Retail Co-operatives

The tension between market competition and democratic

governance

Structure of the session

History of the UK co-op retail sectorThe Co-operative CommissionView from the grassroots—RichardCoffee break & discussionMondragonSuma?

Toad Lane or T’Owd Lane!

1844 Rochdale Pioneers Society established, starting a period of phenomenal co-operative growth. Based on their eight 'Rochdale rules', including distributing a share of profits according to purchases that came to be known as 'the divi'.

1863 Co-operative Wholesale Society (CWS) established, originally called the North of England Co-operative Wholesale Industrial and Provident Society Limited

1873 CWS entered manufacturing and later became substantially involved in importing, ship owning and in many overseas ventures, including joint CWS/SCWS tea estates.

1900 A total of 1,439 co-operative societies now registered

The post-war heyday

1942 First self-service shop opened by the London Co-operative Society. By 1950, 90% of all the self-service stores in the UK were operated by co-operatives.

1955 British co-operatives operating 30,000 retail shops reaching their peak in terms of market penetration; having market shares for food of 20% 12% of non-food; and with 13 million people reported to be in membership.

1956 Independent Co-operative Commission set up, initially only to consider co-operative production, but widened to include retailing, which came to be known as the 'Gaitskell Commission'; publishing its report in 1958

Decline, politicisation and ‘modernisation’

1964 The abolition of resale price maintenance as a result of the introduction of the Restrictive Trades Practices Act, heralding intensive price competition in UK retailing.

1968 Operation 'Facelift' launched and the first national 'Co-op logo' was introduced.

1971 The Industrial Common Ownership Movement (ICOM) established, becoming the central organisation for the 'new wave' of worker co-operatives.

1978 National Co-operative Development Agency (CDA) established by government, mainly promoting worker co-operatives; it was wound up in 1989

Reform and more ‘modernisation’

2000 Co-operative Commission established. 45 co-operative societies. CWS/CRS merger takes place.

2001 Co-operative Commission report published. The Co-operative Union and the Industrial Common Ownership Movement merged. CWS changes its name to the Co-operative Group (CWS) Limited.

Based on the idea of the ‘virtuous circle’ and the slogan ‘co-operative advantage’.

The virtuous circle

The Co-operative Commission was set up in February 2000, with the backing of Tony Blair, following a call by leaders of the Co-operative Movement. The members of the Commission comprised business leaders, politicians, trade unionists and co-operators, under the chairmanship of John Monks, General Secretary of the TUC. [So how ‘independent’ is that?]

Their task was to take an independent and fundamental look at the Co-op, and propose ways to modernise [note this word!] and develop the Movement to help ensure its success in the 21st Century both in terms of its commercial objectives [these come first? Weren't they originally only to serve the social goals?] and its social goals.

The commission's work in now complete. It is now up to the Co-operative Movement to decide whether it is prepared to grasp the opportunity and put its proposals into practice. [In a democratic world they might also choose to reject them]

Recommendation about board structure

Lay members should always be in the majority but:

The main board should be empowered to appoint external, independent, non-executive directors

The Chief Executive and Financial Controller should serve on the Main Board

There should be employee Directors Board size should be up to 15—except in the

case of the Co-operative Group

Discussion

How does this tension operate differently in the three types of firms represented: Social firm Worker/consumer co-operative Social enterprise

Which issue has more leverage: profitability or democracy?

Who really has power within the organization? Who controls the capital? And if more capital is

required? Is there ‘stakeholder dialogue’ or real democracy?

They have long-term (three-year) contracts with over 100 agricultural suppliers, which they offer irrespective of climatic or other conditions. They prioritise supplies from other cooperatives.

Mondragon: beating them at their own game?

Eroski is the largest retail company in Spain

81% of employees are women in their 30s. As a result of positive discrimination

25% of top management are women80% of the workers involved in company

decision-making10% of annual benefits go to the Eroski

Foundation to improve consumer rights

Social responsibility?

Each business in the group has CSR targets and global reporting

There is a strong emphasis on the improvement of community and the environment, including optimum use of road transport for goods to the shops and increasing sea and rail transport.

Eroski has a strong human rights record: the Foundation works in Asia, with programmes for children and micro-credit schemes.

According to Cooperative Grocer:

Consumers join Eroski as voting members, pay about $75 a year for membership, and receive a 5% discount on purchases

Consumer members elect 250 consumer member delegates to the Eroski General Assembly, where the Governing Council, composed of six consumer members and six worker members, is elected.

The President of Eroski is by statue always a consumer member. There are consumer member committees at each Eroski store

The worker members elect 250 worker member delegates to the General Assembly

To become a worker member, employees must invest $6500 in Eroski

Most Eroski employees invest their membership through regular deductions over three years

Over 95% are joining Eroski, as they become eligible

Employees who are not members receive only 25% of the Eroski member profit sharing plan

From among themselves the workers also elect the sixteen member Regional Social Council

The problems of success . . .

Eroski was the MCC's first organizational growth beyond the Basque region, putting non-Basques into leadership positions

Eroski board members and Councils are spread at close to a thousand locations throughout Spain -- there is a different sense of direct governance with few workers knowing board members.

There are now over 23,000 staff in the Eroski Distribution Group, and consumer membership has grown to over 450,000. Only a few co-ops in the Industrial Group are larger than 500 members.

The Distribution Group is growing through alliances and franchises with other retailers. How do worker ownership, control and culture fit these different structures?