Manufacturing Workers Co-operatives

DEFINITION

A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.

VALUES

Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

Co-operatives are founded on seven international principles that empower and educate their members and promote community participation and support; they are value-based entities, albeit ones which can turn a profit for their members. 

Seven (7) Principles of Co-operatives

1. Voluntary and open membership - C-Mac Industries (Aust) Co-operative Ltd is open to all who are willing to accept the responsibilities of membership, without discrimination. 

2. Democratic member control - C-Mac Industries (Aust) Co-operative is democratic organisation controlled by our members, who actively participate in the setting of C-Mac policies and decision-making. C-Mac members have equal voting rights (one member, one vote).

3. Member economic participation - C-Mac members contribute equally to the funds of the co-operative and control the allocation of surplus C-Mac funds

4. Autonomy and independence - C-Mac Industries Co-operative is a independent organisation controlled by  members. Any agreements entered into with other organisations must ensure democratic control by members and C-Mac Industries (Aust) Co-operative has independence.

5. Education, training and information - C-Mac Industries (Aust) Co-operative provides education and training for  members, elected representatives, managers, and employees so they can contribute effectively to the development of the C-Mac Co-operative. C-Mac informs the public about the nature and benefits of co-operation.

6. Co-operation among co-operatives - Co-operatives serve their members most effectively and strengthen the co-operative movement by working together.

7. Concern for community - C-Mac Co-operative works for the sustainable development of our community through policies approved by C-Mac members.
 
Co-operatives National Law (ACT) Act 2017 (“CNL”)

Below is some of the reasons why the founding family of C-Mac decided to implement a co-operative despite many hurdles that presently exist in Australia.

Having recently transferred our 50 year old family manufacturing business to a workers co-operative so I could exit the business, I discovered co-operatives to be the only responsible solution. It was a journey of nine (9) years in exploring and trying different succession options.

If a family business cannot proceed to the next generation the following are the options:

1. Sell business on open market
2. Close down the business
3. Management buyout
4. Employee Share Ownership Plan - ESOP
5. Staff acquisition or take over via a worker co-operative

Back ground information:


Baby boomers (now average age 67) owning many small businesses in Western Sydney want to exit their businesses and realise their assets for retirement.

I was in this category. Faced with many issues.

1. Baby boomers are now realising their retirement asset is their properties not the business. To retire they need to realise their property asset or receive a rental income.
2. Few investors want to buy manufacturing businesses which generally have small or poor profitability even though the business have provided a good living to the baby boomers family and staff. It becomes extremely difficult to sell the business to obtain any $ value.
3. Closure of the business is costly due to LSL and redundancy entitlements due to staff loyalty and long term employment. This can mean existing owners, even after selling equipment assets may have to raise funds to close. (Auction sales generally realise 1/10th asset value)
4. Management staff generally have no funds to instigate a management buyout.
5. ESOP’s Take time to implement. Due to actions by the big end of town legislation is very restrictive and simple schemes are difficult and expensive to setup. Transfer of share ownership takes time and requires companies to be very profitable and cultural change to ownership is slow.
6. Small business owners generally want to look after their staff.
7. Transfer of ownership to staff is possible by setting up a workers co-operative but this is not a common practice in Australia like in the UK, Europe and USA.

Australia has many hurdles and disincentives. I have a concern for many Western Sydney workers and families:

With technology advancing with Industry 4.0 and IoT (Internet of Things) it is predicted that 40% of existing jobs won't exist in the next 10 years.

If workers can stay engaged in running their own businesses they are very likely to reinvent their jobs and provide for their families and their future. However, if small businesses are closed and staff made redundant, their chances of finding new jobs are low.

To get employment in the future their job skills will no longer be required and redundant staff will have to be retrained to find a job. This puts an even greater burden on our economy.

In my journey through succession planning and implantation I found co-operatives to be a good solution.

C-Mac Industries workers co-operative, I have been told, is the first in Australia since the Co-operative Regulations Act was updated in 2013.

See ABS website "Co-operatives in Australia:

Businesses transferring to co-operatives overseas have been done with great success. See http://www.transfertocoops.eu/

Australia is way behind overseas countries which promote and support employee ownership. Many empirical studies show outstanding results for employee owned business, performing better than incorporated companies.

Co-operatives statistically provide higher wages, better overall family wealth along with improved well-being, better health & education. Benefits flow onto local communities with higher employment rates, less community crime rates etc. All this is badly needed in Western Sydney.

Employee Ownership & Economic Well-Being Report

May 15, 2017 released by National Centre for Employee Ownership www.nceo.org 
Based in California's USA. Full report: https://www.ownershipeconomy.org/

Key findings:

• Medium household net wealth among recipients is 92% higher for employee owners than for non-employee owners.
• Employee owners have 33% higher medium income from wages overall.
• Employee owners are much more likely to have access to an array of benefits at work.
• Employee owners have substantially more job stability than non-employee owners.
• For families with children ages 0-8 in their household, the employee ownership advantage translates into medium household net worth nearly twice that of those without employee ownership, nearly one full year of increased job stability, and $10,000 more in annual wages.

What do we really know about worker co-operatives?

Extracts from Co-operatives UK Report by Virginia Perotin:

• A workers co-operative has the following characteristics:
• All or most of the capital is owned by most of the members
• All categories of employees can become members
• Most employees are members
• Members each have one vote (regardless of the amount of capital they have invested in the co-operative)
• Members vote on strategic issues in annual general meetings.
• Members elect the chief executive officer (CEO)

Worker co-operatives represent a high performing business alternative for a very broad range of industries and bring significant benefits to their employees and to the economy.

Because worker co-operatives are owned and ran by them, employees in worker owned co-operatives have far more say in the business, from day to day concerns through to major strategic issues.

Main findings from the analysis and review:

1. Worker co-operatives are larger than conventional businesses and not necessarily less capital intensive.
2. Worker co-operatives survive at least as long as conventional business and have more stable employment. When market conditions change worker co-operatives review wages first and keep employment more stable.
3. Worker co-operatives are more productive than conventional businesses, with staff working "better and smarter" and production organised more efficiently.
4. Worker co-operatives retain a greater share of profits than other business models.
5. Executive and non-executive pay differentials are much narrower in worker co-operatives than other firms.

• Co-ops are larger than other firms.
• Co-ops Grow faster than other firms
• Co-operatives can be found in most industries - differences vary across countries
• Rescue takeover by employees forming co-operatives appears relatively rare.
• Worker-managed firms may hire less than other firms in periods of growth; but importantly may also preserve labour better in down turns.
• When business is bad worker co-operatives first draw from accumulated retained profits in order to preserve both jobs and pay before cutting pays.
• Worker co-operatives plough back significantly more profit than required as a form of insurance against job losses in downturns. 
• As a result worker co-operatives keep more profit in the firm than conventional businesses.
• A job in a worker co-operative is particularly valuable, since it is a job in which the employee has a say in decisions that effect employment risks.
• Worker co-operatives are more egalitarian than conventional firms.

Worker co-operatives could improve local communities employment, and therefore health and social expenditure and tax revenue.

• More worker co-operatives are formed in industries where more co-ops exist.
• Paucity of information available in most countries creates barriers to entry.
• Entrepreneurs have little idea of what co-operatives are, and how to create.
• Worker co-operatives represent a very small part of the business sector, because too few are created.

Existing co-operatives provide an example and show to would-be entreneurs that labour managed firms can be viable businesses.

Nice coincidence that the C-Mac Industries Cooperative began its new life on International Cooperative Day. A great contribution and a cause to celebrate.

C-Mac's  own success is testament to the wide reaching benefits of employee ownership and we’re ideally placed to not just to support transitions, but to help your business become a beacon of employee ownership excellence.

Six things we can learn from Northern Italy’s Emilia Romagna region, where cooperatives drive the economy. 

Would you like to learn what C-Mac Industries Co-operative are working through to transform the business into a "High Performing Manufacturing Workers Co-operative"?