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 cooperatives, 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) - http://www.uk.coop/pressrelease/cooperatives-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
1.
2.
3.
4.
5.
6.
7.
Co-op Principles
Voluntary and open membership
Democratic member control
Member economic participation
Autonomy and independence
Education, training and information
Co-operation amongst co-operatives
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.
http://www.ica.coop/coop/statistics.html, accessed 29 September 2011.
Co-operatives globally (2)
The UK co-operative sector (1)
No. of co-operative businesses in the
UK:
5,450
No. of members:
12.8m
Turnover of co-operatives:
No. of people
operatives:
employed
£32.2bn
by
co-
236,000
Source: Co-operatives UK. The UK co-operative economy 2011: Britain’s return to cooperation (Manchester: Co-operatives UK), 2011.
The UK co-operative sector (2)
Number of co-operatives by country
239
386
473
England
Scotland
Wales
Northern Ireland
4352
Source: Co-operatives UK. The UK co-operative economy 2011: Britain’s return to co-operation
(Manchester: Co-operatives UK), 2011. p. 23.
The UK co-operative sector (3)
% Growth of the UK co-operative movement
16
14
12
10
8
Growth % 6
4
2
0
-2
2008
2009
-4
2010
Year
Turnover
Membership
Co-operatives
Source: Co-operatives UK. The UK co-operative economy 2011: Britain’s return to co-operation
(Manchester: Co-operatives UK), 2011. pp. 20-2.
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.
http://www.co-operative.coop/join-the-revolution/our-plan/
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
http://www.ilo.org/global/about-the-ilo/newsroom/commentanalysis/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”