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Cooperatives - models for worker ownership?

John Lewis in Westfield Stratford City. Maximum pay for managers used to limited to 25 times that of a shop-floor worker. Now it’s 75 times!

Photo EG Focus (CC-BY-SA 2.0)


Honesty, equality, democracy – all this and more comes with cooperatives, according to their backers. Some even see them as capable of blunting the effect of privatisation. Is the dream right? Or is reality somewhat different?

From the government to the trade unions, many people across the political spectrum advocate greater worker involvement in the governance and affairs of their employers. The virtues of worker cooperatives are extolled alongside those that want to see greater employee share ownership, and the John Lewis Partnership (to give it its formal title) is frequently held up as a shining example of worker involvement.

Britain’s cooperative movement proclaims its values of self-help, self-responsibility, democracy, equality, equity and solidarity, along with honesty, openness, social responsibility and caring for others, and many in the trade unions and the Labour Party back this approach. Elements of the Tories and big business clearly prefer employee share ownership to cooperatives.

Worker-owned cooperatives and companies can arguably be set up in any part of the economy to deliver a commercial service. If the goods and services are popular, of good quality, and priced realistically, they would probably thrive. But those that argue for this model to be extended to the provision of public services are in effect advocating privatisation, with public sector bodies taken out of the public sector to compete as a profit-driven entity.

In this year’s Welsh Assembly elections, Carwyn Jones, the “First Minister of Wales, campaigned for the creation of a “not for dividend” company to take over the railway passenger services in Wales. He said, “I am expecting real benefits to passengers, including faster journey times, higher quality services, improved reliability and less overcrowding. Our vision is to see a not-for- dividend model with a strong connection with the communities it serves.”

This approach is supported by train drivers’ union ASLEF which, along with the Co-operative Party, Cooperatives & Mutuals Wales and Co-operatives UK, commissioned a report titled A People’s Railway for Wales. Advocates say that while this new mutually owned company “would not be a full co-operative”, its ethos would fully reflect cooperative principles of social responsibility, democracy, equity and service to the community.

A not-for-dividend approach suggests a profit-driven company, reinvesting those profits in the services it provides. But the reality of the railways in Wales is that they don’t make profits, and are unlikely ever to do so, instead requiring state subsidies.

Bitter experience

How this approach would work is unclear, as are its advantages over the traditional model of state ownership. What is clear from the sometimes bitter experiences of workers elsewhere is that staff are unlikely to benefit more than marginally, either in pay and conditions or in a greater influence in the direction of the business.

It is instructive to examine other examples of “mutual” ownership to see how well workers have benefitted from this.

Take “My Civil Service Pension” (MyCSP), which administers the pensions of civil servants and was of course once part of the civil service. In 2010, it was effectively privatised as a Mutual Joint Venture by Cabinet Office minister Francis Maude. It was forced upon the staff despite their clear opposition, the staff recognising that they would have little or no control over the way the business gets run.

On 1 May 2012, it became a limited company in which the government retained a significant shareholding, and the employees have 25 per cent of the shares in the controlling trust. But 40 per cent of shares were sold to Xafinity Ltd, part of the Equiniti Group, whose Chair and Chief Executive came from outsourcing sharks Serco and Capita, respectively.

The history of creating mutuals out of public services is littered with heroic failures. John Major’s government privatised the nationalised bus companies in the 1980s, and many were bought by employees. But hopes of this being the beginning of the much-vaunted “shareholder democracy” evaporated when the poorly paid workers sold on their shares at a quick profit to the highest bidder, making millionaires out of people like Brian Souter of Stagecoach.

Even those who tried to stay the course soon found themselves under pressure not only from the big companies, but also from the banks that refused to lend for much-needed investment at affordable rates of interest.

Members of building societies that were allowed to de-mutualise were balloted on whether to turn them into banks, and, unsurprisingly, workers voted overwhelmingly to take the cash on offer. Most building societies are now conventional banks with conventional share ownership.

Recently departed Prime Minister David Cameron often cited John Lewis as the model for mutual ownership. 91,000 staff are “partners” in a business with over 400 stores, a production unit and a farm. Yet its cleaners were outsourced and thus denied the opportunity to share the profits. It does not recognise unions – its constitution clearly tellingly states: “Every partner is free to belong to a trade union, although if there is conflict between a trade union and the Partnership those concerned must consider carefully their responsibilities as partners.”

Worker harder!

It also used to limit the pay of its most highly paid managers to 25 times that of a Partner, but this was recently changed to 75 times! Chairman Sir Charles Mayfield, who receives an annual salary of around £1.5 million, has said employees must work harder to justify earning the government’s higher national living wage: “You can only afford to pay someone more if the value of their contribution is better. What was OK at £7.20 an hour is not OK at £9.20 an hour.” Precisely how his contribution is worth £1.5 million a year is not stated.

“Work harder to justify earning the national living wage.”

Waitrose (part of the John Lewis Partnership) has cut “perks” for its staff to help pay for the national living wage, and has stopped paying Sunday and overtime rates for new workers. There seems little doubt that working for John Lewis is much like working for any other employer, but perhaps (for now) slightly better paid.

Tthe biggest mutual employer of them all is the Co-operative Group, the one everyone knows as seemingly having a shop on every street corner.

Growing out of the work of the Rochdale Pioneers, the co-operative movement was initially a response to widespread food insecurity and adulteration issues. In 2000, the merger of the wholesale and retail arms of the Co-op created the world’s largest consumer co-operative, with 6.5 million customers. In more recent times the Co-op has contracted considerably in the face of intensive price competition from the private supermarkets such as Tesco, and its banking arm found itself massively over-extended in the financial crisis of 2008.

The Co-op has had a strong relationship with the trade unions, and shop workers’ union USDAW has a significant membership with the employers under the Co-op banner. But in the main this has not been translated into better pay and conditions.


Relationships with the unions have been stormy in the recent past. The Co-op de-recognised the GMB in 2007, terminating an arrangement that went back to the Victorian era. But the Co-op soon found itself ostracised. A motion moved by GMB and seconded by USDAW was passed unanimously at the TUC Congress in 2008 condemning the decision and pledging all unions’ support to work to overturn it. The Co-operative Party also carried a similar motion at its annual conference.

As a result, the Co-op was banned from TUC and Labour Party Conferences, and events such as the Tolpuddle Martyrs festival where it had been previously welcomed. Undeterred, the Co-op board has ploughed on. The GMB remains unrecognised, but continues to have a substantial membership in the company.

As John Medhurst of the Institute of Employment Rights said of the cooperative approaching 2012, “A Victorian vision, it uses the language of equality and democracy to divide workers, to create armies of little Thatcherites competing with each other for shares in place of trade union and employment rights.”


A longer version of this article is available online as John Lewis and the Co-op: models for worker ownership and control?