A survey of Self-Managed Enterprises in Canada.
Could a corporation function without any executives at all? Thousands of workers around the world are saying “Why not?” and are willing to bet their livelihoods on it. In this era of hyper-capitalism, as French President Jacques Chirac calls it, companies are bigger than countries. They make decisions that affect everyone on the planet and are themselves detached from most of the consequences. Workers are just cogs in the machine. The shareholder reigns supreme.
Someone forgot to tell 83,000 Canadian workers. They are Canada’s contribution to a rising class of modern workers that has spawned the Self-Managed Enterprise, an entity in which the worker is the most important stakeholder.
Self-Managed Enterprises are organizations that exist first and foremost for their workers. They are not social experiments; they are businesses like any other. They operate in a competitive marketplace, where prices are set by supply and demand; they sell products or offer services; they make profits; they pay dividends and they invest; when they spend more than they make, they fail and go bankrupt; and they fire and hire.
The difference between a Self-Managed Enterprise and a Royal Bank or a Wal-Mart is not in what they do, but for whom they exist. Self-Managed Enterprises are, in two words, economic democracy, a form of organization that meets the highest aspirations of democracy and capitalism.
Self-Managed Enterprises are not new, either. The kibbutz (co-operative farm) is a Self-Managed Enterprise. Self-Managed Enterprises have even been attempted on a nation-wide scale. In terms of producing pure economic growth, Tito’s Yugoslavia from 1945 to 1975 was more successful than the red-hot Chinese economy of the past two decades.
Self-Managed Enterprises put the decision-making powers in the hands of the workers. To some, such radical change would only spell doom for a corporation. It would mean taking power away from those with the “know-how” and allowing those with insufficient skills to tamper with the structure of a thriving corporation.
But to others, such changes to the traditional top-down business model would not only create more productive and profitable enterprises, they could also serve as a major force for social change, ecological sustainability and human rights. The infusion of more democratic principles into the market economy would serve everybody in the long term.
Increasingly, companies in Canada (and around the world) are giving more power to their employees; some are even being founded with ‘worker power’ from the start. For many, the desire for ‘economic democracy’—a more equitable distribution of opportunity, wealth, and, ultimately, power—is the inspiration and the motivation behind Self-Managed Enterprises. There are many forms self-management can take, but the outcome is the same: Those who directly contribute to a company’s financial success have a greater share in ownership and control.
One of the simplest ways a firm can spread financial control to its employees is through employee share ownership. A company where employees own 100 per cent of the stock is said to be “employee-owned.” This business structure is reasonably common in the United States—for example, United Airlines was employee-owned until its stock price crashed following the 9/11 hijacking of their planes. The National Center for Employee Ownership in California estimates that there are more than 11,000 employee-owned firms in the U.S., with assets exceeding $650 billion.
In Canada, the construction giant PCL, which turns 100 years old next year, is a notable example of a Self-Managed Enter-prise. Roughly 80 per cent of its employees own shares, and 100 per cent of the shares are owned by the employees. Marty Janowitz, Vice President of Marketing for international employee-owned geochemical engineering firm Jacques Whitford, explains the benefits of shifting power away from the hands of venture shareholders. “Our founders realized very early on that if they wanted to have a company that was going to grow and be successful, the people who were really central to the company’s success had to directly and personally benefit by that success,” he says. “A large group of our employees participate in this company as owners, and they act like owners and they take responsibility for the actions and the successes of the company like owners. It really has affected the direction of the company because it has given us a longer term perspective.”
Janowitz adds, “We’re looking out for the long-term success of the firm, not just what the firm could produce if you’re looking out for short-term profits for a couple of the oldest people.”
Firms where the employees hold the financial cards tend to be more stable and responsible. According to researchers at the Ohio Centre for Employee Ownership, the Enron scandal would not have occurred if the people who made the financial decisions were the same ones who really understood how the company operated, the employees themselves.
Not every firm with employee share ownership is fully employee-owned. Employees at publicly traded forestry company Tembec Inc., the fourth-largest forestry company in Canada, own less than 10 per cent of the shares, but the company is still well-known for its efforts to address employee concerns and environmental and social issues. And while Tembec is not 100 per cent employee-owned, it does actively encourage its employees to purchase company shares to increase their stake.
Instead of simply giving employees a share of the company’s stock, some Canadian corporations are actively trying to formally incorporate workers into the decision-making process. For example, at water filtration company Zenon Environmental Inc., employees from the shop floor to the COO are elected to sit on a “values committee,” which meets to discuss and resolve company issues such as how to improve the employee benefits plan. “The COO is in the room so there’s not a lot of bureaucracy,” says Mike Saulter of Zenon. “If a decision gets made in that committee it doesn’t have to go through many levels. It’s done right then and there—it’s very efficient.”
A growing number of Canadian businesses, however, are forming themselves around an even more democratic model, the co-operative model. Ten million Canadians belong to at least one of this country’s 10,000 co-op firms, with assets worth $26.1 billion. And this number is before accounting for the credit unions. As of 2002, Canada’s credit unions and caisses populaires reported assets of $140.8 billion. The insurance co-operatives tallied up nearly $19 billion in assets and two trust co-operatives administered over $157.4 billion in assets (Co-operatives in Canada Report, Co-operatives Secretariat, Government of
Misconceptions about the efficiency, productivity and competitiveness of co-ops appear to be widespread. “People often think: Oooh, a co-operative, you know, touchy-huggy-feely, perhaps non-profit, not concerned with the bottom line,” says Kevin Thompson of chocolate producing co-op La Siembra, worth half a million dollars, “and we’re the furthest thing from that. [...] We are very business-oriented, and we just happen to have a structure that is democratic. We are very focused on things like budgets, margins and bottom lines, and yet we do it in a way that is conscious of each and every aspect of our business.”
Yvonne Chiu of the Multicultural Health Broker’s Co-op in Edmonton, which provides integrated health services to immigrants and refugees in over 23 different languages, has also run up against these kinds of stereotypes: “When we first started people literally would say, ‘Are you guys communists?’ ”
Co-ops have a simple structure—all members are owners and make decisions based on a one-member, one-vote system. Co-ops are not publicly traded, and profits are not transferred to private shareholders or even divided among employees. Usually the money is put back into the co-op and used to further the economic growth of the local community to serve the broader needs of the members, such as creating more jobs or donating the money to worthy causes.
Co-ops can take many forms, but most co-operatives generally fall into one of four categories: producer (like a farmer’s co-op), consumer co-ops, worker co-ops, and financial co-ops (such as credit unions). Co-ops, by definition, tend to be locally run, but this doesn’t mean they are necessarily small. The world’s largest producer of maple products, La coopérative de producteurs de sirop d’érable Citadelleis, is co-operatively run, and accounts for one-third of the world’s maple production. Canada’s largest co-op, Mountain Equipment Co-Op, boasts a membership of over two million. Taken together, Canada’s credit unions are comparable in size to one of the big five banks. In its home turf, Vancouver City Savings Credit Union is as big as Scotiabank.
While employees in private enterprises may achieve some degree of control, such as that achieved through unions, in a co-op power unquestionably lies with the members, many of whom are employees. This heightened degree of control has obvious and significant benefits for the employees. This heightened degree of control has obvious and significant benefits for the employees. John Restakis of the BC Co-op Federation says, “Time and time again, studies show that the levels of worker satisfaction, motivation and productivity are higher in co-ops because people understand and know that they have much more control over their work, in terms of decision-making, how they design their work and how they deliver their work—that is enormously important in the operation of any business.”
Ian MacPherson of the BC Institute for Co-operative Studies at the University of Victoria points out that worker co-ops have better staying power than their traditional counterparts, “Worker co-ops have a ten-dency to survive better because the members will shoulder the problems and the losses for longer than if they were strictly employees,” he says. And indeed, in a study by the Quebec government of forestry co-operatives, the co-operatives were found to be twice as likely to succeed as private enterprises.
Beyond simply empowering the employees, however, co-operatives are dedicated to being accountable and responsible to social, economic, democratic and environmental issues in their communities. Most co-ops say they have multiple bottom lines, weighting environmental sustainability, local and international economic development and human rights along with profits.
“If you survey the general public, they’ll tell you they would rather choose a product that has a low impact on the ecology,” says Tom Webb of Saint Mary’s University Master of Management in Co-operatives and Credit Unions in Halifax. “For a co-operative this is simply good business. But in an investor-owned company you are not asked to look a year down the road, you’re being asked, what is your next quarter?”
“The way the current economic system works, there is tremendous pressure to pay low wages to cut wage costs, to cut benefits, to move from full-time to part-time, to produce offshore in China, to pollute,” he continues. “There’s tremendous pressure to cut wherever you can for the short run. And it’s difficult in this climate for business managers, no matter how good they are as people, to do the right thing. On the other hand, in a co-operative, it is a good deal easier. In fact, the expectation is that a co-operative manager will address other bottom lines. But that involves a whole new way of thinking.”
Co-ops are extremely diverse, ranging from the traditional farmer’s and fishery co-ops, housing, funeral services, and a variety of worker’s co-ops: The sex shop Come As You Are in Toronto is co-operatively run.
Co-operatives are starting to appear in the tech sector, having already gained a foothold overseas in companies like Poptel in the UK. Vancouver’s Tech Co-op, founded last year, is staffed with four technical support specialists and is run by 50 clients, or members. “It seems like there’s no trust in the tech industry, but the members in the Tech Co-op can trust us because they’re our bosses essentially,” says Chris Palacek, a serviceman for the Tech Co-op. And because there are no shareholders to pay, the co-op can be more competitive and still pay higher wages. “We charge members $80 an hour—the tech gets $40 and the co-op gets $40,” says Palacek. “At other firms rates may be as high as $100 an hour, with the servicemen only getting $12 an hour.”
Co-operatives achieve a number of indirect effects by empowering parts of society that have traditionally had little economic and political power. Co-operatives are one of the largest employers in northern Canada, second only to government. Women hold 30 per cent of all directorships in Canada’s co-ops, compared with 12 per cent on corporate boards. Several studies indicate that people who work in co-ops devote a much higher percentage of their time as volunteers in the community than do employees of private enterprises. Many fair-trade co-operatives have appeared recently, and a number of them purchase their supplies from co-operatives in the developing world, such as coffee producers (see ‘Three Companies’ on page 34).
One of the biggest contributions of the co-operative sector is supposed to be the expansion of skills among workers, which ultimately leads to a more democratic and egalitarian society. This idea is perhaps most dramatically illustrated in Canada’s north, where a number of people who now lead the government of Nunavut first gained experience in management and decision making as members of the boards of one of the 40 co-ops that belong to the Arctic Cooperative Limited System.
But while co-operatives show great potential as an alternative to shareholder capitalism, Canada’s co-operative sector generally pales in comparison to that in countries such as Italy and Spain (although French- speaking Canada has traditionally had a strong co-op movement).
Most representatives for the BC Co-op Federation, the Canadian Co-operative Association, the Canadian Worker Cooperative Federation, and researchers in government and academia agree that in order to foster the co-operative sector, the government needs to provide more support to co-ops—especially at their inception. Co-ops frequently suffer from a difficulty in raising capital and a lack of sufficient management skills. Accounting can be a significant challenge too, as standard formulas and tools are not adequate to address multiple bottom lines, says Webb.
The co-operative movement, although struggling, is gaining ground. In Argentina workers are taking over operation and ownership of bankrupted factories, a phenomenon that was the subject of the 2004 documentary, The Take. Although the co-op movement in the US has always been very small, and even unacknowledged (the US government for example does not keep proper statistics on American co-ops), American co-op employees took a step forward last May when they founded The US Federation of Worker Cooperatives. Back in Canada, Saint Mary’s University introduced a Master’s program in Management in Co-operatives and Credit Unions, which was formed with an international co-operative of people from the UK, New Zealand, Australia, the United States and Ireland.
Restakis feels that co-ops’ multiple-bottom-line philosophy will make them ultimately more appealing to a public increasingly concerned by social and environmental sustainability. “Because [co-ops] have more than simply an economic bottom line—they also have a social bottom line—and consumers, when they become aware of this, choose to support it ... co-ops seem to be very well placed to present themselves as an alternative to traditional corporate forms,” he says.
It could be that traditional businesses could learn a thing or two from their co-operative cousins to win over public support. “It’s certainly an intriguing area,” says Carol Hunter of the Canadian Co-operative Association in Ottawa, “we’re seeing many co-operatives, as they try to professionalize their image and focus on things like being efficient and profitable, [that] many corporations are shifting from the focus on profitability and productivity to being good corporate citizens. It’s an interesting value shift.”