Evaluating Mutuals and Employee-Owned Businesses: Which values are relevant?
29 May 2014
There is currently a great deal of interest in co-ops and mutuals in the economy. But what makes for good performance by a co-op or mutual? What values should enterprises of this kind seek to embody or promote? How can they do it? These questions lie at the heart of a British Academy-funded research project currently being run at Kellogg College’s Centre for Mutual and Employee-Owned Business. In this series of blog posts, also being published on the Politics In Spires blog, contributors to the project explore these questions. This first blog post in this series is written by Dr Stuart White, a Fellow and Tutor in Politics at Jesus College, Oxford.
Across the political spectrum there is a growing interest in mutuals and employee-owned businesses (or MEOBs).[i] At the same time, the crisis in the Co-op group has thrown open the question of what the underlying values and objectives of co-operative enterprise are or ought to be (see also Hunt 2014 and Bastani, Benjamin and Coppola 2014). What constitutes good or bad performance for an enterprise that is a mutual or employee-owned?
In much conventional economic discourse we approach enterprises primarily in terms of one measure: profitability. An enterprise performs well when, and to the extent that, it is profitable. Given certain assumptions, this means it is performing efficiently. But is this really all there is to evaluating how well an enterprise performs?
In order to develop an account of the values that might be relevant to assessing how well MEOBs are performing, a research group at Oxford University based at Kellogg College’s Centre for Mutual and Employee-Owned Business adopted the following approach. First, we considered what values political philosophy might pick out as important. Second, we bounced these initial ideas about values off participants from the cooperative and mutual sector in a workshop and focus group, refining and revising our account according to what seemed to resonate for people and what didn’t.
For example, one idea that we find in contemporary political philosophy is the idea of freedom as ‘non-domination’ (Pettit 1997, 2012). The core idea is that society – including the economy – should be structured so that everyone is secure from subjection to arbitrary power, from having to live ‘at the mercy’ of more powerful others. This might then have implications for how the enterprise should be structured. Another possible source of ideas is John Rawls’s theory of justice (Rawls 1999 ). This emphasises the need to limit inequality in rewards for the sake of fairness, the value of ‘fair equality of opportunity’, and the importance of the ‘social bases of self-respect’. Do these ideas have implications for the way enterprises are structured? Another concept which features in the philosophical discussion is that of ‘meaningful work’ (Yeoman 2011,2013a, 2013b). Work is meaningful when it is has objective value and this corresponds to the worker’s own subjective goals and ambitions. The meaningfulness of work is, in Ruth Yeoman’s view, a function of workplace decision-making. More democratic workplaces give more opportunity for ‘meaning making’. Finally, there is a long tradition of argument which links democratic decision-making in the workplace to democracy in the wider society, claiming that democratic skills and attitudes fostered in the workplace will carry over into politics. Evidence for this claim is mixed, but it is perhaps important to keep asking the question: How far do workplace structures contribute – positively or negatively – to attitudes and capacities that are good for democratic citizenship more widely?
As said, we bounced these and other ideas off workshop and focus group participants from the cooperative and mutual sector. Based on their responses to our initial ideas, we have developed the following provisional account of the values which we think should be used to evaluate how well MEOBs are performing.
- Financial satisficing. While it is not necessarily the aim of a MEOB to maximise profit as a capitalist firm would seek to do, performance cannot be detached from how the enterprise is doing financially. The enterprise must at least be solvent financially and should ordinarily aim to make a reasonable trading surplus.
- General good practice. Beyond the ‘bottom line’ there are certain values which we would expect any economic enterprise, including a MEOB, to affirm. These include, for example, equality of opportunity, due process and recognition of trade unions.
- Democracy and accountability. A key aim of a MEOB is that it should offer a relatively democratic working environment. Key decisions and decision-makers must be accountable, in direct and clear ways, to the workforce.
- Fair distribution. A key aim of a MEOB should be to achieve a distribution of reward within the enterprise that is fair. This does not rule out inequalities of reward, but fairness does require that there be limits on the ratio of top pay to that of the lowest paid workers. (The ratios are to be determined through the democratic procedures internal to the enterprise.)
- Meaningful work. Meaningful work is work that tracks an objective good and which is also seen as valuable by the worker herself. MEOBs function well when decision-making structures offer workers the opportunity to construct their work so that it has meaning. (Again, the democratic structures of the enterprise are relevant here.)
- Mutual respect and recognition of needs. We should expect all enterprises to affirm the worth of workers and foster relations of mutual respect. But MEOBs should be particularly sensitive to the whole person and discourage a view of others that reduces them to their instrumental utility to a productive enterprise. (This might be evident, for example, in the way a co-op or mutual approaches a health issue which a worker has.) Related to this, MEOBs should recognise and affirm the needs of both producers and consumers and service users. The cooperative ethos is grounded in an acceptance of our needs as part of our common humanity.
- Contribution to a wider social good. MEOBs frequently see it as part of their mission to pursue their values in the wider social world, not just within the operation of the enterprise itself. So another aspect of good performance concerns how effectively the mutual or employee-owned enterprise advances its values in the wider social world. A related concern is with the ethical integrity of the enterprise: that it is able to function in the world in a way that is consistent with its values and does not feel pressured to compromise them in its business operations.
These, then, are some suggested values we might use to inform how we assess the performance of a MEOB. Of course, we have only formulated these ideas in general terms and we have not put forward above any proposals as to how they might be measured. That is a topic for another article….
[i] Following Johnston Birchall (2010, p.4), we define a ‘mutual’ as a member-owned enterprise in which ownership and control resides in members of two (or more) key stakeholder groups, namely workers and consumers/service users, and whose benefits go largely to these members.
Bastani, Aaron, Benjamin, Joel, and Coppola, Francis, ‘Crisis at the Co-op: Can Ethical Capitalism Compete?’, Novara, 2014, http://novaramedia.com/2014/03/crisis-at-the-co-op-can-ethical-capitalism-compete/
Birchall, Johnston, People-centred Businesses: co-operatives, mutuals and the idea of membership (London, Palgrave, 2010).
Hunt, Peter, ‘The Co-op should once again embrace the movement for which it is named’, The Guardian, Comment is Free, March 24 2014,http://www.theguardian.com/commentisfree/2014/mar/25/co-op-group-movement-embrace-members
Pettit, Philip, Republicanism: A Theory of Freedom and Government (Oxford, Oxford University Press, 1997).
——, On the People’s Terms: A Republican Theory of Democracy (Cambridge, Cambridge University Press, 2012).
Rawls, John, A Theory of Justice: Revised Edition (Cambridge: MA, Harvard University Press, 1999 ).
Yeoman, Ruth, Meaningful Work and Workplace Democracy, Ph.D thesis, Royal Holloway College, University of London, 2011, http://digirep.rhul.ac.uk/file/ea817e4d-0555-d0e4-73d8-f95a9d058d77/5/CORRECTEDMeaningful_Work_and_Workplace_Democracy.pdf
——, ‘Freedom and Meaningful Work: An Exploration’, openDemocracy, March 29 2013a,http://www.opendemocracy.net/ourkingdom/ruth-yeoman/freedom-and-meaningful-work-exploration
——, ‘Conceptualising Meaningful Work as a Fundamental Human Need’, Journal of Business Ethics, 2013b, http://link.springer.com/article/10.1007%2Fs10551-013-1894-9