Purely for Profit?
| Published date | 01 February 1980 |
| Date | 01 February 1980 |
| Pages | 2-5 |
| DOI | https://doi.org/10.1108/eb054944 |
| Author | Colin Benson |
| Subject Matter | HR & organizational behaviour |
Purely for Profit?
by Colin Benson*
Many people are looking for a change in their work-
ing environment—concerned about such widely diver-
gent problems as job satisfaction, security of employ-
ment, the introduction of democratic decision making
and the responsibilities of industry and commerce to the
wider social spectrum. Such concern is likely to be ac-
celerated in the next decade by changes brought about
by micro-processor technology. However, commercial
change is usually the result of entrepreneurial activity,
which is often assumed to be a purely capitalistic activ-
ity. This article introduces the concept of producers' co-
operatives and highlights the place of entrepreneur-
ship.
This has evolved in an unusual way in the Mon-
dragon Co-operatives of Northern Spain.
In this article I will briefly outline the difference be-
tween traditional commercial activity and the co-oper-
ative movement and make the further distinction between
industrial producer co-operatives and other forms of
co-operative activity. I will then outline the history
of the producer co-operative movement in the UK before
introducing the Spanish experience of the Mondragon
co-operatives. Finally I will examine the possible future
role of the entrepreneur within the producer co-operative
movement.
Commercial Activities and the Co-operative Movement
In the UK the most common forms of commercial
structure are partnerships and limited liability com-
panies. Partnerships are most often found in the pro-
fessions and participation is restricted, with profits being
distributed to the partners. The ownership of a limited
liability company is vested in the shareholders and all
employees, including directors, work to create profits
which are theoretically distributed to the shareholders.
The consumer co-operative societies distribute their
profits to the individual purchasers by way of dividends
or trading stamps. Similarly agricultural co-operatives
exist for the benefit of the participating farmers. All
these forms of activity deny the employee any legal
right to profits.
In a producers' co-operative the enterprise is owned
solely by those who are employed by and within the co-
operative. Capital is rewarded at a commercial rate but
the profits earned are theirs to dispose of as they wish.
The producer co-operative movement has been associ-
ated with the "Utopian" movement and can be traced
from the early activities of the "Diggers" at St George's
Hill, Weybridge in the 18th century. In the early 19th
century Robert Owen founded his mill at New Lanark
and after a 5 per cent return to capital, profits were
used for the benefit of the workforce. It was a success-
ful social experiment widely studied and emulated in
Europe and America. From the mid-19th century on-
wards there was a rift between producer and consumer
movements with the latter rapidly overshadowing the
former. However, some producer co-operatives in the
Midlands have survived for over a century—notably Wal-
sell Locks (1873) with a turnover currently in excess of
£1 million and Equity Shoes (1886) which exports 50
per cent of its £2 million turnover.
Recent interest in producer co-operatives has concen-
trated on Tony Benn's efforts to support Scottish News-
papers, K.M.E. Ltd, and Meriden. It was believed that
by restructuring these firms as co-operatives and inject-
ing public funds, jobs would be saved in sensitive poli-
tical constituencies and that commercial success would
follow—perhaps. The subsequent troubles and failures
have been seen to be failures of the co-operative sys-
tem, rather than the failure to realise that all commer-
cial ventures require sound management or entrepre-
neurial expertise. To suggest that a co-operative struc-
ture will transform a commercial failure into a vibrant
success is, at best, wishful thinking, and at worst, frau-
dulent.
Can entrepreneurial drive be
harnessed within producer co-operatives?
Other examples of co-operatives are the John Lewis
Partnership and the Scott Bader Commonwealth. In both
these cases they were started as normal commercial en-
terprises and later their philanthropic owners trans-
ferred control to the employees. Both organisations have
continued to expand. Scot-Bader has supported both the
Industrial Common Ownership Movement. (ICOM) and
Industrial Common Ownership Finance (ICOF). Both
ICOM and ICOF encourage the establishment of new
co-operatives. Their work has been strengthened by the
Industrial Common Ownership Act which was passed
in November 1976 with all party support. This Act es-
abolished the Co-operative Development Agency in 1978
under the Chairmanship of Lord Oram. Another re-
cently established body is Job Ownership Ltd, chaired
*Colin Benson is 47. In 1960 he started his own garage
business, which by the early 1970s employed 75 people and
had a turnover of in excess of £2 million a year. In 1975
he sold his commercial interests and moved to Aberystwyth
to read Economics & Economic History at the University
College of Wales, where he graduated in 1978. He is cur-
rently involved in the redevelopment of the old Whitchurch
Parish Union workhouse and in 1980 intends to start a pro-
ducers' co-operative in the area.
2 Employee Relations 2, 2 1980
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