Building good corporations

Companies owned by workers and community have different attitude.

by Marjorie Kelly

Our economic system is profoundly broken. To anyone paying attention, that much is clear. But what's less clear is this: Our approach to fixing the economy is broken as well. The whole notion of "fighting corporate power" arises from an underlying belief that there is no alternative to capitalism as we know it.

Starting from the insight that capitalism has become virtually a universal economy, we conclude that our best hope is to regulate corporations and work for countervailing powers like unions. But then we've lost before we begin. We've defined ourselves as marginal and powerless. There is another approach. It's bubbling up all around us in the form of economic alternatives like cooperatives, employee-owned firms, social enterprises, and community land trusts. We don't recognize that these represent a coherent, workable alternative to capitalism, for two reasons.

First, we haven't acknowledged what unites them. Second, we don't have a name for this seemingly disparate batch of alternatives.

Ownership unites them. That's the reason that these different models represent change that goes deep. It's the reason this change is fundamental, enduring, and real. This transformation doesn't depend on the legislative or presidential whims of a particular hour, but is instead a permanent shift in the underlying architecture of economic power.

The alternatives emerging in our time represent an unsung ownership revolution. This revolution is about broadening economic power from the few to the many and redefining the purpose of economic activity. The aim isn't to endlessly grow gross domestic product or to create wealth for a financial elite, but to generate the conditions for the flourishing of life.

Here we confront the second consideration — the need for a name. We can call this new economy the generative economy. The word generative is from the Greek ge; it's the same root form found in the word Gaia and means "the carrying on of life." The generative economy is one whose fundamental architecture tends to create beneficial rather than harmful outcomes. It has a built-in tendency to be socially fair and ecologically sustainable.

Employees in this firm are not a countervailing power. They're not legally outside the firm, negotiating with it. They are the firm. Options like worker ownership and cooperatives not only spread wealth but ensure that owners are local, hence more likely to care about local ecological impacts. And they allow enterprises to reject the growth imperative endangering the biosphere. Generative enterprise does not answer to the demands of the finance system, which locks publicly traded companies into a growth path in order to keep stock prices inflated.

In writing the book, Owning Our Future: The Emerging Ownership Revolution, I've been traveling around and visiting places where this new economy is bubbling up. Here's some of the good news I have to share: Generative ownership isn't just about small, local, founder-run companies. It's possible to keep the soul of these companies alive even at large scale, and long after the founder is gone.

Consider, for example, the John Lewis Partnership (JLP) in England. It's the largest department store chain in the country, with 35 department stores and 272 Waitrose grocery stores. Revenues of this company are more than $11.5 billion. If placed into the Fortune 500 list of the largest US corporations, JLP would settle in around 212 — a little higher than Starbucks. It's 100 percent owned by its employees.

The John Lewis Partnership is built around the value of fairness. The founder, John Spedan Lewis, who created its democratic structure about a century ago, believed that traditional ownership was unfair because dividends paid to shareholders for doing nothing were obscene when workers barely earned subsistence wages. The stated purpose of the company he created is to serve the happiness of its employees, or, as the company calls them, partners.

To see if this firm was real, I flew to London and visited a few of its stores — including a Waitrose grocery store. I met a butcher at the meat counter wearing a white linen fedora, a crisp white shirt beneath a green-striped apron, and a bow tie. The hats were required, he explained. But wearing a tie every day was his choice. "I just feel more dressed," he told me.

People notice touches like that at Waitrose, where pay raises are given for performance, including such things as "being a tidy person," John said. He told me about his sister, Carol, who also worked at Waitrose and had just been diagnosed with cancer. "They've been really good," he said, referring to the company. "There's a budget set aside for people like this. She's been off for three months, and they're holding her job."

When employees at Waitrose and other JLP stores face a family emergency, they can seek a grant or loan from the Committee for Financial Assistance. That committee, composed of and elected by employees, controls the special budget John referred to and makes decisions outside the chain of management. Help from that fund — plus the commitment to hold Carol's job — took "the money side of worries away," John said.

I also visited the company's Peter Jones department store, entering through an arched doorway with the legend inscribed in stone, "Here is Partnership on the scale of modern industry." There I encountered a mid-level manager named Harry Goonewardene, who served on the Partnership Council, an elected body of employees that works alongside the board of directors.

"How did you get on the council?" I asked him. "Did you campaign?"

"Very much so," he said. "I stood at the door and grabbed people, told them, 'Hi, this is who I am.'" He carried himself as a city councilmember might, calmly, with an air of dignity that was almost arresting. He was impeccably dressed in a dark suit and had dark olive skin — he is from Sri Lanka, I was later told. He lacked that harried, pinched sense one often sees among floor managers at other retailers. A meeting of the Partnership Council would be held soon, he told me, during which an adjustment to the pension scheme would be discussed.

Each year, the company contributes to pension accounts a sum not far below employees' annual pay; employees aren't required to contribute anything. However, they are not eligible until they have completed three years of work, and people were concerned about that. "A committee has been looking at this, and we'll take it back to constituents and present a plan," he said. By "constituents," he meant the workers.

John and Harry are among the 76,500 employee-owners of the John Lewis Partnership. If the ultimate perquisite of being an owner is the right to pocket some of the profit left after the bills are paid, then these employees are genuine owners. Each year, after the firm sets aside a portion of profits for reinvestment in the business, the remainder — generally between 40 and 60 percent of profit — is distributed to employees. One clerk named Emma told me her recent bonus was 2,000 pounds [U.S. $3,264]. "I spent some on a holiday in the Canary Islands," she told me. "It was my first holiday in four years."

Every employee at JLP, from shop clerk to the chairman, gets a bonus representing the same percentage of individual pay. As one manager told me, "In the worst year, it's 8 percent, in the best year, 24 percent" of salary. Last year, the annual figure was announced with fanfare on the floor of the company's store on Oxford Street, where a partner held up a poster reading "18%," and employees clapped and cheered. That bonus amounted to about nine weeks pay.

Here we begin to see what is revolutionary about the John Lewis Partnership. Employees in this firm are not a countervailing power. They're not legally outside the firm, negotiating with it. They are the firm.

This concept represents a kind of revolution akin to the shift from monarchy to democracy. In the American Revolution, the founding generation didn't attempt to regulate or restrain monarchy. They created a new source of political power and sovereignty that they controlled themselves. The revolution they began is one that we are in a position to finish today. That previous generation democratized the political aspect of sovereignty. But our politics and economy are so intertwined that imbalances in wealth and ownership have eroded our political democracy. To fix this, we need to democratize the economic aspect of sovereignty.

Today the ruling oligarch in our economy is capital. Only capital has the right to vote inside most companies, and only capital has a claim on profits. Serving capital — maximizing returns for absentee shareholders — is the goal of publicly traded companies.

In the generative economy, ownership is rooted instead in the hands of stakeholders connected to the life of the enterprise. In some cases, these are employees. They can also be community members, as with municipally owned electric plants and wind installations. In the case of credit unions, the depositors are the owners.

With a farmer-owned cooperative like Organic Valley — a Wisconsin firm with more than $700 million in revenue — the owners are the suppliers, the people who produce the organic milk, cheese, and eggs that the company distributes. While the purpose of JLP is to serve employee happiness, the purpose of Organic Valley is to save the family farm.

Both JLP and Organic Valley share certain ownership design patterns: a combination of rooted ownership and a mission that is not about maximizing profits but serving the needs of life. Protecting and enhancing the biosphere is integral to Organic Valley's operations, since it deals only in organic products. The company helps its new farmers through the rigorous process of going organic, which means company growth translates into wider restoration of soils and watersheds.

There are many other benefits the company produces. Farmers benefit from healthy income. Employees benefit from stable jobs and rewarding work. Customers benefit from chemical-free food. Investors in the firm's preferred stock benefit from dependable rates of return. Farming communities benefit from the return of vitality that flows from farmers' prosperity.

Through enterprises like these, we can begin to grasp the principles that we could use to create a generative economy:

1. There is an alternative to capitalism. This is the heresy that the keepers of the temple do not wish us to utter. It is possible to organize a large, sophisticated, modern economy that tends toward fair and just outcomes, benefits the many rather than the few, and enables an enduring human presence on a flourishing Earth.

    

2. Getting there is not only about regulation but about emergence. As organizational change theorist Margaret Wheatley writes, "emergence" refers to what happens when local actions spring up and connect through networks. Without warning, emergent phenomena can occur, such as the rise of the organic food movement. Such movements rely not on central leadership but on shared vision.

    

3. The generative economy is not a legal exercise but the embodiment of an emerging value system. Companies in the generative economy are built around values; the John Lewis Partnership's core value is fairness, while Organic Valley's core values are sustainability and community.

    

4. Generative values become enduring through the social architecture of ownership. The generative economy is built on a foundation of stakeholder ownership designed to generate and preserve real wealth — resources held and shared by our communities and the ecosystems we live in. These enterprises don't have absentee ownership shares trading in a casino economy, but ownership held in human hands.

Today's major corporations may seem eternal. But as economist Joseph Schumpeter observed, creative destruction is ever present in capitalism. In industrialized nations, an estimated 15 percent of jobs are destroyed every year, and new jobs replace them. It's the same with companies. Hypothetically, a new economy comes into existence every seven years. In the long run, battling the dinosaurs of today may be less important than getting the next economy into the right kinds of ownership.

We can't get where we need to go by starting with corporations and asking how to restrain them, regulate them, or rein them in. We need to start with life, with human life and the life of the planet, and ask: How do we generate the conditions for life's flourishing? Will we continue to rely on ownership architectures organized around growth and maximum income for the few? Or can we shift to new ownership models organized around keeping this planet and all its inhabitants thriving?

Our greatest challenge lies in the realm of imagination and ideas. Imagine, for example, if the energy aroused by Occupy Wall Street were channeled into achievable strategies that supported ownership alternatives. Such strategies could include the Move Your Money campaign to shift bank deposits to cooperative and community banks or a push for major legislation to advance employee ownership (an alternative favored by both left and right). Imagine if campaigns like these were unified as a single movement for a generative economy. We might create an unstoppable force — a movement less about regulating corporations as they are and more about building living enterprises as we want them to be.

Marjorie Kelly wrote this article for 9 Strategies to End Corporate Rule, the Spring 2012 issue of YES! Magazine. Marjorie is a fellow with the Tellus Institute in Boston and director of ownership strategy with Cutting Edge Capital. Her new book, Owning Our Future: The Emerging Ownership Revolution, will be published in June 2012 by Berrett-Koehler Publishers.

 

References
  Full story

© Copyright 2012 Marjorie Kelly, All rights Reserved. Written For: StraightGoods.ca