Whose business is it anyway?

Arlo Brady

CEO, freuds

The average consumer of the world’s mainstream media could be forgiven for thinking that there are only two models of business:

1.  Towering, glass-fronted offices in the world’s great capitals, inhabited by overpaid all-powerful executives, their chauffeur-driven Maybachs waiting patiently outside whilst they generate wealth for the few and report to no-one but their shareholders – who often struggle meekly to voice their collective opinion.

or

2.  Vast corporate empires ruled over by powerful but reclusive families who locate themselves in the world’s most exclusive tax havens, and only break cover to post bail for the fast-lifestyle loving black sheep of the family.

Of course these are two extremes. In reality, the idea that all centres of wealth-creation live up to the stereotype painted by the Occupy Wall Street protesters and successive episodes of The Apprentice could not be further from the truth.

Sure, everyone reads the Harvard Business Review; Professor Porter’s latest article is emailed around office blocks at the speed of light and armies of MBA trained, Brooks Brothers styled, globetrotters do their best to implement his words of wisdom; but the reality is never uniformity. It is the very opposite – irregularity.

Corporate culture is at the root of these differences, but so too is variation in structure. Most businesses are of course either family- owned, or publicly quoted – but there are other structures that are increasingly common, fast growing, but also surprisingly low profile.

For me, the most interesting of these is the cooperative or the mutual – in other words, a business that is wholly owned by either its employees, consumers or suppliers.

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Some of these have management structures that Lenin and Trotsky would have been proud of – worker cooperatives – but others are almost impossible to distinguish from their public peers. Except that they are not subject to the vagaries of the stockmarket and therefore are generally more stable, plus the public consider them to be trusted, fair and honest.

In the UK, turnover of the cooperative sector is over £33 billion – with profits distributed amongst 12.8 million members. In the last three years that turnover has increased by 21 per cent – compare that with the performance of the British economy over the same period and you have a stark contrast.

The John Lewis Partnership is the most prominent employee-owned business in the UK, and The Co-operative Society – which owns a range of businesses spanning food, travel, banking, insurance and more – is the most significant customer-owned business.

Cooperatives are far from being just a UK phenomenon. In the USA, the top 100 cooperatives have a turnover of more than $194 billion, including household brands like Do it Best Corp and Ocean Spray.

And they are doing very well – despite the economic gloom, Ocean Spray had its best year ever last year. The profits were then distributed amongst roughly 700 cranberry growers and 50 grapefruit growers who are the only shareholders in the company.

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In some regions of Italy, small social cooperatives provide up to 87 per cent of social care in the community. In Canada, the nation’s largest supplier of outdoor equipment is a cooperative – the Mountain Equipment Co-op (MEC) – which boasts almost 3 million members and a reputation as being one of the world’s greenest retailers.

2012 will be the United Nations’ international year of the cooperative. I suspect that, given the nosedive in trust that the business community at large has suffered, and the public service cuts, the UN is right – cooperatives, having been conceptualised in the 19th century, have finally come of age.

But cooperatives can’t drive home any advantage if people don’t know about them. They must more effectively communicate their distinctiveness and, given their disproportionately significant role in communities, surely governments must vocally support their development?

This journal is about family businesses – that term has a wholesome ring about it – but in a real family, everyone (eventually) should benefit more or less equally from belonging.

I think it is possible to construct an argument that suggests that the democratic model at the heart of most cooperatives makes their modus operandi more family-like than family businesses themselves.