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  • Posted December 15th, 2016
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    Companies like Fairphone, Ecotricity etc. are doing great things, but could easily be picked off by the corporate sector; why aren’t they co-ops?

    Companies like Fairphone, Ecotricity etc. are doing great things, but could easily be picked off by the corporate sector; why aren’t they co-ops?

    Body Shop, Green & Blacks, Ben & Jerry’s and Innocent Drinks represented a Brave New World when it came to doing business – Fair Trade, sustainable, (slightly) less hierarchical, informal, friendly. But those companies didn’t have a structure to prevent them from being bought out by the corporate sector, and now they’re owned by L’Oreal, Cadbury (Mondelez), Unilever and Coca-cola respectively.

    Do we really want the corporate sector to be able to pick off ethical companies as soon as they become successful? Here’s an interview with Taylor McLeod, about Fairphone in particular. If you’re not familiar with Fairphone, it’s a company with a conscience – taking great pains to ensure that its phone contains materials, and is constructed in ways that are as benevolent to environment and people as possible. It’s available through the Phone Co-op – see this article for more.

    ——————————————————————————-

    A bit about Taylor:

    In 2014, Taylor graduated from the University of Victoria in British Columbia with a BA in Economics and Environmental Studies. His earlier student organizing work in climate justice led him to explore how the ownership structure of companies can impact their decision-making on issues of social and environmental justice. After years of independent social-economy research, one failed coop startup, and a year working abroad for a national telecoms co-operative in the UK, he has focused his attention on contributing to the discourse around the Platform Coop movement.

    L: https://ca.linkedin.com/in/taylormcleod
    T: @lorLeod

    ——————————————————————————-

    Lowimpact.org: Fairphone is an exciting development. But it isn’t a co-op. Why not?

    Taylor McLeod: First, I want to say it’s great that you’re considering the ownership design underlying all other aspects of those companies. So few think of it, yet the ownership structure of companies influences everything else they do.

    You should talk to Bas, the founder of Fairphone, about this. I asked him this question in passing at the Fairphone 2.0 launch in London. He said they had seriously considered it, but felt it wasn’t right to make a decision on that just yet. I’m not certain, but I think he mentioned a major stumbling block with coops was ensuring some level of continued control for the early investors and founders until such time that it was appropriate to transition the governance. I’d agree that is one of the largest glaring issues for coops in the modern era. Lots of new companies are founded by visionary individuals. Being visionary is by definition a non-democratic action. If you are trying to do things that haven’t been done before, seeing things that most others don’t see, then you will often be making “radical” decisions, decisions that groups seeking consensus wouldn’t make. The struggle between visionary leadership and democratic governance is one of the biggest issues that new wave coops/companies need to overcome.

    LI: Does it mean that it will eventually be picked off by the corporate sector too, do you think?

    TM: I think the ownership design of an organization is the foundation, not the house itself. You can have a well-built house on a poor foundation. Fairphone are doing amazingly good things right now. They have a well-built house. The foundation is unclear though. Right now, it is privately owned and controlled. As far as I can tell, it is entirely possible for Fairphone to become the next Ben & Jerry’s, succumbing to profit-maximizing and reinforcing economic inequality instead of continuing to find balance between purposeful action and profit. Fairphone could be bought out by Google or Samsung.

    LI: How could Fairphone be persuaded / cajoled / pestered to become a co-op, and is that the best model?

    TM: In my opinion, the traditional coop model is not optimal for modern times. I’ve researched and experienced enough of them to see that their ownership design actually suppresses “ecosystem level” innovation quite a bit by failing to enable sustained risk-taking by founders, early employees, and – yes – investors. There is much to say here, but the point is that the traditional coop model is not appealling to modern entrepreneurs and hence puts the entire sector at a disadvantage. I think if a kind of “Coop 2.0” can be developed and refined, it can get to the point where choosing this model of business will be an easy choice for entrepreneurs such as Bas. We don’t want to force coops into the hands of unwilling innovators. We want to draw innovators in with all the benefits of a new model. B corps and social enterprises demonstrate that new socially-minded corporate models are in demand. Let’s take those a step farther. I’d say you would have to show Bas and the other owners of Fairphone a viable option for them to transition to. You’d have to convince them that it’s the best course for achieving their mission.

    LI: This Coop 2.0 model – tell me more about that.

    TM: This is a highly complex space. There are a lot of opinions and names out there for what many thinkers say needs to replace (or at least supplement) the current suite of corporate designs. These thinkers are looking for optimal company designs that can eventually come to replace the old corporations that have done so much damage to people and the planet over the decades. The current dominant corporations the world over cause so much damage because their negative impacts go largely to different groups of people than the positive impacts. Most people get pollution, wage-slavery, advertising-corrupted culture, among other negative impacts, while a very small number of people receive higher returns on their stock investments and pension plans. Traditional corporations may have been positive in the past to raise material standards of living, but we can do better now.

    I like to look at corporate design in layers:

     

    Daily actions / Interactions / Decisions

    ————————————

    Product / Strategy / Mission

    ————————————

    Ownership Design

     

    Each layer is affected by and depends upon the layers below. Only the top layer is actual actions in the real world. This represents everything companies do. This is choosing to pay workers more or less. This is deciding to transition off of fossil fuels or not. This is Fair Trade. Or not.

    There are many companies that do lots of good for their community. But there are just as many which start out with the intentions of doing good, but end up becoming “slaves” to profit maximization when the deeper layers aren’t properly thought out. If you’ve got a company that goes on the public stock market, you will have strong pressures from the shareholders and board elected by those shareholders to maximize the profits and returns to those shareholders. All other things become secondary.

    Coops by design are resistant to the damage of the profit-maximizing drive, because their shareholders are the *same people* as their workers or customers. Unfortunately, they are not as competitive in the current economy. Their marketshare has fallen over the years to become a sideshow compared to the dominant form – traditional shareholder-owner corporations.

    I imagine Coop 2.0 to combine the competitiveness, capital-gathering-ability, and innovating qualities of traditional capitalist corporations with the empathy, democracy, and capacity for purpose that traditional coops have.

    LI: Is there another structure that would prevent predation by the corporate sector?

    TM: Coops are the best structure so far, but there are many proto-models out there.

    LI: Do you know anywhere else I could get information about this?

    TM: There are many things that touch on these topics, but I feel like there are surprisingly few that speak directly to anti-corruption, “good companies”, and the role of ownership design. Writings on the Platform Coop movement are the closest thing so far. The public discourse is in its infancy, so it’s still thinking about combining traditional coops with internet companies. The synthesis into a “Coop 2.0” and what that would look like hasn’t played out yet.  The writings of Michael Bauwens on Open Coops and Rory Ridley-Duff on Fairshares companies also come to mind. Also The Institute for the Future’s Workable Futures Initiative.

    Hope that is useful!


    The views expressed in our blog are those of the author and not necessarily lowimpact.org's


    3 Comments

    • 1nane December 15th, 2016

      Let’s get rid of capitalism.

    • 2Dave Darby December 15th, 2016

      Very difficult, but I agree – it’s inherently unsustainable and undemocratic.

    • 3David December 16th, 2016

      An audio version of blogs like this would be really good to have. Really interesting topic!

    • 4John McGrath December 20th, 2016

      People need to read “Owning Our Future” by Marjorie Kelly. It presents a number of socially and ecologically positive business models, not just co-ops. The main secret to a company controlled by owner managers who operate as a Social Enterprise Corporation is having investors get only well designed bonds rather than stock. A social enterprise company is by corporate charter designed to benefit a certain group without that group controlling the management. The John Lewis Partnership in the UK is a good example. Its corporate charter, legally binding, states that it exists to benefit its employees. Yearly profits go into a fund for distribution according to a specific formula to all the workers, not to owners or just upper management. This is a major company. Homeboy Industries in Los Angeles is another example. It is chartered to benefit a specific group by hiring them and paying them well. The group being benefited is made of ex-cons, that is, HomeBoy hires only ex-cons They are hard to employ by your usual company, due to gang tats (often on the face) and other knock-out features. … The main idea of all models is that profits do not go to absentee owners. Profits may be shared with investors in the form of bonds that pay a specific interest rate based on profits. Bond holders are not owners.

    • 5lorleod December 20th, 2016

      John, I totally agree. Owning our Future was a key influencer in the development of my thought and I agree with everything you say. Co-ops are only part of the solution. In fact, the bonds for investors is something that I see as possibly playing a key role in any “coop 2.0” model. Thanks for taking the time to share your thoughts.

    • 6Dave Darby December 20th, 2016

      I read an interview with Kelly a while back, although I haven’t read her book (and I should). She said that there’s nothing wrong with corporations per se (I think that maybe there’s a different definition of corporation in the US, where it means any private company, but in the UK it tends to mean giant, multinational, publicly-traded company) – but she also said that maybe the real problem is with profit-maximising, publicly-traded corporations. I’d like to ask her, from where we are now, what would prevent smaller, non-cooperative companies being bought, or becoming giant, multinational, publicly-traded companies.
      I think what she’s suggesting is worth a try, although she’s looking at a one percent per year growth in the ‘generative’ economy, as she calls it. I don’t think that’s fast enough, because at the moment, we’re headed in the wrong direction – the Co-op bank (ex-coop), building societies (ex-mutuals) and even the Guardian (ex-trust) have been swallowed by the corporate sector (as well as council houses, now owned by the banks). Plus in the States, the massive ‘savings and loans’ sector (remember ‘It’s a Wonderful Life’?) has gone the same way.
      She brings up ecological problems and questions the perpetual growth agenda, but I don’t know if she mentions the money supply in the book, as one (probably the main) reason a capitalist economy has to perpetually grow is to pay interest to the banks for lending their imaginary money. There’s room for lots of different approaches, from co-ops to social enterprises, to community-supported schemes to credit unions to mutual societies etc. The challenge is to stop all these non-corporate structures from being swallowed up by the corporate sector. I do agree that this is a more feasible approach than to try to corral corporations into behaving sustainably and equitably via legislation from a political system that is falling more and more under corporate control. But in the absence of a system that isn’t totally controlled by the corporate sector, and more specifically, the finance sector, this can sound a bit like the nonsensical ‘corporate social responsibility’. We do need to prise their hands off the steering wheel, as well as building alternatives – we don’t have the luxury of time (cf ecology).

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