E:S

TRENDS.AND CHALLENGES FOR CO-OPERATVES AND SOCLAL ENTERPRIS

2. Recent trends in European co-operative structures

- isomorphism

During the second half of the twentieth century, developments in the c o

operative sector have frequently been marked by a tendency to change
structures and practices in order to compete more effectively with con-
ventional business in increasingly deregulated markets. A central feature
of these changes has been the adoption of capitalist structures and prac
tices, so that an isomorphic trend is apparent with co-operatives becom-
ing more similar to capitalist business structures and practices
There have been several major isomorphic trends in co-operauve struc
tures, firstly adaptation of the co-operative form, secondly the separation
of economic and social dimensions of the co-operative organisation;
thirdly hybridisation (especially increasing use of holding structures using
share based legal forms); and fourthly degeneration.
Adaptations of the co-operative form- the post-war period in Europe has seen
a number of significant legislative changes to the co-operative form in
order to facilitate its operation in more competitive capital and product
markets (see Monzòn Campos et al., 1996). Three in particular are note-
worthy:
issuing of non-voting shares to third-party financial partners;
creating the capacity to change the membership base to include fi-
nancial partners as members (as well as employees);
adaptating voting rights (away from the principle of equality of mem-
bers) towards voting rights being weighted according to the extent of
patronage
Separation of econonie and social oljectves/ aspects. This has been a strategy
pursued by many co-operatives in order to allow an unhindered focusing
on each aspect, for example in consumer co-operatives where member
relations become rather separate from customer relations, and are linked
mainly to governance requirements. Thus the consumer is treated sepa-
ratedly from the member the consumer becomes the focus of eco-
nomic activity, whilst the membership aspect becomes marginalised and
dealt with through separate social administrative structures. This results
in the idea of membership being reduced more and more to a tiny mi-
nority that might be involved with AGM meetings and the occasional

100
 EXPERIENCF
AN
TRENDS IN E:UROPE
ENTERPRISE:

SOCL-41.
ROM CO.oPER 4TILE TO

into the
idea of membership
incorporate the
SOClal e v e n t but attempts to
consumers base is neglected.
experiences.
These trends c a n be s e e n
in the following to raise equity
to e n -
co-operatives
in 1995 allowed to somme
In legislation
Spain share issues) subject
investment (through (11) a
courage greater capital capital employed;
more than 33% of no
o n region); (11)
limited to no
restrictions: (1) shareholders (depending
for
limit of 35-45% of
votes

return on
dividend. internationally,
limits to of co-operation
bastion
which has been a orienta-
In Sweden, the consumer co-operative
to
from the 80s there
was a change their dominant

members with members losing to a degree cus-

only 'signiticant'
-

tion to its were

instead, "they
the co-operatives; for general
position in consumers.
...and "many
resources

other research units,

tomers among discontinued:
consumer

have been and

consumer policy consumer
information
for consumer debate,
weeklies for
magazines and member relations, laboratory
facilities
for
education, departments
etc." (Akë Böök and Blomqvist, 1996).
product testing, trends can be seen away
While in Swedish agricultural co-operatives relations between
more market type
relations towards
from solidaristic
members and the co-operative.
this is modified in
proportional financing is the norm,
Thus: although which lead to larger producers
additional regulations,
practice through it used to be that
less than smaller ones; similarly
paying proportionally is m o r e cost-based - ac-
was the s a m e
for all members, n o w it
pricing this again is likely
c a u s e s the co-operative
-

costs a member
the
cording
to larger producers.
favour
successful savings and
Mouvement Desjardins, a highly
In Qucbec, the and
has and developed as the markets have changed
grown
credit union,
tensions between:
internationalised, but as a result, creating
its co-operative and corporate components;
and institutional in-
capital
the balance between members' internal
vestors' external capital;
the balance between members and managers;
of economies threatens Desjardins role in economic
the globalising
development of Qucbec.
of these tensions are unclear but indications are that un-
The outcomes

101
TRENDSAND CHALIENGES FOR CO-OPER ATII ES AND SOCI-AIL ENTERPRISES

threatened by the
der certain conditions members interests are clearly
corporate entity:
in Italy the 1992 reforms raised the limits on social capital that
mem-

extension
bers could hold, but perhaps of more significance was the
hold up to
of the position of financial members, so that they could
33% of voting rights, and 49% of seats on the board - thus challeng-
ing traditional notions of democratic member control;
in France, a remarkably similar 1992 Act enabled co-operatives to
issue shares up to 35% of the capital base, with voting rights propor-
tional to capital owned, but with similar risks to traditional democ-
ratic member control.

3. Hybridisation - the rise of holdings structures

In many countries there was also a bybridisation of co-operatives (Coté,

as a way of own-
2000) - a tendency to utilise capitalist structures either
activities with another society
ing subsidiaries or as a way of combining This can be
(where the shares are owned by both co-operative societies).
seen in a number ot larger co-operatives which have wholly or partially
owned share based subsidiaries. Holding structures are also used for joint

ventures and merged activities;

and such holding structures employ share
two co-operatives may hold
based corporate forms so, for example,
the logic of capital is counter-
shares in a joint venture activity. Thus
members. Member influence and control be-
posed against the logic of since control be-
exert over such structures
-

comes more difficult to

comes indirect the board of their co-operatives to the board of

through
the joint venture.

The key points about this hybridisation

are:

based subsidiaries within social

the main form of hybrid is share
economy structures;
for joint
there are also holding structures (share based companies)
have been seen in-
ventures and merged activities; both the above
as a tor c-operatives and mutuals to
combat global
creasingly way
competition;
member ownership and control f o r
hybrids often involving partial owned
employee
example the employee stock ownership plan (the
102
 ROM CO-OPERATIVE TO SOCIAL ENTERPRISE: TRENDs IN EUROPEAN EXPERIENCE

structure:ESOP) - a "two-tier" structure, in which the worktorce as a

whole controlsan organisation that owns
(in whole or in part) the
Operating company (registered under conventional company law).
Hybrid two-tier structure cover a wide range of
posibilities for part-
nership between members as a collectivity and external bodies that
CO-Invest and co-own the business. The principal draw-back of such
arrangements is the additional complexity involved and usualy each
hybrid has to be devised almost from scratch (although in the UK
bus sector, for
example, employee ownership models are being de-
veloped). It ought to be possible to devise some models for such
partnerships.
4. "Degeneration" of the co-operative form

There are 3 forms of degeneration. Constitutional degeneration where

membership becomes restricted and employees are taken on to secure a
greater proportion of the surplus to members. Organisational degenera-
tion where the participatory structure of the co-operative becomes
dominated and goal degeneration where the goals of the
by an elite; co
operative change so that it becomes no different from a small capitalist
business in the same sector (Cornforth et al., 1988).
The co-operative principles are intended to counter these tendencies but
most recent torms of co-operatives have model rules and constitutions
that make it extremely difficult for constitutional degeneration to take
place. Hybrid forms - ESOPs, Employee Ownership structures, Sociedad

Anonima Laboral (SALs: Spanish employee owned structures), which

tend to be partially mernber owned enterprises are particularly suscep-
tible to this form of degeneration. On the other hand where the co-
operative spirit only ever was skin deep, they (the members) may not see
this development as a disadvantage.