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Big day for co-op

by Laurent GUERBY Sat Feb 24th, 2007 at 09:25:06 AM EST

New Economist says big day for co-op fans:


The joys of employee ownership

For Chris Dillow and other advocates of employee ownership, the last few days have been heady indeed. On Saturday it was revealed that the boards of the UK's two biggest co-operatives have agreed the terms of a merger that would form the world's largest consumer co-operative group, with a combined workforce of more than 87,000 staff and more than 4,500 sites. On Sunday The Observer reported that John Lewis plans massive expansion:

    John Lewis Partnership is embarking on a highly aggressive expansion strategy which will see the employee-owned business create 35,000 new jobs and double its turnover to £12bn. ...A 10-year business plan, signed off by the partnership board in recent days, will see the retail concern boost its total workforce to 100,000 by 2017. The plan envisages John Lewis significantly increasing its 26 department stores and 184 Waitrose supermarkets.
[...]

From the diaries -- whataboutbob


Extract from a paper by Richard Reeves (PDF):


[...]
The best study undertaken of relative performance suggests a 19 per cent productivity lift from co-ownership. Applied across the economy, co-ownership would make the UK the most productive nation in the world. In a survey of managers in co-owner firms, 72 per cent reported that staff worked harder than in competitor companies, and 81 per cent that they took on more responsibility.
[...]

Anyone with more papers on this topic? As I said multiple times here, this seems to be a vastly under-studied area of economics. No wonder why?

Display:
I think this:

The best study undertaken of relative performance suggests a 19 per cent productivity lift from co-ownership. Applied across the economy, co-ownership would make the UK the most productive nation in the world. In a survey of managers in co-owner firms, 72 per cent reported that staff worked harder than in competitor companies, and 81 per cent that they took on more responsibility.

is both really interesting and, if accurate, quite amazing...

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia

by whataboutbob on Sat Feb 24th, 2007 at 09:23:59 AM EST
Me too... !

"What can I do, What can I write, Against the fall of Night". A.E. Housman
by margouillat (hemidactylus(dot)frenatus(at)wanadoo(dot)fr) on Sat Feb 24th, 2007 at 09:35:04 AM EST
[ Parent ]
From the BBC article:


Co-operative retailers had a 20% share of the British grocery market in the 1950s, but have lost ground to supermarkets in recent years and seen their share shrink to closer to 6%.

So not all is well.

by Laurent GUERBY on Sat Feb 24th, 2007 at 10:51:34 AM EST
[ Parent ]
There is a BIG distinction between the (declining until recently) Coops owned by their customers and those owned by their staff.

A pal of mine in Leicester - which has always been a hotbed of Cooperativism - regaled me with tales of the bitter battles a hundred years ago or so between the shoe-making Coops in Leicester owned by staff and by customers.

My experience of the retail Coops in London, btw, is of almost universally abysmal customer service etc etc.

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

by ChrisCook (cojockathotmaildotcom) on Sat Feb 24th, 2007 at 06:50:11 PM EST
[ Parent ]
The co-op lost its uniqueness in the seventies when it stopped paying the dividend-an annual share of profits to its owner-customers.  My mother defected to the bigger, closer Tesco at that point, along with millions of others.

Over the last decade or so it has been marketing itself as an ethical retailer.  It was the first to offer ethical banking, and is still, as far as I know, unique in being the only large retailer to use only fair-trade ingredients in its own-brand coffee and block chocolate.

It was a leader in improving animal welfare standards (not to the standard I'd like to see, but any improvement is better than none) and, as one of the UK's largest farmers and dairies, has refused to take part in trials of BST (milk-yield improving hormone) or to process the milk so produced.   Co-op ethical statement here.  It's also an underexploited up-and-running network for the distribution of local food.

By pure coincidence, I visited a Co-op 'superstore' this afternoon.  It was large, though not on the scale of some of the behemoths built by competitors, but what was really impressive was the effort taken to set it back from the road and allow it to disappear into the landscape.

Most co-ops are smaller and urban. Prime Tesco Metro sites.  We need to cherish them and use them.

(And, apparently, last year,
the 'divi' was reinstated. No more excuses?)

by Sassafras on Sun Feb 25th, 2007 at 11:57:03 AM EST
[ Parent ]
I am convinced that cooperativism will be the predominant form of human economic and perhaps even political organization in the future.  There may be other organizational innovations that could save civilization, but this is the only one I know of that already exists.

Anyone with more papers on this topic? As I said multiple times here, this seems to be a vastly under-studied area of economics. No wonder why?

It is obvious why mainstream corporations are threatened by cooperatives.  What is less obvious is why social democratic states do not do no more to encourage and promote the most social democratic form of capitalism.*  My impression is that cooperatives are succeeding, growing, multiplying primarily due to their own efforts.

Perhaps Chris Cook is right and the emergence of "open corporate" legal structures, such as the UK LLP, will become an express lane for cooperatives to becoming the most successful and indeed the standard form of enterprises, both those operating "for profit" and those operating "for the community".)

(By the way, thank you for awakening my interest in cooperatives with your diary last year, Capitalism That Works For All.)

*Or do they already?  I was not aware of how big the state's role in promoting solar energy in Germany, Japan, and the U.S. has been, so maybe the state has already played a big role in the promotion of cooperativism in some countries?  Absence of evidence is not evidence of absence and so forth.

Truth unfolds in time through a communal process.

by marco on Sat Feb 24th, 2007 at 09:47:35 AM EST
What is less obvious is why social democratic states do not do no more to encourage and promote the most social democratic form of capitalism.*

Co-op movements in the UK were largely working class enterprises, which received managerial and financial advice from within the Methodist Christian movement which was traditionally associated with Co-ops.

However, the co-operative ideal was not the sort of over-arching explanation of the world attractive to middle class political "intellectuals". And so when the Labour movement began in the UK, it recieved its "intellectual" drive from dilettante middle class Marxists who preferred to strive for the impossibilism of overthrowing capitalism rather than its better managmement. They therefore distrusted the autonomy of co-ops which they felt were part of the capitalist system they were trying to  sweep away.

Therefore both the Labour and Conservative party have, for different reasons, attempted to prevent the co-op movement from thriving.

Now that marxism has finally, belatedly expired, there is no left wing context for reviewing capitalism, we are left in the grip of mercantile corporatist raiders. All aided and abetted by governments of all hues who see no alternative to the immiseration of millions to enable the enrichment of the few.

Co-ops are probably assured of a good future in the UK, the alternative increasingly resembles a sort of fuedal slavery. But first they needed the dead hand of marxist socialism to be lifted from their backs.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Sat Feb 24th, 2007 at 12:36:46 PM EST
[ Parent ]
Now that marxism has finally, belatedly expired, there is no left wing context for reviewing capitalism, we are left in the grip of mercantile corporatist raiders.

I am optimistic that cooperativism is ripe for coming into its own.  After decades of pushing by committed pioneers, cooperativism will soon reach the point where it takes off like a flywheel spinning faster and faster, propelled by its own weight.

Cooperativism had a false start in the U.S. as well, in the age of Populism, at the end of the 19th century.  Indeed, one of the railroad barons, Leland Stanford, who became U.S. senator and governor of California, before founding Stanford University, "converted" to cooperativism and even tried to get a bill passed to promote cooperativism in the United States.  His bill did not follow the Rochdale principle of one person-one vote, as voting rights would be based on capital contribution, but his commitment was clearly to a vision where workers were their own employers, where people worked together as partners, and not in employer-employee relationships.  In an interview with the New York Tribune Stanford "drove home his vision by imagining what would happen if the industrial system had always been cooperative, and now someone were proposing to reorganize it as a corporate system":

To comprehend it in all its breadth, however, let us assume that in all time all labor had been thus self directing. If instead of the proposition before us to change the industrial system from the employed relation and place it under self direction, the co-operative form of industrial organization had existed from all time, and we were now for the first time proposing to reorganize the employment of labor, and place it under non-concurrent direction, I apprehend the proposer of such a change would be regarded in the light of an enslaver of his race. He would be amenable to the charge that his effort was in the direction of reducing the laboring man to an automaton, and ... would leave but small distinction in the minds of workingmen between the submission of all labor to the uncontrolled direction of an employer, and actual slavery.

Beyond Capitalism: Leland Stanford's Forgotten Vision

Earlier in the interview, he states:

When you see a man without employment, ... the contemplation is necessarily saddening. The fault is with the organization of our industrial systems. ... The hirer of labor uses other men in the employed relation only to the extent that his own wants demand. Those therefore, who having productive capacity, remain in poverty, belong to the class who constitute the surplus over and above the numbers required to satisfy by the product of their labor the wants of the employer class. The numbers belonging to this surplus class would be constantly diminished, and would eventually disappear under the operation of the co-operative principle.

His bill did not pass, but I was surprised to learn that one had even been proposed in the Senate at so early a date, and by a railroad Robber Baron to boot.

Are there any politicians today for whom cooperativism is even on the radar?

Truth unfolds in time through a communal process.

by marco on Sat Feb 24th, 2007 at 01:23:29 PM EST
[ Parent ]
The co-operative movement has been fathered (or mothered) by two different schools of thought: the first one was the socialist Utopians, like Charles Fourier and Louis Blanc. It was the case in France. The second one was the social Christians movement which developed during the XIXth century. For example, the biggest Spanish (Basque) co-operative, Mondragon, was created by a priest. I discovered in Helen's post it was also the case in England. It has also been influenced by the mutual insurance organisations which developed among farmers in the German countryside (and elsewhere) at the same period.

In France the debate has been very strong among the worker's movement at the end of the XIXth century and the beginning of the XXth. The co-operative movement and the reformists, represented by Jean Jaurès, were in favour of developing new models within the capitalist society, including workers' ownership of the means of production, whereas the Marxists, represented by Jules Guesde, were in favour of the revolution, the dictatorship of the proletariat, and giving the control of the means of production to the "enlightened vanguard" (the Communist Party). After the victory of Guesde against Jaurès in 1905, the official line of the Socialist Party was the Marxist one, and the co-operative movement was in the view of the mainstream socialists.  The co-operative movement has continued to exist, often supported by the non-communist unions, but within its own niche, without trying to promote strongly its approach as a model for the economy.  This shyness is still strong in the movement.

The main problem with he left is that, while most of it has now rejected Marxism (except in France where it is not so clear...), it hasn't been able to build a strong alternative economic and social model (i.e. a well regulated and harnessed market economy) Rightly or wrongly, the left has figured that, in order to access to power, it had to accept the dominant economic narrative and limit its ambitions to be "nicer" than the right wing.  They have succumbed to a substantialist approach: we are good people, so when in power, we will have good policies, without taking into account the homeostatic forces of the system and the cognitive corrupting effect of power.

However, I think, as a number of people in the co-operative movement at international level, that the time has come to promote the co-operative model as a model for the future firms, even if it has to evolve. As I said in a seminar bringing together CEOs of big co-operatives of the world: "In my view, even if all of them will not be co-operatives, in the future, companies will have a lot in common with co-operatives, particularly in terms of relationship between capital and labour, ownership, power-sharing and governance."

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sun Feb 25th, 2007 at 01:26:47 PM EST
[ Parent ]
The Confederation of Finnish Cooperatives: http://www.pellervo.fi/finncoop/

There are proportionately more cooperatives in Finland than in any other country in the world. The father of the Finnish cooperative movement, father Hannes Gebhard, founded Pellervo in 1899.

Today Pellervo integrates over 420 member cooperatives whose membership amounts to well over 1.6 million persons (the population of Finland is 5.2 million persons). The joint turnover of Pellervo's member businesses reached over 14 000 million euros in the year 2000. Most member businesses are market leaders in their respective fields.

Cooperatives have a traditional strong representation in agriculture, forestry and food processing, in banking and insurance, and there are several large retailers that are quasi-coops: as a consumer-member you don't quite own anything, but the relationship goes far beyond Loyalty Cards.

You can't be me, I'm taken

by Sven Triloqvist on Sun Feb 25th, 2007 at 02:06:42 PM EST
[ Parent ]
I think co-operatives are one of the promising models to promote.

I've been working for a few years with the International Co-operative Alliance which unites, represents and serves co-operatives worldwide. They have launched an initiative named "Global 300" to promote the model and role of big co-operatives in the framework of globalisation. This initiative was launched in Lyon, in October 2006.

Here is the Global 300 initiative brochure, and the list of the world's 300 biggest cooperatives.

I am currently working with them on the creation of a high-level education scheme (MBA-like) for the managers of co-operatives. It will aim at developing a culture of management which includes the values of the co-operative movement and a critical approach to the dominant schools of thought in economics and business.

 

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sat Feb 24th, 2007 at 10:14:19 AM EST
The Co-operative movement is active in Europe.

Check the following sites:

The European Confederation of Workers' Co-operatives, Social Co-operatives and Social and Participative Enterprises (CECOP)

Cooperatives Europe


"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sat Feb 24th, 2007 at 10:37:05 AM EST
[ Parent ]
I wonder why J-C.Lescornet changed the PSU in that Red-Green thing... ?
It used to be a good place for the Co-operative minded people (sigh)!

"What can I do, What can I write, Against the fall of Night". A.E. Housman
by margouillat (hemidactylus(dot)frenatus(at)wanadoo(dot)fr) on Sat Feb 24th, 2007 at 01:03:21 PM EST
[ Parent ]
Thanks for those link.

Except for the BBC extract above which is quite negative (coop retail got smashed in the UK), I've yet to find comparison data between non coop vs coop, on any scale. I can't seem to find employment data either.

Is the coop situation so catastrophic?

by Laurent GUERBY on Sat Feb 24th, 2007 at 10:57:31 AM EST
[ Parent ]
I don't think the coop situation is catastrophic, but it depends on the country. As far as I know, the figures for the market share of the consumers co-operatives in UK are true. But in Japan, for example, consumers co-operatives are huge and very powerful.

For employment figures, it is difficult to find them. The ICA claims that co-operatives represent over 100 millions of employees worldwide (and 800 millions of members).

If you need data on co-operatives, I can try to find them with the ICA.

Do you think it would be interesting to organise a chat on ET with a representative of the Co-operative movement? I think I could organise it.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sat Feb 24th, 2007 at 11:29:41 AM EST
[ Parent ]
I didn't search real hard, but I'm surprised that the coop  movement publications I could find are about 99.99% narrative with little or no comparative data.

The only quantitative data I could find is the "Employee Ownership Index", but last datapoint is in 2005 ...

http://www.equityincentives.co.uk/resources/news.aspx

(and it's not really coop).

The Reeves paper is 29 pages, and has only one data point.

I do believe that publishing data will have vastly more impact on public opinion than creating an MBA, so yes I'm really interested in the chat with knowledgable people you're proposing :).

I'm in Paris, but I can travel if face to face is necessary.

Disclaimer: I own 60 000 euros of coop shares (mostly "La Nef").

by Laurent GUERBY on Sat Feb 24th, 2007 at 12:10:05 PM EST
[ Parent ]
I was thinking of an online chat on ET...

However, I can put you in contact with people from the co-operative movement. The ICA is located in Geneva and its president lives in Bologna.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sat Feb 24th, 2007 at 12:48:21 PM EST
[ Parent ]
As you know, I am fascinated by ICA - thanks to you!  I would be great to introduce them to ET - they'd get a lot of feedback and encouragement.

If Jerome hasn't registered a new domain yet - then a .coop would be a good gesture. (Available via the ICA site)

I think if we could put ChrisCook's ideas on Open Capital together with coops, and then use the web to connect people together. it would be possible to build empowering organizations with very low transaction costs.

You can't be me, I'm taken

by Sven Triloqvist on Sat Feb 24th, 2007 at 01:22:48 PM EST
[ Parent ]
I believe that the optimal enterprise model could well consist of an LLP/LLC "Coop of Coops" ie to combine in an LLP "Wrapper" a John Lewis-style employee coop with a Retail Coop owned by its customers - and with any necessary investment coming from these stakeholders as "Capital Partners" through simply "buying revenues forward".

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sat Feb 24th, 2007 at 06:54:35 PM EST
[ Parent ]
Yes, it is this *'Buying Revenues Forward''' that really changes the game,
 IMO.

You can't be me, I'm taken
by Sven Triloqvist on Sun Feb 25th, 2007 at 12:03:24 AM EST
[ Parent ]
Travel only if necessary, a chat is perfectly fine!
by Laurent GUERBY on Sat Feb 24th, 2007 at 03:01:10 PM EST
[ Parent ]
chat => online chat on ET
by Laurent GUERBY on Sat Feb 24th, 2007 at 03:01:40 PM EST
[ Parent ]
There is of course the famous case of the notoriously militant South Wales miners acquiring their own pit and running it profitably for the last few years (they once even went on strike briefly against themselves - on a matter of principle apparently....)

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sat Feb 24th, 2007 at 06:58:02 PM EST
coops rule the supermarket situation here in italy, as far as i can tell.

they have a good organic section usually, and special deals and points to redeem with different goodies.

they have their own eco-lines on many articles, from detergents to toilet paper, and the people working there doon't seem so downtrodden as in other countries, or worse, afflicted with that syrupy niceness that is the modern equivalent of forelock-tugging.

proud to be a member, they seem an excellent model for other businesses to emulate.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Feb 24th, 2007 at 07:29:26 PM EST
Here are a few articles I ran across:

Managerial and Decision Economics: Employee versus conventionally-owned and controlled firms: an experimental analysis

. . .  In our experiments, subjects in employee-owned firms exhibited higher productivity, perceived greater fairness in the pay they received and the method used to pay them, reported higher levels of involvement in their tasks, had more positive evaluations of their supervisors, and showed a greater propensity to interact with and provide assistance to their co-workers than did those in employee-owned firms.

Industrial and Labor Relations Review: Employee Stock Ownership and Corporate Performance among Public Companies

   This study compares the corporate performance in 1990/91 of two groups of public companies: those in which employees owned more than 5% of the company's stock, and all others. The results of the analysis, which looks at profitability, productivity, and compensation, are consistent with neither negative nor highly positive views of employee ownership, but where differences are found, they are favorable to companies with employee ownership, especially among companies of small size. . . . these results are broadly consistent with those of past studies.

Industrial and Labor Relations Review: The Scope, Nature, and Effects of Employee Stock Ownership Plans in Japan

Using data for various years, including new data for 1973-84, the authors examine the scope, nature, determinants, and effects of Japanese employee stock ownership plans (ESOPs). . . . Evidence is also found that ESOPs enhanced enterprise productivity. The authors argue that ESOPs have played an important, and largely overlooked, role in the success of the Japanese economy over the past two decades.

Managerial and Decision Economics: The Effect of ESOP Adoptions on Corporate Performance: Are There Really Performance Changes?

Employee Stock Ownership Programs (ESOPs) have long been promoted as a motivational tool: employees become profit-minded owners. . . .  We find little evidence to support the motivation hypothesis: while actual labor costs are lower for ESOP firms, after industry-adjusting they tend to be unaffected or higher. We find that a few measures of firm financial performance [return-on-equity (ROE), return-on-assets (ROA), net profit margin (NPM)] do improve significantly, but this appears to be largely a short-term effect. Industry-adjusted holding period returns appear to be unaffected by the ESOP; however, ESOP firms that leverage show evidence of long-term market underperformance. We conclude that ESOPs provide, at best, only a short-term boost to corporate performance.

Oxford Economic Papers: Profit Sharing--Can It Work?

The purpose of this paper has been to summarise and assess the debate about the merits of profit sharing and employee share ownership. We have identified three ways to make the case for more income sharing in the British economy. They are, in our terminology, (i) the morale and productivity argument, (ii) the wage flexibility argument and (iii) Martin Weitzman's macroeconomic argument. . . .  The major studies in the UK and abroad have produced no evidence that such schemes influence employment. Blanchflower and Oswald's (1986) analysis of more than 600 British plants, for example, finds no effect. . . .

International Journal of Manpower: The Economic Effects of Profit Sharing in Great Britain

Employee Attitudes to Work

Estrin and Wilson, using a panel of 52 firms in the engineering and metal working sectors over 1978-82, found evidence in their sample that "profit sharing is widely regarded as an employee incentive scheme, likely to increase labour commitment and reduce anti-management attitudes." . . . respondents in the 1985 and 1987 British Social Attitudes Surveys . . . did give their views on the state of industrial relations at their workplace . . . With the exception of participants in employee share ownership schemes, we find little evidence that industrial relations are better in the presence of income sharing schemes. . . .

Employment

The available evidence on the employment effects of income sharing is inconclusive. . . .

Investment

. . . the presence of employee share ownership schemes in 1980 had had no statistically significant effect upon an establishment's investment behaviour over the preceding two to three years . . .

Productivity

Estrin, Jones and Svejnar . . .  found that profit sharing . . . had a positive effect upon productivity [for 50 producer cooperatives in the United Kingdom in three industries between 1948 and 1968]. . . . Jones studied the productivity effects of profit sharing in a sample of 50 British retail cooperatives in 1978. Profit sharing . . . had a positive, but statistically insignificant impact on productivity. . . .

. . . in a sample of 52 firms in the UK engineering industry from 1978-1982[,] [t]he main finding was that firms operating profit sharing had productivity differentials of between 3 per cent and 8 per cent compared to firms without such schemes. . . . The authors argue that: ". . . the introduction of profit sharing . . . will not necessarily have productivity enhancing effects; accompanying changes in other dimensions of organisational design are likely to be required."

by TGeraghty on Sun Feb 25th, 2007 at 12:58:41 AM EST
Anyone with more papers on this topic?

Check out the University of Wisconsin Center for Cooperatives.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Feb 28th, 2007 at 10:38:38 AM EST
There is an ongoing project to build an international online Co-operative Learning Centre. It aims at becoming a worldwide resource for co-operatives management and development, as well as education.

The CLC site is under construction, but you can already have a look at it and find interesting links: Co-operative Learning Center

Professor Ian McPherson from the British Columbia Institute for Co-operative Studies (BCICS), is the CLC project leader. I know him personnaly.

Check also the British Columbia Institute for Co-operative Studies web site


"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Thu Mar 1st, 2007 at 08:18:18 AM EST


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