The Workers' Paradise

January 25, 2010

#20 Payment Solidarity

Filed under: Identity Statement Series — Tags: , , , , , , — John McNamara @ 1:50 pm

The Mondragon Co-operatives maintain the concept of wage solidarity. From the beginning, the ratio of the highest paid position (manager) and the lowest paid (new worker) was locked at 3:1. In the 80’s this changed and today there are some positions that earn a 6:1 ratio and one (the CEO of the International MCC) who receives 9:1. Even with the tripling of the upper end of the ratio, it is still a far cry from the 150 or even 300:1 ratios that modern stock corporations tend to employ.

What interests me about this principle (and I think that it should be in the Identity Statement as well), is that Mondragon expresses the co-operative value of solidarity. It puts solidarity into the operations of the co-operative.

The language of Mondragon follows:

“The Mondragon Co-operative Experience proclaims sufficient and solidarity remuneration to be a basic principle in its management, expressed in the following terms:

a) Sufficient, in accordance with the possibilities of the Co-operative

b) Solidarity, in the following specific spheres:

  1. a. Internal. Materialised, amongst other aspect, in the existence of a differential, based on solidarity, in payment for work.
  2. b. External. Materialised in the criteria that average internal payment levels are equivalent to those of salaried workers in the area, unless the wage policy in this area is obviously insufficient.”

Note that the principle calls upon the worker co-operative to either ensure that its workers receive the prevailing wage or, if that wage is too low, become the wage leader in their industry and area. The prevailing wage must be at least a living wage*  for the community.

The principle of pay solidarity helps flatten the hierarchy in worker co-operatives. The pay differentials are kept small as a means of valuing all work performed to help the co-operative succeed as well as valuing all workers in the co-operative from the very new to the very senior. This principle helps to deflate the ego within the co-operative. Is someone with 30 years in the co-operative worth more as a worker? In some senses, the  experience and knowledge of the industry that comes with 30 years of work can be vital to the success of the organization, but is it worth them being paid 30 times the pay of a new hire?

Does someone who manages the marketing of the co-operative do more to create wealth (by getting customers) than front-line workers? Should that ability earn more than others?

These are very real questions for worker co-operatives and they are questions which can cause a lot of divisiveness. The way that the worker co-operative addresses these issues can dramatically effect the co-operative to enable it to succeed or cause it to fail.

Does a flat compensation system (everyone gets the same pay regardless of their job duties) encourage good management or cause the people who have management skills to seek employment elsewhere? Does a staggered system of seniority and pay levels create an aristocracy within the co-operative?

It is important for worker co-operatives to find the right balance based on their industry and their internal culture. It probably needs to be revisited from time-to-time. One aspect, in thinking about payment solidarity, should be leadership development. If the compensation levels are set too low, then the co-op will likely become a training center for its competitors or other businesses. If it is set too high, the co-operative may create a rift between the high bracket managers and the low bracket workers. Creating an “us vs. them” mentality can only lead to failure of the co-operative.

To truly maintain solidarity in payment, co-operatives must employ measures to develop leadership among their own ranks. When we need to hire managers from outside, who know the industry, we risk a lot. The culture of a worker co-operative can be destroyed by outside management who bring the attitudes of the traditional corporations with them. I’ve seen this up-close and personal and also from a far. Good Vibrations recently demutualized (becoming a standard ESOP) after hiring outside management (and changing the pay ratio to do so). Now, I am sure that the decisions to demutualize were very complicated (and it was a unanimous vote of the membership); however, it was clear that the culture of the organization changed after they increased their pay ratio in order to hire a manager from the mail order industry.

Of course, once we develop management, we also will need to compete with the outside world to keep them. Thus, our development programs must be based on two concepts: the management needs of the industry and the management needs of the co-operative. Whether our management has a traditional hierarchy or done through committee and semi-autonomous collectives, these two concepts need to be part of the discussion. With this in mind, it can be easier to develop a payment solidarity plan that recognizes a member’s experience, knowledge and commitment while also ensuring that the  “floor” for workers (whether by position or seniority) remains suited to a living wage for the community. This is the opposite of the corporations who figure out the senior management pay and stockholder dividends first and then use what is left over for the workers.

From Don José María Arizmendiaretta, “Solidarity is not just a theoretical proclamation, but something that should be put into practice and made manifest, willingly accepting the limitations of team work and of association, since this is the way to enable people to help each other.” (as reported by José María Ormaechea in his book The Mondragon Cooperative Experience)

This marks the end of the Mondragon diversion. I have called these four principles the “worker co-operative user principles”. These four principles should, in my opinion, be part of the Co-operative Identity. Co-operatives, regardless of the sector, require people to do work to benefit the users. Because of this, co-operatives should see the worker as a primary stakeholder and create means for the worker to truly benefit from their experience in the co-operative. I will even go so far as to argue that all co-operatives should either have a membership class for the workers or actively promote the unionization of their workers. Co-operatives must avoid exploitation. If we believe in Fair Trade for farmers producing coffee, chocolate, sugar and the like, then we must also believe in fair trade for the laborers who get those products on the shelf.

*what is a “living wage”? Madison, WI sets their definition as 120% of the poverty threshold for a family of four (currently $11.21/hour). Dane County arbitrarily declared it to be $8.70/hour. I think that worker co-operatives should work on this definition. I think that it should be a wage that allows a family to experience security with regards to nutrition, housing, health, education, clothing and socialization. This number will vary based on the community. I don’t think that it needs to mean a single-income home, but it should mean that someone can take care of themselves and their dependents at a basic level. Probably a topic for another post. . . .

Next: the 4th Principle—Autonomy and Independence

November 9, 2009

#10 Social Responsibility

Filed under: Governance,Human Relations,Identity Statement Series — Tags: , , — John McNamara @ 8:00 am

In my office, I have the Identity Statement posted where I can easily refer to it (along with Union Cab’s vision, mission and core values). I have a version that is based on the background paper, but includes other commentary.

This version describes the ethical value of Social Responsibility as follows:

“Social Responsibility—the interdependence of people and recognition of their dignity leads to a realization that individual and group action has profound effects on individuals, groups and their relationships.”

Clearly, this ethic ties into the values of solidarity, mutual self-help, and self-responsibility. It is, however, an ethic that has been co-opted by the corporations under the ideal of “corporate social responsibility” or CSR.

Of course, a lot of corporations do engage in a more humanized version of capitalism and that comes from a true belief that capitalism and an ethos of humanitarianism may be compatible. This group still pales in comparison to the clout and numbers of the neo-liberals and neo-cons; in fact, they are teaching those groups how to put a smiley face on their corporate actions. In some cases, they are also teaching the leaders of co-operatives without decent co-operative management theory the wrong ideas about management. In the corporate world, CSR is often about charity and marketing. Support a local little league team, clean up a highway, and sponsor the Komen Race for the Cure will offset the exploitation of developing countries environment and swear shop labor. Getting accreditation though SA8000 puts lipstick on the corporation that might also lobby the host governments to codify exploitation through ridiculous minimum wage laws ($2/day).

In the co-op world, social responsibility shouldn’t be about marketing. It should be about a genuine concern for the community and building a better world. This means to work to avoid or minimize the effects of exploitation. That includes exploitation of the earth and exploitation of labor. In the consumer co-ops, working with local producers and vendors, concentrating on fair trade (and fair production as fair trade is being co-opted). It means reducing waste, encouraging environmentalism, supporting worker rights.

In worker co-ops, social responsibility means the above as well, but it also means working to overcome the tendency to focus on the internal process of the co-operative. Worker co-operatives need to reach out to the stakeholders of their organization who aren’t members: consumers, suppliers, and the community as a whole. But how does the Worker Co-op Social Responsibility differentiate itself from CSR?

If WCSR means sponsoring benefits, cleaning up highways, and supporting little league teams, then worker co-ops aren’t really doing much different from their corporate counter-parts and failing to create the co-operative difference. Without a co-operative difference, the co-operative advantage fails.

How should we engage the public in our co-ops? For the retail outlets, consumer education offers a lot of value, but we need to go further. We need to be willing to be a voice in our community (especially around our specialty). We need to accept a role as community leaders because we are just that. By choosing the model of co-operator for our business (a model that says that workers don’t need bosses, but can manage their own affairs), we have chosen a model that promotes the worker as a community leader. Transportation co-ops should be active in promoting sustainable transportation systems even if it means promoting options other than what the co-op offers. Grocery Co-ops in promoting food security and sustainable living. Sex worker co-ops in promoting healthy choices affirming our humanity without the dogma of morality. All of us should be supporting the dignity of workers and the rights of workers to choose their representation (even if that means actively supporting and encouraging the unionization of the consumer and producer co-ops).

For the most part, most of the worker co-operatives that I have come into contact with do a good job on social responsibility. Although I have met some who don’t really support worker rights (they tend to be co-ops in a high-tech field or who see themselves as “entrepreneurs” rather than identifying as workers. Of course, a key part of WCSR is joining your federation of worker co-operatives. There really isn’t a good excuse not to do so. We need to start measuring it, however. The corporate world is measuring their success through SA8000, the WorldBlu Democratic Workplace, and other means.

The Co-operative, in the UK, has an extensive system of measuring their values. I am part of a research group through St. Mary’s University that is creating a similar tool for worker co-operatives. We want to create an index for worker co-ops that will create a score for them along the lines of the Identity Statement.

Ultimately, social responsibility is about more that patting ourselves on the back, but in accepting our role as community leaders, creating the change in our communities needed to develop a more sustainable and just society.

Next Week: Caring for Others

July 8, 2009

The Fair Trade Dilemma

Filed under: Movement — Tags: , — John McNamara @ 9:05 pm

When the US Federation members went on a tour of Madison worker co-operatives everyone expected to learn a lot about how we practice cooperation in Madison. We didn’t expect to get the incredible education about Fair Trade’s failures and a new understanding of how successful forces have been in co-opting this once great movement.

Just Coffee no longer uses the TransFair certification and you won’t find their label on their coffee. That sounded rather amazing to me, but then a look at their site and one sees Starbucks and other major corporations. I try not to be a cynic, but the folks at Just Coffee explained that the trend in Fair Trade has been to draw in the “big fish” like Maxwell House, Nestlé, and Starbucks. To get them in the fair trade movement, the “fair trade” floor price hasn’t moved in two years despite the incredible inflation in fuel prices last year and the world’s worst economic crisis since 1929.

I haven’t been able to verify that the prices have stayed flat partially because I can’t find prices on TransFair’s site. that is the real problem. The lack of transparency will ultimately undermine the Fair Trade movement. Just Coffee’s response has been to withdraw the certification (and save the money spent on it) and try a new tactic: Transparent Trade.

What is Transparent Trade? Well it is the concept that the person who consumes the coffee should be able to easily track the bean back to the seed purchase and see the price paid at every step. It means that financial statements and contracts should be published on -line and accessible to consumers so that they can research how their money circulates.

One of our hosts said that the most common question from peers is if they suffer from the competitive disadvantage of full disclosure. He retorts that Just Coffee sees it as a comparative advantage.

This leads to the essential difference between community development and social transformation. The community development model uses co-operatives to teach people to fish, but doesn’t discuss the overall failure of the society. It helps people play by the rules instead of changing rules that work against them.

Worker cooperatives should be about social transformation. They should strive to change the dominant paradigm of profit-motive that Corporate Social Responsibility as a means to mitigate the worst aspects of capitalism.

Flattening “fair” prices doesn’t grow the movement, it dilutes it.

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