Co-operation Among Co-operatives in a Policy Governance Context

Co-operation Among Co-operatives in a Policy Governance Context 2009 CCMA Conference Pittsburgh, PA • 6/12/09 Erbin Crowell • Cooperative Fund of New England Don Kreis • Hanover Consumer Co-operative Society

Our Backgrounds • Board of Hanover Consumer Co-op since 2003, president ’06 to ’09. • Board of Cooperative Fund of New England since 2007. • Served on 3 other non-profit boards. • Ass’t Professor, Vermont Law School. • First job @ co-op – Associated Press. • Member of 8 co-ops

Our Backgrounds • 10+ Years with Equal Exchange • Master in Management: Co-operatives & Credit Unions, St. Mary’s University • National Co-op Business Association • 5 food co-ops, 3 credit unions, 1 worker/consumer co-op • Co-operative Fund of New England / Co-operative Capital Fund • Neighboring Food Co-ops Association & Valley Alliance of Worker Co-ops

Outline • Our context • The sixth principle of co-operation • Why co-operate? • Co-operative economies • The context of policy governance • Model policies for food co-ops • Monitoring for effective impact • Discussion

Our Context • Crisis of Global Economic System • Unemployment & Instability • Dramatic Shifts in Wealth • Diminished Democracy • Corporate Influence • Instability & Change

Alternative Visions • Desire for Economic Alternatives • Social Entrepreneurship • Demands for Greater Equity • Community Democracy • Grassroots Engagement • Change as an Opportunity

Co-operative History 1800s: England’s Industrial Revolution… • Dislocation of local economies • Dramatic shifts in structure of labor • Concentration of wealth & power • Poor working conditions • Limited democracy • Globalization

Early Co-operators • Robert Owen (1771–1858) • “The lowest stage of humanity is experienced when the individual must labour for a small pittance of wages from others.” • William King (1786–1865) • “Knowledge and union are power. Power, directed by knowledge is happiness. Happiness is the end of creation.”

Rochdale Equitable Pioneers • Founded in 1844 • Group of Weavers, Unionists and other Community Activists • Established a Member-Owned Grocery Store • Basic Principles for Modern Movement

An Integrated Co-op Economy • Begin with a store • Accumulate shared capital • Seed new co-ops: worker, production, farming, housing, etc. • Stores as leverage for new enterprises • Integrated co-operative economy as goal

Sectoral Expansion • Worker co-ops • Farm & fishery co-ops • Food co-ops • Housing co-ops • Credit unions & co-op banks • Health services co-ops • Insurance co-ops • Multistakeholder co-ops

International Co-operative Alliance • Founded in 1896 • Cross sector organization • 800 million are members of co-ops worldwide • 100 million jobs (20% more than multinationals) www.ica.coop

The Co-operative Identity A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. International Co-operative Alliance, 1995 • www.ica.coop

Co-operative Principles • Voluntary & Open Membership • Democratic Member Control • Member Economic Participation • Autonomy & Independence • Education, Training & Information • Co-operation Among Co-operatives • Concern for Community

The Co-operative Promise

Sustainable Regional Development & Co-operation Limitations of Small & Medium Enterprises • High failure rate • Succession challenges • Vulnerable to buy-outs • Isolated enterprises • Unstable employment & services

Sustainable Regional Development & Co-operation Advantages of Co-op Enterprise • Community ownership, community wealth • Focus on service, meeting needs • Ability to assemble limited resources • Low failure rate • Difficult to move or buy-out • Mobilize member & customer loyalty • Stable employment & services

Sustainable Regional Development & Co-operation Challenges to Co-op Potential • Lack of awareness of co-op model • Slow to launch • Access to financial resources • Risk averse • Democracy is an asset, but also a process • Sectoral isolation

Co-operationamong Co-operatives “Co-operatives serve their members most effectively and strengthen the movement by working together through local, national, regional and international structures.” International Co-operative Alliance • www.ica.coop

Mondragón Co-operative Corporation • Basque Region of Spain • 1943 - Training school • 1956 - First factory • ±1960 - Credit union • Educational co-ops • Strategic expansion of network to maximize employment

Mondragón Co-operative Corporation 1950s • 1 co-op (1956) • 5 employees • Import substitution • Credit union with entrepreneurial division (1959)

Mondragón Co-operative Corporation 1985 • 86 production co-ops • 44 educational co-ops • 7 agricultural co-ops • 15 building co-ops • Grocery co-op • Insurance co-op • Credit union with 130 branches

Mondragón Co-operative Corporation 1997 • $5+ billion in sales • 34,000 employees • $7.5 billion in assets • Largest domestic grocery chain in Spain (worker & consumer co-op)

Mondragón Co-operative Corporation 2008 • $21 Billion in Sales • 103,700 Employees • $25 Billion in Assets • 264 Co-ops & Subsidiaries • Leading Producer of Domestic Appliances

The Italian Co-operative Movement • Most co-ops per capita • Decentralized but integrated • Co-op consortia • Cross-sector federations • Economic expansion

The Region of Emilia Romagna • 4 million people • 7,500+ co-ops (2/3 are worker co-ops) • 30-40% of GDP • 2 out 3 are members of co-ops • 10% employed by co-ops • Cross-sector collaboration • Full employment (2.9%) • High standard of living

A Co-operative Economy

Giovani Relagatori Social Co-op Imola • Employment & training for marginalized individuals • 25 permanent employees • €1.25 ($1.79) million in sales • Social co-op legislation • Key loan from co-op federation • 60% of customers are co-ops

Coopfond Bologna • “External mutuality” • Lending & equity • Technical assistance • Cross-sector role • Funded by co-ops through contribution of 3% of surplus • Ready source of funds and expertise for co-opreneurship

Legacoop Imola District of Imola • Cross-sector federation • Coordination, advocacy, training, funding • Growth 1982 - 2007 • 52 co-ops - 84 co-ops • 18,336 members - 65,604 (258%) • 2,910 direct employees - 6,863 (136%) • €164,743 revenue - €2.4 billion (1,365%) • Industrial expansion in foundering economy

What’s Going On? • Shared co-op identity… • Cross sector collaboration… • Mobilization of co-op resources… • Co-opreneurship • Co-operation among co-ops

Co-ops in the U.S. • 29,285 co-ops • 350+ million members • $514+ billion in annual revenue • 856,000+ employees • $25+ billion in wages • $3+ trillion in assets University of Wisconsin, 2009 • http://reic.uwcc.wisc.edu

Some Questions • Do we as co-operators have an opportunity as well as a responsibility to make co-operation available to more people? • What could these numbers look like if co-ops across sectors had policies that supported the principle of “Co-operation among Co-operatives” and the development of a co-operative economy? • What could such policies look like and how could they be monitored?

How Policy Governance Can Help • “There must be systematic encouragement to think the unthinkable and to dream. . . . The governing board is a guardian of organizational values. The framework must ensure that the board focuses on values . . . All functions and decisions need to be rigorously weighed against the standard of purpose. A powerful model would have the board not only establish a mission in terms of an outcome but procedurally enforce such a mission as the central organizing focus.” (Carver, Boards that Make a Difference, 3d ed., at 30-31)

Obviously… • The Cooperative Principles, and in particular, here, the 6th Principle, are “unthinkable” (in the sense of being idealistic), are “organizational values,” reflect “purpose,” and provide a “central organizing focus,” in the sense Carver uses these terms.

Ends Policies • According to Carver, these describe “[t]he organizational swap with the world. What human needs are to be met (in results terms), for whom (outside the operating organization), and at what cost or relative worth. It is important that no means be included in this category.” • An excellent policy home for “cooperation among cooperatives!”

Ends Policy Examples • Because of the Hanover Consumer Cooperative Society . . . • 3. Customers will be better educated about food issues and, as a result, make healthier choices than those who shop elsewhere. • 4. There will be vibrant cooperative sector in the economy, both nationally and regionally, and a local community educated in the value of cooperative principles and enterprises. • [Actually 2 of 7 specified ends]

An alternative formulation • The purpose of the Vladivostok Consumer Cooperative Society is . . . • to give cooperators in the Primorski Region enduring ties to cooperators in other parts of the nation and world, and the cooperative movement a growing role in assuring the economic and ecological health of human civilization. • A pleasantly global ring, but too vague?

Monitoring the Policy • Under Policy Governance, promulgating any policy is just the opening move in the dance. • General manager regularly interprets the policy and provides evidence to the Board of its compliance. • Board can accept GM’s interpretation and accept her report as in compliance, or not.

If “not”… • The Board can • Change the policy so as to rule out the GM’s interpretation • Decline to accept the report and require GM to marshal more evidence • Revoke the policy on grounds of impracticality or otherwise • Take adverse personnel action against GM

Implications of the Process • This cycle of interpretation, monitoring, board review of monitoring and revisitation of policies is the ongoing work of the board. • The record of this work is what documents for the ownership the extent to which the co-op is achieving anything for them. • Members who think the 6th Principle is a waste of time can vindicate that view in Board elections.

Monitoring the 6th Principle • Amount and type of goods/services purchased from (or sold to) other co-ops • Funds invested in or loaned to other co-ops or development funds • Staff hours spent assisting other co-ops or participating in national or regional organizations • Sales by, members of, GDP contributions of, cooperative sector in relevant region • Penetration of cooperative membership in relevant geographic area • Number of members also belonging to other co-ops • Multi-year trends in this data

Yes We Can! (Monitor, that is.) • ’08-’09 NCBA/U-Wisconsin study • $652 billion in annual revenue, 2.1 million jobs, 29,000 firms – in just four biggest co-op sectors (not grocery or housing) • 2008 Doug Hoffer report: “The Economic and Fiscal Impacts of Food Co-operatives in Northwestern New England” • $161 million in revenue, or 9% of counties’ grocery sector, plus $118 million indirectly • 2,289 in direct and indirect employment • Research is expensive but costs can be shared and benefits can be leveraged • The Federal Rules of Evidence recognize the probative value of circumstantial evidence – and so should we!

An Executive Limitation policy? • Not the preferred option, since cooperation has intrinsic worth. The same rose, from a Piggly Wiggly, would not smell as sweet. • But if you insist: • The GM “shall not fail to strengthen the co-operative movement by working with other cooperatives through local, national, regional and international structures.” • Appealing because it quotes directly from the latest iteration of the 6th Principle • Easy to generate monitoring data – too much so!

Three concluding thoughts • “Take care not to be fooled by the immediate attractiveness of good deeds. Well-intended organizational activity may be impressive, but under the harsh light of subsequent judgment will be hollow if results are poor.” – John Carver, May 1, 1992 • “United, there is little we cannot do in a host of cooperative ventures.” – John F. Kennedy, January 20, 1961 (noting that “the energy, the faith, the devotion which we bring to this endeavor will light our country and all who serve it—and the glow from that fire can truly light the world.”) • “Nation shall not lift up sword against nation, . . . tanks will be beaten into tractors, . . . every man and every woman shall sit under his or her own vine and fig tree, and none shall be afraid; . . . justice will roll down like waters and righteousness as a mighty stream.” – Rev. Joseph Lowery, January 20, 2009 (proposing Global Ends statement for Obama Administration)

“The Rochdale Pioneers conceived in one association of what would now make a multisectoral co-operative movement. The complementary half of this multisectoral vision is that it was a localized vision: integrated co-operation within a geographically compact community… The plan laid out… was one of active progress toward the vision of a new kind of society.” Brett Fairbairn, The Meaning of Rochdale

For a copy of this presentation to share with your co-op, please leave your business card or e-mail address. For further dialog: Don Kreis • dmk54@columbia.edu Erbin Crowell • erbin@cooperativefund.org

Co-operation Among Co-operatives in a Policy Governance Context