What we could learn from French co-ops

Shame to see plans for SeaFrance to become a worker co-op have run aground.  This is despite having political, legislative and support structures that promote worker co-operative buy-outs.

"The cooperative, was to be financed by workers' standard lay-off  payments as well as "exceptional" cash of 60,000 euros per worker, paid by SeaFrance's parent company, state-owned rail form SNCF."

Reportedly, not enough workers were committed to investing their lay-off cash in the co-op and the Trade Union was holding out for Government bail-out. Other trade unions representing SeaFrance personnel, and the national CFDT trade union, criticised the hard line stance of the local branch.


So 880 people will lose their jobs and probably the same again indirectly. As well as the reduction in services and competition in the market. I had a good grumble in my head about trade union intransigence (coal mines all over again), unviable businesses being forced upon the workers due to management failures... grumble ...grumble....

But what struck me was, it even got to this point, Nicolas Sarkozy was in favour of the idea! Would this ever happen in the UK?

I know Nick Clegg and David Cameron talk about increasing employee ownership, but would this happen? and if it did how would the workers be supported to make a real go at success? Labour Governments have not had great success at top down saving of industries through worker co-ops. (Meridian Motorcycle Co-op)

Despite the situation with SeaFrance, France has a really good track record of worker co-op conversions and has a Government backed programme (both buying successful business from retiring owners and businesses rescues.)

Given the very large number of SME business owners expected to retire in France of the next few years this area has been a particular focus for the co-operative movement. There have been 70 enterprises converted to worker co-ops each year over the last few years. There is also a specific support network called “APERE” (Association for the Promotion of Enterprise and Takeover of Enterprise) which partners with CG-SCOP the worker co-op federation.

I've linked to this report before in relation to success factors in the Italian worker co-op sector, but there is also a section on France, well worth a read:

Bit of history:
In France, a worker co-op is called a “SCOP”, an acronym for “Société coopérative et participative;”.

The French worker co-op movement dates back to early in the 19th century. A law passed in 1791, the “Chapelier law”, forbid workers’ associations, including worker co-operatives and trade unions. However during the revolutionary periods many worker co-operatives formed clandestinely. In 1878, the Administration repealed the Chapelier law, stopped the attacks and eventually became supportive.

Recent Growth
At the end of 2008, there were 1,893 cooperatives belonging to national federation involving 39,929 employees. Between 1994 and 2009, there was a 40.1% increase in the number of SCOPs from 1392 to 1950 SCOPs, and a 41.8% increase in the number of SCOP jobs, from 28,691 to 40,685.

Since 2007, approximately 200 new SCOPs have started each year through start up, recovery or business transfer and generated an average of 1,500 jobs per year since 2007. During the economic crisis although affected worker co-operatives have proved resilient as recent CECOP reports show.
At the end of 2010, there were 1 959 co-operatives a growth of 3.5% per year over the last 15yrs with survival rates after 3 years of 74% (average in France: 66% - source INSEE)

Success factors
Indivisible reserves
According to Patrick Lenancker, President of CG-SCOP (the national Federation), a significant reason that SCOPs have been so successful is they have substantial stable capital. A minimum of 15% of surpluses must be placed in reserves (in practice,it’s 40% to 45% on average) with the key advantage that the reserves are permanently owned by the co-operative, ensuring financial stability in the long term.

Like Italy and Spain the principle of indivisible reserves in worker co-operatives is strong (a bit like the common ownership worker co-ops of the 70's like Suma or John Lewis being held in Trust on behalf of the workers).

This large indivisible reserve prevents the SCOP from being taken over by external parties; ensures the independence and sustainability of the enterprise in the long-term.

Positive Government and legislative environment
There is a recognised worker co-operative legal form with requirements: The re-investment of surpluses and indivisible reserves mentioned above. Also in a SCOP, the workers must have at least 51% of the capital, and 65% of the votes.

But worker co-operatives receive tax benefits from the French government. SCOPs do not have to pay the professional tax, which is 1.5% to 2.5% of revenues and income on worker shares is exempt from income taxes. There are also financial mechanisms for workers to use redundancy payments as part of wider financing package to buy-out and provide cash-flow for the business once they take it over.

Principle 6 in action with strong Federations and support organisation
One of the other requirements to gain SCOP status is to finance the worker co-operative movement. The membership fees are 0.42% of revenues. Interestingly that would be about £60,000 from current worker co-ops (Turnover around £150m) and £3.7m if you add employee trust owned co-ops like John Lewis. Imagine the support that could be offered to grow the economy if we had £3.7m! (anyway I digress).

SOCODEN (Société coopérative de développement et d’entraide) is a financial institution managed by the SCOPs since 1965 and offers equity loans and financing for working capital requirements.

Finally the sense of solidarity and mutual support between worker co-ops is high. CG-SCOP’s slogan is “A SCOP is never alone.” The “Confédération Générale des Scop” leads and coordinates the SCOPs network and represents SCOPs at the national level in France. There are thirteen regional unions providing day-to-day development, and representation at the regional and local levels. There are also three professional federations that represent the SCOPS in their sector and provide economic, technical and legal advice.

Here is a diagram taken from www.les-scop.coop (your French is probably better than mine.

Further Reading
But don't read my blog go straight to the horses mouth:
http://www.les-scop.coop/sites/en/index.html
English translation of economic stats

Can we really create a co-operative economy?

All the talk at the moment is about public service co-ops and mutuals. How the co-operative model would be great for driving up performance, lowering costs, but at the same time keeping these new businesses accountable and lets be honest ethical.

I agree with this generally and particularly if the employees get a real sense of ownership and control of their work life. But the question I'd like to ask Dave and George is: If its so great for the public services (especially in this time of budgetary constraint) why is it not a great idea for the rest of the economy and particularly those areas of high capitalism that got us into this mess in the first place?

I know a number of you must be thinking the same, in a recent SEC survey showed 2/3rds of people want more employee owned business in the private sector.

We are not the only ones who want to create a more co-operative economy either.  Fidel Castro at the other end of the spectrum admits Cuba's centrally planned economy is not working and worker co-operatives should be promoted.(I find it slightly bizarre that a communist and a Conservative could agree on a economic model.)

Some people like the Basques in Mondragon and Emilia Romagna in Italy have been creating a worker co-operative economy on a regional level for years. Hugo Chavez in Venezuela is also a convert:

"When he took office, there were 762 co-ops in Venezuela with 20,000 members. Many of these were more credit unions than worker-owned cooperative work places. By mid-2006 there were 108,000 co-ops with 1.5 million members with half in the service sector and a third in production.
More information on his Bolivian Revolution here and here.

So creating a worker co-operative economy is doable, but is it doable in the England or the US?
Well some in the US are giving it a try; the steel worker union of America is looking to partner with Mondragon.  There is also an experiment going on in Cleveland to create a Mondragon like network of co-operatives, the first group of co-operatives are focused around The Evergreen Co-operative.

So is it achievable in the UK and what could it look like?  
Co-operatives UK is releasing a paper (more of a tomb) written by Robin Murray who was heavily involved in the formation of the fair trade movement: Twin Trading, Cafe Direct, Divine Chocolate etc. Its called Co-operation in the Age of Google,

Co-operation in the age of Google shows that we are living at a time of profound transformation. The information and communication revolution, widespread concerns about private sector greed, public sector finances and impending climate chaos present a wide range of possibilities for co-operative expansion.

Robin argues the UK Co-operative movement is not yet in a position to make the most of these opportunities. It needs to be more innovative, more integrated, more internationalist, to get better infrastructure and to find ‘the idea’ that can mobilise support for co-operation. The review proposes a series of practical initiatives for 2011 and 2012 to strengthen the co-operative sector.

Have a read and in true co-operative style add your own comments, thoughts and ideas.


Another report released by MIT in October looks at Mondragon and the Evergreen Co-operative Model case study them and then create a theoretical framework for what creating a worker co-operative economy.


"The most important lesson from Legacoop and the Mondragon is the importance of developing an economically integrated network of cooperatives rather than a single cooperative."

I've added a diagram from this report as it sums up their framework.But do have a read of that too.

We live and vote in a country run democratically and we may well soon have a public sector run in a more democratic and mutual way.  Why should we not work in a business that is run in a democratic and co-operative way?


Wider Reading
Co-operation in the Age of Google (Co-operatives UK) 
Sustainable Economic Democracy: Worker Cooperatives for the 21st Century (MIT Co-lab)

American Study Visit:

On Tuesday 12th June members of the Co-operative Charitable Trust (founded by Bob Giel) visited Co-operatives UK.  John Butler did a fascinating presentation on consumer co-operatives and I was asked to talk about worker co-operatives.  So here are the highlights and some of the things I found out in return.

I started off with the headline figures for the Co-operative Economy and how worker co-operatives make up roughly 8% of the UK co-operative economy by number, but less than 0.5% when you look at their turnover.

The size of the UK worker co-operative sector is very small compared to our Spanish, Italian and French cousins (something I will go into in my next post or two). But we are comparable to the US in number, although they do have some worker co-operatives that are larger (one has 1500+ staff!).

Although the US Federation of Worker Co-operatives doesn't collect data to the same extent as Co-operatives UK they estimate there are over 300 democratic workplaces in the United States, employing over 3,500 people and generating over $400 million in annual revenues.

He is a break down of the worker co-operative economy for 2009 (please always send back your annual return to help us keep our data accurate).

Our US visitors were particularly interested in our Worker Co-operative Code of Governance and the flatter more collective management structure in the UK. I focused particularly on some of our larger worker co-operatives like Suma, Edinburgh Bicycle Co-operative and Dulas. To show the different structures, governance models and industry sectors.

 
I could only find the 5 largest American Worker Co-operatives, but it is interesting to compare and contrast them.  There largest (in turnover) is comparable to Suma and mostly similar industry/size to our co-operatives, when you think how much larger the US is. The big surprise is Bronx based homcare provider with 1500+ workers, far larger than any of our worker co-operatives. I understand our own Sunderland Homecare a UK employee owned business were inspired by them (Sunderland are not usually categorised as a worker co-operative though).

Defiantly worth a deeper look into their governance mode and business; particularly in light of the Conservative Governments interest in public service delivery through Co-operatives.

Name	State	2005 Revenues	Workers
Rainbow Grocery Cooperative	Calif.	$38 million (£25mm)	200+
Cooperative Home Care Associates	N.Y.	$24 million (£15.8m)	1,500+
Equal Exchange	Mass.	$22 million (£14.5m)	70
Alvarado Street Bakery	Calif.	$20 million (£13.2m)	120
Isthmus Engineering & Manufacturing	Wis.	$10 million (£6.6m)	50

I finished off with a graph to give a flavour of the industries worker co-operatives operate in. I organised them under the below categories (my own creation). In the future our members will be able to tag and categorise themselves in our new directory hopefully improving the number and depth of our data.

Most of these should be self-explanatory apart from "Creative Arts" that brings together all the music, art, theatre and craft based worker co-operatives.

If you are an American reader I would love any links of info on your larger worker co-operatives, and what makes them successful.  Please leave comments.

Japanes visit to Co-operatives UK and Suma

Recently Co-operatives UK received a request from the Japanese Embassy in London to help them with research into worker co-operatives.  The Japanese Government is looking to update their co-operative legislation and were interested in the situation in the UK. How we  promote and develop worker co-operatives and what the barriers for growing and developing the movement are.

Co-operatives UK quite regularly gets international enquiries and we do our best to support co-operatives in other countries whenever we can. I therefore organised a visit to Co-operatives UK and Suma for the First Secretary (Economic Section) a Mr Ishizu that took place yesterday.

Mr Ishizu was fascinated with Suma's business structure; especially their lack of executive management.
Suma deals with this by treating management as a function (not status) and different aspects of management are dealt with by different people on behalf of the Co-operative. All members of Suma are paid equally and all have an equal responsibility for the management and performance of the business.

Here is a picture of Bob Cannell showing Mr Ishizu photographs of all the members in Suma.

CECOP General Assembly Brussel's: Part 1

Bob Cannell (Suma) and I attended the CECOP General Assembly earlier this week to represent the UK. This post will give a brief overview of what CECOP is and what the main issues discussed were. I hope you find this interesting and if any worker co-operatives want to get more involved or build links with our European partners please contact me.


CECOP – CICOPA Europe is the European confederation of cooperatives and other employee-owned enterprises that are active in industry, services and crafts, most of them being worker and social cooperatives. It affiliates 25 national federations in 16 EU countries, which in turn affiliate approximately 50,000 enterprises which employ 1.4 million workers and generate an aggregate turnover of around €50 billion.

Big numbers and the UK is a small fish in this pond with France, Spain and Italy all having massive worker co-operative sectors in comparison to us. Mondragon in Spain is their 7th largest Corporate Group....

CECOP's is similar to Co-operatives UK but on an EU level, their primary role is unite all the different national federations and lobby the EU commission and Parliament on our behalf. The main discussions were:

Impact of the Financial Crisis
On the whole, worker co-operatives have faired better during the crisis, particularly more likely to survive and with lower job losses. CECOP has made a point to lobby on behalf of the sector to take advantage of this turn of events. Reason's for why worker co-operatives have faired better include:

• Longer term thinking, re-investment of profits.
• Less reliance on financial markets lower levels of debt (leverage).
• Prioritise good quality and sustainable employment for its members rather than withdrawing wealth from the business.
• Worker Co-operatives tend to focus more on training and development.
• Not so much in the UK but Italy and Spain have a good track record for Co-operatives supporting each other and "clustering" to gain economics of scale and provide services for each other.

Lobbying work and Post-Lisbon EU Strategy (2020)
After the Lisbon Treaty the EU Commission has developed a strategy and priorities for the future, CECOP were involved in the consultation process and has worked hard to lobby and make sure that Co-operatives get treated fairly.

In the UK we don't get any real preferential treatment (in fact it could be argued we get less favourably treated than mainstream business forms). Whereas in other countries like Italy and Spain there are benefits, concessions and tax breaks for co-ops. For example in both Spain and Italy people can use their employment benefits to invest in setting up a worker co-operative that succeeds the previous business that employed them (employee buy-out).

Other Lobbying work includes, working hard to make sure changes to International Financial Reporting Standards do not put Co-operatives at a disadvantage (Whether members investments are treated as Assets or Liabilities for example).

Social Co-operatives and Social Enterprise
In the UK we have taken a different approach to other EU countries when looking to change public service delivery. Italy, Sweden, Spain and France have focused on the co-operative model as the vehicle to deliver these services and be the "social economy"; we have mostly focused on Social Entrepreneur model of Social Enterprise.

"Social Co-operative" is a growing term and a source of new co-operatives (7000 just in Italy alone). CECOP has recently released a book and is working on standardising the term across the EU with the future goal of properly recording them and promoting the model.

Whats a Social Co-operative?
It is always difficult to understand concepts from other countries, but basically a "Social Co-operative" is:

• Multi-stakeholder Membership - users, workers and customers (funders).
• Deliver services of "General Interest" (which is similar, but a tighter definition than our "community interest" test for CIC's, more specifically about public services).
• They abide by co-operatives principles; in Italy they have their own legal form.

What is fascinating for the me is there are definitely Co-operatives in the UK that fall into this category, and there maybe other democratically owned social enterprises as well. Both groups would benefit from understanding and learning from the more developed sector on the continent. 

I don't understand the full import, of this new model, but once CECOP completes their work I will do a bigger article.  This model could be what the new coalition Government is looking for to square the circle between freeing up public service delivery but keeping it accountable.

Relationships with Trade Unions
A big theme of the conference was building links with Trade Unions when dealing with businesses in crisis (particularly relevant in the current economic climate!).  Other than in Wales, where that has been some great examples Tower Colliery).  The UK is miles behind our European colleagues when it comes to Trade Unions and the Co-operative movement working together to turn business in crisis into sustainable worker co-operatives (Particularly France).  There is a myth that worker co-operatives by there nature don't need trade unions. This doesn't seem to be the case with worker co-operatives like Suma being heavily unionised (over 80%).

Other Tid bits
Dealing Business Succession - France, CGSCOP are very good at it.
Bringing Disadvantaged people into employment - Italy, Federsolidarieta are very good at it.

Mostly written while traveling back so apologies for poor prose...