11 November 2010

What is an employee owned co-operative?

If you work in a public service, you're probably asking the question: What is an employee owned co-operative? If you're an owner/member in a worker co-operative you might well be asking the same thing, but for a different reason; I'll get on to that later.

But first the answer:


Unsurprisingly its kinda in the title: An employee owned co-operative is an organisation owned & controlled by the people who work in it, that either consciously or unconsciously follows co-operative principles .

Ok what does that mean?

The first bit means: for it to be genuinely employee owned the employees should at a minimum control 51% of the voting shares or indirectly own the business via an employee owned trust (like John Lewis).  This ownership also has to be spread throughout the workforce, not just by the managers and come with a real sense of control over the business. Giving 10% of shares to employees is not an employee owned business.

You could just stop there and be an employee owned business, which is fine (damn site better than being investor owned), but I believe the bit that adds the real value (and makes it more palatable for me regarding public service delivery) is the co-operative bit.

You can read the internationally agreed Co-operative Principles here. But essentially they say that a co-operative is a business where:
  1. You can't be forced to be a member, and if you fit the criteria (length of service, commitment, etc) you can't be turned down.
  2. If your a member, you get a say in the running of the business and that say is equal to others not based on how much money they have invested.  (This doesn't preclude managers by any means, but does change the dynamic).
  3. You control the capital; you should also benefit from the performance of the business.
  4. Significant when it come to public services, as a business you should be independent, from the state or anyone else's influence.
  5. Members should be fully trained and supported so they can play a full role in running the business.
  6. Where possible you should co-operate with other co-operatives, to develop the whole co-operative economy.
  7. You should also have a wider concern for the community around you.
So if you're a public sector worker whose stumbled here I hope that helps. If you want to make an enquiry about setting up public services  mutual or employee owned co-operative click here. If you are interested in my own views on what model could help us create a big society click here.

My more regular readers might be asking, why I've essentially restated what a worker co-operative is. Why? because when you go on wikipedia, co-operative websites, or talk to people in the co-operative movement no-one really uses the term "employee owned co-operative".

In the US, Canada and UK we use the term worker co-operative, or if were really old-school "producer co-operative". As with most things in the English language the why has been lost in history.
The more pedantic people like me might argue that "worker" is technically a broader legal term than employee. But for most people the two phrases are interchangeable. (or are they? If you disagree please leave a comment)

I've heard grumbles that the use of this new term by Government and others is to distance these new entities from co-operatives of the past; or because "worker" sounds a bit too socialist for people's liking.

There are good examples of public service co-operatives out there.  But I do understand the need to look if exhisting models will fit and what these public service mutuals are going to really look like. Co-operatives UK provides a point for accessing information and signposting for people interested in starting a co-operative delivering public services. At the moment we are working with the Government particularly in relation to the Post Office.

And that's the real point of all this, what is being proposed by the coalition Government is going to break new ground, if public sector workers really are going to opt for some sort of mutual / employee owned co-operative model then they probably will be different from the worker co-operatives we have at the moment.

But if they share enough of the same characteristics, they are going to be dealing with the same issues worker co-operatives face.  How can we pass on our learning, and what can we learn? What are the opportunities (or threats) from some potentially massive new worker co-operatives that could easily dwarf the existing worker co-operative economy in the UK.

I'll end by saying; you can’t bluff it; if you say something is a co-operative it has live up to it. If its called employee owned, it has to be genuinely owned and controlled by those employees.

This is something I'd really like your comments on both from worker co-operatives and those in the public sector trying to understand how this might work for them.

Wider Reading:
Demos - John Lewis vs easyCouncil
Respublica - Turning public servants into service partners


CaroleRL said...

Good stuff, John, and timely considering all the confusion regarding what is and what isn't the "John Lewis model"! None of the examples described in the media represent anything like the 100% Trust ownership that exists at JLP. Definition and understanding of terms is crucial if we are to be clear what we are talking about.

I believe that what is important is that each organisation finds the model that is right for them. In some cases that will be a workers' co-op, in some cases it may be an employee owned business. Of course, it might be something completely different. I think your proposition that to be properly employee owned requires a controlling stake is good, and I'd like to see that. However, the reality is that for many reasons it is not always possible. I've spent the weekend reviewing the evidence given to the Parliamentary Committee on the Postal Services Bill and consensus appears to be Royal Mail requires external funding. It's likely this will be equity and therefore large scale employee ownership AT THIS STAGE, doesn't seem a likely outcome. However, I agree with you that the proposed 10% is paltry and it was good to see that many of the MPs agreed with that. The actual wording on the Bill is "at least 10%" so let's hope that is increased. There are many employee owned businesses with less than 50%, but I'd say these organisations use their governance structures to ensure real employee voice. Personally, I do agree this is sub-optimal.

CaroleRL said...

The other interesting thing that came out of the Bill discussions is the commitment to avoid the mistakes of previous privatisations from the 80s: these were seen as "get rich quick" schemes rather than attempts to instil any sense of ownership either with employees or share purchasing citizens.
Employee ownership works well because the absence of external shareholders means that the organisation can concentrate on being a successful, sustainable enterprise. There has to be thought given to the longevity of the shareholding and how that shareholding can be exited. Of course, neither of these points are issues with employee trusts.
(On your comment re worker vs employee, I thought the working time regulations set the precedent here that they covered workers, not necessarily just individuals with employee status? It's an important point, especially with so many kinds of contracts for services now)

John Atherton said...

Thanks for the comments Carol, yes I agree that each business needs to find the model best for them and their situation. As long as it's clear if these are poperly set-up cooperatives or employee owned businesees.

The Benn Co-operatization of failing industries in the 70's and the privatisation of public transport in the 80's both in my view tarnished Government view about employee ownership of bussiness, as they both failed to implement the model fully.

I'm glad to see there is a committment by Government to try better this time and I hope as a sector were better equipted to support them.