Tensions in the co-op movement of the 19th century and governance models for a diverse co-op movement of the 21st century were the focus of this year’s UKSCS conference.
The event was set to be held in Hebden Bridge at the end of the Co-operatives Fortnight – to mark the 150th anniversary of the Hebden Bridge Fustian Manufacturing Co-operative – a successful pioneering experiment in worker-led industry. The Covid-19 lockdown meant this commemoration had to go online.
The event included a lecture by Sonja Novkovic, professor of economics and academic director of the International Centre for Co-operative Management at Saint Mary’s University in Halifax, Canada. She offered an update on her four-year study of co-operative governance, from the perspective of co-operatives as a humanist business model.
She said humanism – or a people-centred approach – is an inherent property of co-operatives alongside joint ownership and control, and democratic self-governance. Co-ops are also embedded in the economy, society and environment where they are based.
But Prof Novkovic also identified dualities and tensions in the co-op movement – as iIlustrated by two broad theories of governance. There is the principal/agent relationship, which separates ownership and control. This sees the owners hire a CEO – a profit-motivated individual who must be held in check by the directors on behalf of the owner.
And there is the stewardship model – where the CEO’s interest and values align with those of the co-op values; here, the board’s role is to support and advise CEO.
Even within co-ops there are tensions, she noted: between member democracy and the business imperatives of an enterprise; between the interests of individual members and those of the collective. Members can have dual roles as they are both owners and users of a co-op; and co-ops are split between acting as a social and an economic entity.
And some co-ops see themselves as working in the business mainstream while others want to challenge that mainstream as alternative enterprises.
When it comes to governance these tensions bring paradoxes: boards must include representation of lay members but also carry expertise. There are different ways to square this circle, said Prof Novkovic – in larger co-ops there can be a power hierarchy where members elect directors and the directors select a CEO, leading to a separation of ownership and control. This is less suitable for smaller co-ops or worker co-ops.
For Prof Novkovic, humanism adds a valuable element to co-op governance as it presents “a challenge to classical economics” and establishes that people are not commodities. In worker co-ops labour owns the capital; the model differs from other forms of employee ownership because its owners have a personal right, not a property right, she argued.
But humanistic management “looks at human dignity in all stakeholder relations” to promote dignity and wellbeing, and ownership type does not affect this.
“Humanistic management is the process of achieving organisational objectives by working through with and for people in order to achieve the integral human development members of the work community and contribute to the common good of society,” she said.
One theory springing from this is Shann Turnbull’s network governance approach, which assumes that people are not fully rational: we all have a limited ability to process and store information, and have inbuilt biases. “No wonder governance fails,” said Prof Novkovic.
Solutions to this problem include a compound board structure; engagement of multiple stakeholders; having decisions made at different nodes in an organisation; empowering people within the organisation to make decisions relevant to them; to have checks and balances at a human scale.
“The more voices are heard from different perspectives of engagement with the enterprise the better,” said Prof Novkovic.
Questions arising form this include how consumer co-ops should involve their workers in decision-making; how to account for different levels of commitment among members – from occasional to exclusively loyal shoppers, for instance – and how governance should fit the purpose of a co-op, with some pursuing the interests of their members and others working for the common good.
“It’s about structures process and dynamics,” she added. “How do changes happen?”
Decisions can be made at board level; through rule changes; by sociocracy or consensus; on an informal straw vote basis. “Organisations are living organisations where individuals act and communicate,” said Prof Novkovic. There need to be ways to formalise this and also to ensure that the adoption of external influences and ideas does not push the co-op away from its values.
Such tensions have long been apparent in the co-op movement. In his presentation on the Hebden Bridge Fustian Manufacturing Co-operative, historian Andrew Bibby noted a bitter 40-year debate, beginning in the 1870s, between supporters of consumer co-operatives and more radical figures from ‘productive co-ops’ – manufacturers like Hebden Bridge, and the Coventry Watchmakers and Leicester Hosiery co-ops.
The debate focused on the question of whether co-op workers should take a share of the profits – which was opposed by the CWS and eventually rejected. “It was a touchstone,” said Mr Bibby “because it symbolised the radicalism of the movement”.
Even so, Mr Bibby noted, the productive co-op model had to compromise with workers sharing control and profits with the consumer co-ops society stakeholders and with private investors. But he regretted that the history of this movement had “sunk without trace” by the 1970s when it could have served as a positive example for the burgeoning worker co-op movement.
He added that advocates of the productive co-op model had advocated a Mondragon-style federated model for the UK co-op movement. This was rejected by the CWS and fizzled out in the 1890s. Had the idea survived, he said, it could have offered an alternative to the centralised top-down model of public ownership adopted by the UK after World War II – and seen history take a different course for the country as a whole and not just its co-ops.