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The principal problem with Co-ops is that they almost invariably use genetically modified forms of Joint Stock Companies.

So firstly, they always have the principal/agency problem with management.

Secondly, they have a severe problem with access to capital, since borrowing puts the business at risk, and as with any mutual their only other source of capital - without relinquishing control - arises out of gradual accretion of surplus.

But since a worker co-op like John Lewis - not really a perfect example, because it was philanthropically endowed with assets by John Spedan Lewis at the outset - tends to distribute surplus to workers in one form or another (which is fine); and retail co-ops tend to distribute surplus to customers (the 'divi' - which is also fine) then retained surplus tends to be low.

In order to survive and thrive in the modern world, Co-ops have tended to become increasingly corporate, and the risk is that they are run by and for the management. That is less likely in a worker Co-op, but pretty much the norm in a retail co-op (eg the UK Co-ops, particularly the big ones) or in a producer Co-op eg NZ's Fonterra, or other agri-co-ops like Arla.

The management of these beasts are always on the look-out for a management buy-out/flotation etc, and sometimes the members go for the short term windfall and long term screwing which results.

The approach I have evolved - and it's probably moved on a bit since we last discussed it, TBG - is essentially to create a Co-operative of Co-operatives within an associative framework agreement.

In this model Labour works with, not for, Capital, and there is no principal/agency problem because management share the gross revenues or production with staff and investors.

See Partnership Finance

If it's not participative and democratic, then the workers don't subscribe to the agreement.

Simples.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue May 31st, 2011 at 05:59:27 AM EST
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