Alternative Models of Enterprise and Ethics: The Co-op Standard Diarmuid McDonnell Co-operative Education Trust Scotland 12/11/2012

Introduction Despite the wide-ranging successes of co- operatives, in financial terms as well as in the development of sustainable communities, the study of these democratic forms of enterprise remains surprisingly absent from the curricula of most university business schools around the world.

The Invisible Giant

Co-ops defined Co-operatives are businesses Member-owned Democratically controlled Distributes surplus to members

Accounting International Accounting Standards Board (IASB) proposed changes to how co-ops treat profit distribution (2010) - operatives-uk-negotiations-new-accounting-rules-undermine-dividend operatives-uk-negotiations-new-accounting-rules-undermine-dividend Due to their distinct ownership, governance and surplus distribution, co-ops pose significant accounting and ethical challenges

Value-driven Co-op Values Solidarity Equity Equality Democracy Self-help Self-responsibility Ethical Values Openness Honesty Social responsibility Caring for others BUT... Google, Tesco and Barclays have values as well...

Values in action Co-op Principles 1.Voluntary and open membership 2.Democratic member control 3.Member economic participation 4.Autonomy and independence 5.Education, training and information 6.Co-operation amongst co-operatives 7.Concern for community All* co-ops subscribe to these principles – firm ethical foundation

Co-operatives globally (1) Source: ‘Statistical Information on the Co-operative Movement’ ICA. accessed 29 September 2011.

Co-operatives globally (2)

The UK co-operative sector (1) Source: Co-operatives UK. The UK co-operative economy 2011: Britain’s return to co- operation (Manchester: Co-operatives UK), No. of co-operative businesses in the UK: 5,450 No. of members:12.8m Turnover of co-operatives:£32.2bn No. of people employed by co- operatives: 236,000

The UK co-operative sector (2) Source: Co-operatives UK. The UK co-operative economy 2011: Britain’s return to co-operation (Manchester: Co-operatives UK), p. 23.

The UK co-operative sector (3) Source: Co-operatives UK. The UK co-operative economy 2011: Britain’s return to co-operation (Manchester: Co-operatives UK), pp

Co-op benefits increased productivity and organisational stability (Blair, Kruse and Blasi, 2000; Lampel, Bhalla and Pushkar, 2010); increased levels of innovation and growth (Erdal, 2011); more equitable societies and reduced inequality (Wilkinson and Pickett, 2009); benefits to community (Erdal, 2000); impact during times of economic crisis and poverty reduction (Birchall and Ketilson, 2009); as well as more normative conjectures based on notions of economic democracy (Dahl, 1986).

The Market Shareholder value vs Member benefit CSR cover for unethical practices? Co-ops and market failures: Fairtrade Micro-credit Sustainable employment Positive externalities Not a panacea to all of society’s ills BUT puts power in people’s hands to improve their lives

Case 1 Fairtrade and Environment The Co-operative Group: Produced an Ethical Plan covering social goals, environmental targets, support for young people and communities, and fairtrade commitments. Ethical practices driven by the members

Case 2 Employment Mondragón Corporation: Implemented a crisis management plan – at firm-level and network-level. Retraining, relocation, social insurance, education fund. Ethical practices driven by the members

Case 3 Finance and credit Financial co-ops: Suffered losses but not bailed out Stable and risk-adverse Lend to some of the poorest members of society (credit unions) More resilient during the crisis analysis/WCMS_192406/lang--en/index.htm Ethical practices driven by the members

Conclusion Co-ops are not ‘perfect’ ethical enterprises – demutualisation (Northern Rock) Ethical dilemmas are often faced at an individual level “It’s the managers, not the model”