UN International Year of Co-operatives

United Nations Association, Sheffield, 30th March 2012

Dr Rory Ridley-Duff, Sheffield Business School

(email r.ridley-duff@shu.ac.uk)

Course Leader - MSc Co-operative and Social Enterprise Management

Board MemberCo-operatives Yorkshire & Humber

Rory Ridley-Duff, 2012

My connection to co-operatives…

• Interest as an educator/researcher:– Lead author of Understanding Social Enterprise: Theory and Practice, Sage

Publications (student text for post-graduate study of co-operative and social entrepreneurship).

– Course leader for MSc Co-operative and Social Enterprise Management, and module leader for two MSc Charity Resource Management modules, at Sheffield Business School (SBS).

– Frequent contributor (and reviewer) of academic articles on social enterprise / social economy / co-operative enterprise.

• Interest as a practitioner:– Worked for a co-operative that co-founded Social Enterprise London (1998)

– Serve on four co-operative and social enterprise boards, including.

• Social Enterprise Yorkshire & Humber

• Co-operatives Yorkshire & Humber

Three questions for this talk…

• What are the aims of the International Year of Cooperatives?

• How do co-operatives work?

• To what extent do they offer a realistic alternative to organizing economic life?

What are the aims of the UN Year?

• The United Nations has designated 2012 the International Year of Co-operatives. It is a unique opportunity to open the lid on some of one of the world’s best kept secrets.

• There are over 1.4 million co-operatives across the globe, working in everything from farming to football, healthcare to housing.

• Between them they have over 1 billion members and over 3 billion people secure their livelihood through co-operatives.

• Co-operatives are more than successful businesses - they are a global movement that is building a better world by giving everyday people an equal say and a share of profits.

• The International Year of Co-operatives is a chance to find out more about cooperatives.

Co-operatives UK, 2011, Key Messages

What are the aims of the UN Year?

• Co-operatives are businesses owned and run by their members. Whether the members are customers, employees or residents they are everyday people who have an equal say in what the business does and share in the profits.

• As well as benefiting their members, co-operatives act together to build a better world through cooperation.

• Key Messages:

– January to March – “Local impact on a global scale”

– April to June – “Co-operatives share their profits”

– July to September – “Co-operatives give everyone a say”

– October to December – “Co-operatives are bubbling up everywhere”

• Co-operatives UK, 2011, Key Messages

Early History

• Profit-sharing cooperatives started in 1761 (in Scotland) and from the 1790s in the US.

• The first journal for cooperatives was established in 1824 (20 years before the ‘first’ set of cooperative principles).

• In 1834, the UK Government passed the Poor Laws Amendment Act to cut welfare payments by 50%.

• The Poor Laws started to distinguish between the ‘deserving poor’ and the ‘undeserving poor’.

• The ‘undeserving poor’ formed a network of Friendly Societies, and by early C20 most people in the UK, Australia and New Zealand received welfare support from them (Wienbren, 2008).

Ridley-Duff and Bull (2011), Understanding Social Enterprise: Theory and Practice: Chapter 1

Early HistoryThe Rochdale Pioneers were a group of weavers and artisans inspired by Robert Owen’s view on education and welfare, and the one-person-, one-vote democracy developed in Friendly Societies. They opened cooperative stores, pooled their resources, and established principles that have been adapted throughout the world for 168 years.

The 1844 Rochdale Principles1. Open membership. 5. Political / religious neutrality. 2. Democratic control (1 person 1 vote). 6. Cash trading (no credit). 3. Distribute profit in proportion to trade. 7. Promotion of education. 4. Pay limited interest on capital.

1995 ICA Statement of Co-operative Identity1.Voluntary and open membership 5. Education, training and information2.Democratic member control 6. Cooperation amongst co-operatives3.Member economic participation 7. Concern for community4.Autonomy and Independence

For further details see, http://www.ica.coop/coop/principles.html

How do consumer co-operatives work?Source: Conn, 2006 Barcelona Arsenal

Shareholders In 2006, 142,000 members, one member, one vote. (Now 170,000 members)

In 2006, 4 major shareholders own 87% of voting shares. (Now 2 shareholder own 96% of shares).

Leadership President elected by members for four-year term (maximum two terms).

Chair of the Board decided by the major shareholder.

Cheapest adult season ticket

£69 £885

Most expensive adult season ticket

£579 £1,825

• At Barcelona, a 1 million euro bond and 5,000 member signatures are needed to stand for the board. At Arsenal, need to secure appointment by key shareholder.

• At Barcelona, board can be sacked by a 2,000 strong (randomly selected) General Assembly of members. At Arsenal, the board can be ‘sacked’ by one person.

Extending co-operative principles

Source: http://www.mondragon-corporation.com/mcc_dotnetnuke/Portals/0/documentos/eng/management-model/mgc.swf

How do worker co-operatives work?Mondragon Cooperative Corporation US Multinational Corporations

Shareholders Capital owners must be workers and/or consumers. Supporting organisations may have a voice in ‘secondary’ cooperatives. Open membership system (not limited by ability to pay as contribution is linked to starting salary, and ‘people’s bank’ provides loan finance).

Capital owners typically managers and/or institutional investors (limited only by ability to pay). Special arrangements for block shareholding (with limited voting rights) may exist through employee share ownership plans (ESOPs).

Leadership President elected by members for four-year term (maximum two terms). Governing council of 7, 9 or 12 workers/consumers. Social council(s) elected from each department, and members can represent trade union interests.

CEO appointed by directors. Directors appointed/elected by shareholders. Rarely find consumer or worker representatives on boards, and low engagement (hostility to) with trade unions.

Ratio of highest to lowest paid

Originally 3:1, now typically 5:1 (maximum 9:1) – stable since mid 1980s (highest to lowest paid worker).Source: “Mondragon, Wage Regulation”, http://en.wikipedia.org/wiki/Mondragon_Corporation, accessed 1st December 2010.

Increased from 85:1 to 419:1 throughout the 1990s (highest to average employee).

Source: Aslam (1999), US Labor Statistics.

Core concepts: mutuality, reciprocity, democracy

“The essential characteristic of a mutual [co-operative] business is that those who contribute to a common fund as part of a scheme for their mutual benefit must be the same persons as those who are entitled to participate in any surplus that arises from the operation of the scheme.”

HM Revenue and Customs: http://www.hmrc.gov.uk/manuals/gimanual/gim9010.htm

“Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.”

ICA, Third Cooperative Principle

Source: http://www.scottish.parliament.uk/s3/committees/eet/inquiries/banking/CooperationandMutualityScotland.pdf

Are co-operatives a viable alternative?

• Having worked in and studied them for 25 years, this is a strange question to me, but here’s some pointers.

– Emilia Romagna – now the wealthiest part of Italy, highest density of cooperatives (Source: Retaskis, 2010; Erdal, 2000, 2011).

– Mondragon now 10th largest enterprise in Spain, and ‘most democratic’ multinational in the world (80% of workers have a capital stake).

– Barcelona FC, consumer co-operative, one of European ‘Top 10’ clubs. Its model has inspired hundreds of new ‘supporter owned’ clubs in the last decade (Supporters Direct, 2012).

– 78% of people trust co-operative businesses (compares to 18% for private business) (Hertz, 2011).

From around the world…

• Japan has the largest agricultural and fishery co-operatives (3 times bigger than the Co-operative Group), (Source: Coop 300)

• Italy has the largest co-operative sector in Europe, particularly around Bologna. 40% of Italy’s retailing sector is co-operatively owned and managed (Restakis, 2010).

• South America and Asia have fast growing co-operative sectors. In the BRIC countries (Brazil, Russia, India, China), nearly 4 times more people have bought shares in co-operatives than private companies (Hertz, 2011).

• The UK now has one of the largest consumer co-operatives in the world with 120,000 staff and 7 million members (Wardle, 2012). A new co-operative is opening every day of the year…

SBS Support for the UN Year• Futures North – Co-operatives Conference

– 23rd June 2012 (Saturday)

– Flagship event for Co-operatives Fortnight 2012

• Co-operative and Social Enterprise Summer School– 18th-20th July 2012 (Wednesday – Friday).– Two day taught course, one day Open Space event.

• Co-operative Council Open Space Research Day– 26th July 2012 (Thursday)– For co-operative researchers and council officers/leaders

• Co-operative and Social Enterprise Management Degree– PG Certificate / PG Diploma / Masters– Intakes in June 2012 and January 2013.

• At ICA Coop Expo, Manchester, 31st Oct - 2nd Nov.– http://www.icaexpo.coop/

References and Useful ReadingAslam, A. (1999) “U.S. Wage Gap Widens”, Global Policy Forum, http://www.globalpolicy.org/component/content/article/218-

injustice-and-inequality/46639.html, accessed 14 December 2009. The claim is based on data from the US Bureau of Labor Statistics.

Co-operatives UK (2012) UN International Year of Co-operatives, http://www.uk.coop/resources/documents/2012-key-messages-and-text, accessed 20th March 2012.

Conn, D. (2006) “Barcelona‟s Model of Integrity Show Rights is Might”, The Guardian, 17th May, http://www.guardian.co.uk/football/2006/may/17/championsleague.europeanfootball, accessed 20th January 2010.

Cornforth, C. J., Thomas, A., Spear, R. G. and Lewis, J. M. (1988) Developing Successful Worker Co-ops, London: Sage Publications.

Ellerman, D. (1997) The Democratic Corporation, Beijing: Xinhua Publishing House. First published as ‘The Democratic Firm’ in 1990.

Erdal, D. (2000) The Psychology of Sharing: An Evolutionary Approach, unpublished PhD Thesis, University of St Andrews.

Erdal, D. (2011) Beyond the Corporation, Humanity Working: London: The Bodley Head

Hertz, N. (2011) Co-op Capitalism: A New Economic Model From the Carnage of the Old, Manchester: Co-operatives UKI.

Restakis, J. (2010) Humanizing the Economy: Co-operatives in the Age of Capital, New Society Publishers.

Ridley-Duff, R. J. and Bull, M. (2011) Understanding Social Enterprise: Theory and Practice, London: Sage Publications.

Wardle, L. (2012) Keynote Speech to the West Midlands Co-operative Meeting to celebrate the UN International Year of Cooperatives, Birmingham City Council, 23rd March.

Weinbren, D. (2008) Families and Friendly Societies, Friendly Society Research Group.