorrifiedtofinddonkeyswerestillusedasbeastsofburdenmanypeoplehadnoelectricityorpropersanitationandthereweresofewvehiclesthatpetrolwasstillpumpedbyhand.However,atMondragontheydevelopedasimplebutpowerfulsetofactionstochangetheirsituationbyharnessingwhattheyhad.

Capturingandlockingintotheareawhatmoneypeoplehadthroughthecreationofalocalco-operativebank,whichwascreatedin1959,only3yearsafterthefirstco-opwasestablished.Thismoneywastheninvestedandre-invested,againandagaininlocalpeople’sjobsnotsomeprojectinanothercountrywhichwouldmakemoreprofit.

Theco-opstheycreatedlinkedtogether,investingineachother.Whilst100%workerownershipistheirgoal,theyarepragmaticaboutotherarrangements,aslongasthereisaplannedexittoworkerownership.Inindustrialproductionco-opstheinitialinvestmentcannowbeashighas€300,000peremployee,sotheworkersinitialinvestmentcanbeaslowas7%offundsrequired.

ThecurrentfundsundermanagementbytheLaboralKukta(thenewnamefortheCajaLaboral)is$7.5billion.


Inadditionaproportionofthebank’sprofitsarepassedtovariousprojects,includingadevelopmentfund,andonly50%isdistributedtotheworkermembers.

CLTs

TofacilitatethedevelopmentofCommunityLandTrusts,CommunityFinanceSolutionsattheUniversityofSalfordsetupnationalCLTtrainingsystemsforknowledgetransferandthelinkedCLTFund.Thelatterisatieredsocialinvestmentfacilitationfundsothatearlystagespecialistadvice(oneday),feasibilitystudies,legalwork,businessplans,riskfinance,constructionfinanceandlongertermmortgagefinancearesystemicallyconnectedwithinaturnkeydevelopmentframework.Moredetailsareathttp://www.cltfund.org.uk

Thefundwasoriginallycapitalisedat£2millionbutitrevolvesandhasrecentlybeenrecapitalised.Mostofthecapitalisrecyclablethroughtheinvestmentsystemandreturnstobereinvestedagainandagain.

TheSolidarityFundsinQuebec

Itwas30yearsagothattheboldbuildersoftheFondsdesolidaritéFTQcreatedthisuniqueinstitution!WhenQuébecfellintoadeeprecessionintheearly1980s,theFédérationdestravailleursettravailleusesduQuébec(FTQ)feltcompelledtoact.Emergingfromavision,theideatookrootandbecameareality,andonMarch3,1983,theFTQannouncedthecreationoftheFondsdesolidaritédestravailleursduQuébec(FTQ),afirstintheannalsofthelabourworld.

Today,theFondshasbecomeoneoftheflagshipsoftheQuébececonomy.Currentlymanagingnetassetsof$8.8billion,itcontributesinasustainablemannertoQuébec’seconomicdevelopment.TheFondsreliesonthestrengthofavastnetworkofmorethan2,200partnercompaniesacrosstheprovinceandonthesolidarityofnearly600,000shareholders-owners.

TheFondsdesolidaritéFTQisfocusingmorethaneveronthefuture.Havingover2,200partnercompanies,itprovidesQuébecentrepreneurswithpatientcapitalthathelpsthemgrowandofferqualityjobs.TheFondshasdevelopedavastinvestmentnetwork,nowcomprising85localfunds,16regionalfundsandover70specializedfundsacrossQuébec.

Withcloseto600,000shareholders,whobenefitfromadditionaltaxsavingsof30%,theFondsfulfillsanothersignificantaspectofitsmission:encourageQuebeckerstosaveforretirementwhileresponsiblycontributingtoQuébec’seconomicdevelopment.

TheQuebecFederationofLabourSolidarityFundhasbecomeamajorelementintheeconomicdevelopmentoftheCanadianprovince.Avoluntarypensionschemewithover550,000shareholdersandassetsofapproximately$4.6billionCanadiandollars,theFundholdsequityinsome1,900smallandmedium-sizedenterprisesthathavecreatednearly100,000jobsoverthelastcoupleofyears.ThesuccessoftheFundisfoundedupontwinobjectives.Itsmaingoalisprofit,yettheFundpromotesworkers’rightsandtraininganddevelopmentfor


employees.ItwasthevisionofLouisLabergeandotherQuebeclabourmovementactivistssawtheneedforthecreationofanalternativetoolforeconomicdevelopmentandsocialprogress.OverthelasttwentyyearstheFundhasliveduptoitspioneeringroleasauniquelaboursponsoredinvestmentfundlayingthefoundationforanewtypeofeconomicdevelopmentbaseduponhumancapital.FernandDaoust,formerpresidentoftheadministrativecounciloftheFundandnowspecialcounsellortothepresident,explainsthevisionoftheuniqueorganisation.

BackgroundandSocialLogictotheFund16

Montreal–TheSolidarityFundisafinancialinnovationinNorthAmerica,andisoneoffewsimilarinstitutionsintheworld.Createdin1983bytheQuebecFederationofLabour,theFundwasbornintoaperiodofdeeprecessioninQuebecandCanada.“Fullemploymentwasahighlyattractiveprospectatthetime,”affirmsDaoust.Newideaswereneeded,andtheQuebecFederationofLabourhadasolution:Anewinvestmentfundsponsoredbyworkersthemselvesandwithattractivetaxratesforinvestors.

Fromthestart,realitieshadtobetackled.“Firstly,therehastobeastartingpoint,atradeunionopentosuchaproject.Secondly,youneedthewilloftheauthoritiesandthegovernment.Thirdly,itiscriticalthatthoseincontrolofbusinessandfinance–thosewho,toacertainextent,holdthereinsofthecountry’seconomy–donotkillofftheideabeforeithashatched.”Intheend,despitescepticism,theFundreceivedsupportofalltheactorsinvolved.

TheFundseeksprofitability,butitisconsideredfirstandforemosta“capitalfordevelopment”fund,financialoutputrepresentingonlyonepartoftheequation.TheFund’sphilosophyisfoundeduponasociallogicwhichpromotesthecreationandmaintenanceofjobs.“Ourendgoalis,withoutanydoubt,profitability,butbeyondprofitability,weseektheeconomicdevelopmentofQuebec.”

In2003,theSolidarityFundhadoverhalfamillionshareholders.Fromactiveassetsof$4.6billionCanadiandollars:$2.6billionwereinvestedin2,104companies,tocreate,maintainorsafeguardover90,000jobsinQuebec.AlthoughtheFundhadinitiallybeenblamedforinvestingincontroversialcompanies,itistodayrespectedasafinancialinstitutionwhichbenefitsnotonlytheshareholdersandcompaniesinwhichtheFundinvests,butalsothepopulationofQuebecandCanadaasawhole.

Year 1985 1993 2003 2013

NumberofShareholders

5,094 193,039 550,119 594,287

NumberofPartnerCompanies

4 214 2,104 2,200

16Updatedinformationfromtheoriginalpublication:-SolidarityFund-Labour-sponsoredSolidarityFundsinQuebecaregeneratingjobs-WorldofWork,No.50,March2004


NetAssetsoftheFund

$14,306,000

$797,116,000 $4,620,181,000 $8,763,000,000

Source:AnnualReport2003,SolidarityFundsQFL,p3.(AllfundsinCanadian$)

GuidingprinciplesoftheFund

TheSolidarityFundhasfourguidingprinciples:

• toinvestinsuitablecompaniesandprovidethemwithservicestocreate,maintainandsafeguardjobs;

• tosupportthetrainingofworkerstoallowthemtoincreasetheirinfluenceontheeconomicdevelopmentofQuebec;

• tostimulateQuebec’seconomythroughstrategicinvestments;and• tofosterawarenessandencourageworkerstosavefortheirretirementand

contributetothedevelopmentoftheeconomybypurchasingFundshares.

Asaresult,workershavearolebeyondtheexecutionoftasks.Theygainaninsightintotheoperationoftheircompanyanditsinternalmechanisms,notonlyintermsofthemicroeconomicsoftheenterprise,butalsooftheworkplace,theregionandQuebec.

Beyondthefourinitialguidingprinciples,theSolidarityFundknewithadtodevelopothercharacteristicsoverits20yearhistory–thereasonforitssuccesstoday.TheResponsablesLocaux(LocalRepresentatives)holdgreatprideintheFund.

“Voluntaryworkersareinchargeofenrollingnewmembersintheirownworkplaces.Theyplayanimportantpartbecausetheyworkdirectlyontheground,atthecentreofthecompanies.It’sthese(ResponsablesLocaux)whoformthespineoftheSolidarityFund.UndertheFund,over2,240volunteershavereceivedtraining,attendedcourses,takenpartinallthepublicactionsoftheFund(i.e.meetings)andhavebecome,intheirworkenvironment,theexperts,thepeoplewhohaveagoodknowledgeoftheoperationoftheFund.”

TheFunddoesnotmakeanyinvestmentinanycompanyuntilithasa“socialassessment”ofworkingpracticesthere.“Itrequiresameticulousexaminationoftheoperationoftheenterprisewithregardto:itsemployees,itsstyleofmanagement,theemployees’profile,theworkingconditions,theworkingrelationships,theproduction,competitionandrespectfortheprincipalpoliciesoftheFederationofLabour,inparticularasregardshealthandsafetyatwork,andenvironmentallaws.”

Moreover,focusingmuchoftheirworkonsmallandmedium-sizedenterprises,theFundsetupregionalstructureswhichare–withtheResponsablesLocauxandthesocialassessment–atthefrontlineofoperations.TheSolidarityFundhas17regionalFunds,whichcaninvestbetween$50,000to$2millionCanadiandollars;86localinvestmentcompanies,whichhavetherighttoinvestbetween$5,000and$50,000Canadiandollars;and43specialisedfunds(agro-business,technologies,etc.)Thetablebelowprovidessomehighlightsfromthe2003AnnualReport.


Year 1999 2000 2001 2002 2003 2013

NumberofJobsCreated,MaintainedorPreservedbytheFundanditsPartners

78,525 90,919 93,026 96,641 91,694

NumberofPartnerCompanies

1,404 1,617 1,829 2,112 2,104 2,200

FairValueofInvestmentImpactingontheQuebecEconomy($millions)

$2,235 $2,571 $2,878.8 $2,768.6 $2,633.5

RateofReturnoftheFund%

4.4% 8.6% 2.6% (11.4%) 6.9% 2.6%

ShareholderContributions($millions)

$480.8 $592.5 $782 $869.9 $724.7

Source:AnnualReport2003,SolidarityFundsQFL,p9.(AllfundsinCanadian$)

Byactingwithtransparency,theSolidarityFundproposesanewwayofmanagingasectoroftheeconomy,byfoundinga“participativeeconomy”whereallmembersareimportantactors.

FurtherInformationSolidarityFundsQFL,Suite200,545CremazieBoulevardEast,Montreal,QuebecH2M2W4,Canada,Tel:(514)3838383,Fax:(514)3832502http://www.fondsftq.com/en/a-propos/qui-sommes-nous.aspx

TheCanadianDesjardinsGroup17

DesjardinsGroupisanorganisationofcaissespopulairesandcaissesd'économie(creditunions).The572DesjardinscaissesinQuébecandOntarioasatDecember31,2004andtheirservicecentresareassembledunderasingleFederation:theFédérationdescaissesDesjardinsduQuébec.

Thecaissepopulaireisaco-operative,themembersofwhicharegenerallypeoplelivinginagivengeographicalsector,suchasthesametownorneighbourhood.MostQuébecersaremembersoftheDesjardinscaissethatisclosesttotheirhomeorworkplace.

Thecreditunionisalsoaco-operative,likethecaissepopulaire.However,inthemajorityofcases,membershipinacreditunionisbasedonbelongingtoacertainprofession,orsharingacommonworkplace.Forexample,thereistheCaissed'économiedesTravailleursunis(Montréal-Outaouais)andtheCaissed'économiedesemployésdelaCIPLaTuque.

Desjardins Capital régional et coopératif: DesjardinsCapitalrégionaletcoopératifisaninvestmentfundestablishedbytheDesjardinsGroupin2001toraisedevelopmentcapitalforallregionsofQuébec.Oneofitsprioritiesistomeetthecapitalneedsofco-operativesandtoinvestin17InformationfromanExplanatoryNoteproducedbyJohnGoodman,HeadofPolicy&theRegions,Co-operativesUK,March2009,aspartofresponsetoUKGovernmentconsultation:ReviewoftheCITRandthirdsectortaxincentives,Feb2007.


the‘resource’(less-developed)regionsofQuébec.Inthefiveyearssinceitwasfounded,assetshavegrownfrom$79mto$587mandthenumberofinvestorsfrom35,000to115,000.Thetotalamountinvestedisnowaround$350m.

SharescanonlybepurchasedbyindividualsandentitlethepurchasertoaQuébectaxcreditof35%ofthepurchaseamount.Theyhavesometightconditions:

• Minimumamountofpurchaseis$500andsubsequentpurchasesinmultiplesof$100,foramaximumof$2,500peryear.

• Taxcreditisnon-refundableandwithnocarry-overfromoneyeartoanother.• Sharesarenottransferabletoanotherperson.• Mandatory7-yearholdingperiod.

By31December2006andInthecourseofeachfiscalyearthereafter,theproportionoftheFundsinvestmentsineligibleentitiesmustrepresent,ontheaverage,atleast60%oftheaveragenetassetsoftheFundfortheprecedingyear,andatleast35%ofthatpercentage(i.e.21%ofthetotal)mustbeinvestedinentitiessituatedintheresourceregionsofQuébecorineligibleco-operatives.These21%targetwasreachedin2005andthe60%targetwillbereachedduring2006.

An‘eligibleentity’is:

• aneligibleco-operative;and• apartnershiporalegalpersonactivelyoperatinganenterprise,themajority

ofwhoseemployeesareresidentinQuébecandwhoseassetsarelessthan$100,000,000orwhosenetequityislessthan$50,000,000,otherthananeligibleco-operativeorapartnershiporlegalpersonwhoseactivitiesconsistmainlyininvesting.

ClickhereforacopyoftheActconstitutingCapitalrégionaletcoopératifDesjardins

MutualGuaranteeSocietiesandMutualCredit

Since1990anincreasingnumberofEuropeancountrieshavesupportedthedevelopmentofmutualguaranteesocietiestoassistsoletraderstoaccesslowercostfinancethroughmutualinsurance.SuchmutualriskpoolingserviceshavenotyetbeenintroducedtotheUKandunfortunatelyanearlypioneer,theNationalAssociationofMutualGuaranteeSocieties,setupinEnglandinthe1990swasforcedtoclosedownnotbecauseofanyproblemswiththemodelitselfbutbecauseofastrictinterpretationofinsurancelawsbytheUKregulatoragenerationago.ThiswasbeforemutualguaranteesocietieswentontobecomeubiquitousinmostofcountriesoftheEuropeanUnionoverthepasttwentyyears.

MorerecentresearchbyCo-operativesUKanddiscussionswiththeFinancialConductAuthorityhasbeenencouragingaboutthepotentialforafreshapproachtodevelopingmutualguaranteesocieties.


OtherJurisdictions

MutualcreditlikeWiRinSwitzerlandwithover65,000members(oneinfoursmallbusinessesnationally)

IthacahoursinNewYorkaresuccessfulformsofco-operativemoney.

ThereisanotherestablishedmodellikeWiRinBelgium.

Thoughts

We’veneverhadabankintheUKwhosepurposeistosupportco-operativedevelopment;we’veonlyhadabankownedbyalargeconsumerco-operative.

Experienceabroadshowsthatpoolingourcommonfunds,eveninpoorcommunitiessuchastheBasquecountryin1959,enabledlarge-scaledevelopmenttotakeoff.

Thefundsofco-operativemembersaremostlyinvestedelsewhere.Weneedtobringthemhomesomehow.


BuildinganetworkofBusinessAdviceThehistoryoftheCo-operativeBusinessAdvicesystemoverthelast40yearsintheUKisasbelow(muchabbreviated)

• 1974LabourGovernment

• BenniteCo-operatives–TriumphMeridenetc.

• 1976-IndustrialCommonOwnershipAct–GovernmentfundingtoICOM,ICOFandSCDC

• CDAmovementtookoffwithLocalAuthoritysupport–upto60CDAsatpeak-mostlysmallandlocal

• 1979ConservativeGovernment!

• 1980s-SteadystateinCDB(CDA)activity.ManyLAscontinuedtofundCDBsdespiteGovernmentfundingsqueeze

• 1990-NationalCDAclosedbyThatcher(ittookhersometimetofindoutaboutit!)

• SlowdeclineinCDB(CDA)activitycontinuesasLAfundingreducedfurther

• 2000-Millenniumprojects–bignationalprojectscreated–noneinco-operativemovement

• 2001-MergerofICOMandCo-opUnion

• Co-operativesUKtookonroleofpolicydevelopmentandsomespecialiseddevelopment–LocalFood–CommunityShares

• 2008-Co-operativeEnterpriseHubboostedsupportforco-operativedevelopmentandCDBmovement

• CDBmovementgrewinstrengthandconfidence,butstilldisjointedgeographically

• 2010-Conservatives“invent”BigSociety

• GovernmentfundsinEnglandtakenfromRDAs–closeddown

• FundsdivertedtoLEPsandnationalprojects–noneinco-operativemovement

• 2011-Conservativesinvent“PublicSectorMutuals”–nonedeliveredbyco-operativemovement–nonesofararereallymutual

• 2014–CreationofDevelopmentCo-operativeLtd,aconsortiumofCDBstopitchforlargercontractsoverwiderareas,inc.allUK

It’sbeenratherdisjointedsofar,whichiswhyCo-operativesUKisnowembarkingonastrategicdiscussiontodetermineitspolicyforthefuture.

Clearly,whilsttheyarenotnecessarilybestplacedtodelivercoordinatedbusinesssupportitself,theywillhaveapivotalroleindevelopingacoordinatedapproach.


AnyapproachneedstobringtogetheralltheexistingplayersincludingthegenericslikeCDBsandDevelopmentCo-operative,togetherwiththespecialistssuchasPlunkett,CCH,SupportersDirect,etc.

WhatisclearfromtheworksofarofDevelopmentCo-operative,isthatwehavealimitedsupplyofexperiencedDevelopmentWorkersasmanyhavemovedonorretiredasthesupportorganisationshaveshrunkfromtheir1980sand2008peaks.

Thoughts

Weneedtobuildonwhatwe’vegot–wearethinonthegroundalready.

Weneedtogetorganised,aswehavebeenunabletoinfluencetheso-calledPublicServiceMutualsprogramme,andhavenotgotanyofthework(andmoney)fromitsofar.

AjoinedupserviceneedstoreflecttherealityofbothaUKGovernmentanddevolution.

Eirehasnojoinedupco-operativebusinessdevelopmenteither.Irelandisdividedbycurrencyandreligiousdifferences,butunitedgeographicallyandinmanycultural,civilsocietyandsocialways.Wehavenoreasonnottoassistourcolleaguesthere.


Co-operativeManagementandDevelopmentTrainingWhatisclearfromtheworksofarofDevelopmentCo-operative,isthatwehavealimitedsupplyofexperiencedDevelopmentWorkersasmanyhavemovedonorretiredasthesupportorganisationshaveshrunkfromtheir1980sand2008peaks.

Wearethinontheground,andmustn’tloseanymoreexperiencedpeople.

WeneedatrainingandpersonaldevelopmentprogrammeforDevelopmentWorkers.Thisneedstorecruitexperiencedco-operators,asnoamountofbooklearningcanreplacepracticalexperience.Intheworldofordinarybusiness,veryfewsuccessfulentrepreneursstartwithanMBA,mostlearn“onthejob”andgainqualificationsalongtheway.Weneedtoemulatethat.

Wealsoneedtokeepthefaith.Conventionalbusinessandmanagementtrainingdoesn’tdevelopaco-operativewayofbusiness,butinsteadencouragesacompetitiveandgreedyapproach.WeneedourownManagementSchool.

Thoughts

TheCo-operativeCollegeisundergoingchange.Thiscouldbeanopportunityforthem.AtMondragontheyhaveamanagementtrainingcentre(Otalora)andtheMondragonUniversity,bothownedandrunasco-ops.Betweenthemtheyhavedevelopedatrainingprogrammethatgivespracticalbusinessskillsanddevelopsco-operativevaluesandprinciples,andaco-operativeattitudetobusinesslife.


OverallThoughtsandConclusions• Weneedtoworkoutwhatisneededtokick-startthesortofgrowthwesee

elsewhereintheworldandlobbythenextgovernmentforit.Whilstthelawhasbeenupdatedinrecentyears,wenowneedaradicaloverhaultointroducebestpracticefromothercountries.Thismustbeaimedatcreatingtheclimateforgrowthofallco-ops,butprioritisingworkerco-opsandconsortiumco-ops.

• WemustincludeanassetlockoptionforCo-operativeSocietiestoenableanyAssetTransferfromGovernmenttobemadewithconfidenceitwon’tbehivedofftotheprivatesector.Ifwecannotsecurethis,thenpublicserviceswillcontinuetobevulnerabletoprivatisation.

• Weshouldconsiderabandoningcommonownershipofcapitalasthepreferredoptionforworkerco-ops,andmarketthemasaformofdemocraticpartnershipbusiness.Tofacilitatethis,weneedtodevelopamodelwhereeachmember’sshareholdingrepresentsnotjusttheirinitialinvestmentbutalsotheincreaseinvaluethattheyhavecontributedto.

• Co-opsneedtobeseenasnotforexcessiveprofit,butafairreturn.Thatmeansfairwagesandadecentreturntomembersintheformofdividendand/orbonus.Asalarycapforallco-opsof12:1(TopPay:LowestPay),wouldre-establishco-opsinthepublic’smindasadifferentandbetterformofbusiness.

• Memberengagementneedstobebetter,andarealinvestmentinaco-op,coupledwithagoodreturn,wouldassistthis.Minimumshareholdingshouldberaisedto£100

• Weneedtointroduceasystemofcommonownershipofaproportionofrevenue,withallco-opsdonatingatleast5%ofprofitstoadevelopmentinitiativeplusafurther5%toacommonloanfund.ShouldCo-operativesUKalsoimposesuchaprofitsharingregimeforallco-opsasaconditionofmembership?Atotaltakeof10%tothemovementisthesameproportionasthechurchoncetookasatithe,andfitswiththestrongMethodistandCatholicinfluencesinthemovement.

• Experienceabroadshowsthatpoolingourcommonfunds,eveninpoorcommunitiessuchastheBasquecountryin1959,enabledlarge-scaledevelopmenttotakeoff.Thefundsofco-operativemembersaremostlyinvestedelsewhere.Weneedtobringthemhomesomehow.We’veneverhadabankintheUKwhosepurposeistosupportco-operativedevelopment;we’veonlyhadabankownedbyalargeconsumerco-operative.ChangingthatwillbedifficultunderexistingUKlaw,butifwedon’tlayoutwhatwewanttopoliticiansandpolicymakers,we’llnevergetit.

• WeneedatrainingandpersonaldevelopmentprogrammeforDevelopmentWorkers.Thisneedstorecruitexperiencedco-operators,asnoamountofbooklearningcanreplacepracticalexperience.Intheworldofordinary


business,veryfewsuccessfulentrepreneursstartwithanMBA,mostlearn“onthejob”andgainqualificationsalongtheway.Weneedtoemulatethat.

• Wealsoneedtokeepthefaith.Conventionalbusinessandmanagementtrainingdoesn’tdevelopaco-operativewayofbusiness,butinsteadencouragesacompetitiveandgreedyapproach.WeneedourownManagementSchooleitherinanexistingUniversity,orweneedtostartourown.ThechangesattheCo-operativeCollegeareapossiblestartingpointforthis.Unlesswecandevelopaco-operativeapproachtolifeinourfuturemanagementwewillalwaysrevertbacktocorporatisminourlargerandmoresuccessfulco-operatives.

• Weneedtobuildonwhatwe’vegot–committedandexperiencedco-operatorswithdevelopmentandmanagementskillsarethinonthegroundalready.Wemustensurethatanewstrategydoesn’tresultinuslosinganybody.

• Weneedtogetorganised,aswehavebeenunabletoinfluencetheso-calledPublicServiceMutualsprogramme,andhavenotgotanyofthework(andmoney)fromitsofar.AjoinedupservicealsoneedstoreflecttherealityofbothaUKGovernmentandDevolution.Indoingsoweneedtoavoidthedeadhandofcorporatismthancancomefromscale,particularlythroughmerger.Weneedtoremembertheco-operativemovementwas,andstillis,bestbuiltonfederation.

• Eirehasnojoinedupco-operativebusinessdevelopmenteither.Irelandisdividedbycurrencyandreligiousdifferences,butunitedgeographicallyandinmanycultural,civilsocietyandsocialways.Wehavenoreasonnottoassistourcolleaguesthere.Plunkettisalreadydoingitwithinitsspeciality;weneedtofollowtheirexample.

Documents

Case Study - Some thoughts on a Co-op Development Strategy · largest grocer, and have subsequently dropped down the league table, they are still the fifth largest grocer in the UK