ACCORD Newsletter No. 7

ACCORD NEWS obtains its material from various sources in Australia and overseas. We actively seek suggestions and canvass feedback from our readers and we endeavour to respond to their needs and interests. Our readers come from government, the private sector, financial institutions, community development organisations, co-operatives, mutuals, and education and research institutions.

In this issue we cover a range of topics that demonstrate the richness and breadth of co-operatives and the wider social economy. We feature: Co-operative achievements in sport and catering, a story on ethical superannuation investments, the social auditing toolkit, and how co-operatives rate in the top 50 private companies. We look forward to your Feedback.

Almost 40% of the 50 largest private companies in Australia are part of the social economy. A quick calculation based on the Business Review Weekly (BRW) and IBIS "Top 500 Private Companies" (BRW August 1-7, 2002) shows that the 19 largest social economy companies turned over nearly $18 billion during 2001/02.

Two main groups of firms constituted the social economy - agricultural co-operatives or co-operative companies (mainly dairying) and insurance/superannuation companies (mainly health insurance and industry super funds). NRMA (member services), the RACV and the Sisters of Charity Health Services made up the remainder. Many more social economy organisations are included in the remaining 450.

Unfortunately, IBIS, which compiles the list, does not publish information on organisational forms or forms of ownership. The list is available at http://www.ibisworld.com.au

A government taskforce, headed up by Clive Hildebrand, to conduct an independent assessment of the Australian Sugar Industry, delivered its the final report to the Minister for Agriculture, Fisheries and Forestry, Warren Truss, in late June 2002. The purpose of the assessment was to improve the industry's long-term sustainability and profitability. The assessment provided stakeholders of the sugar industry with the opportunity to participate and the Task Force received more than 200 submissions.

One of the key recommendations is that the industry be rationalised into larger units of farms or farm co-operatives within mill areas and that the Government be fully supportive of industry's efforts. The report asserts that co-operative farms would save transport costs and time, and spread farm risk. It mentions the New South Wales Sugar Milling Co-operative, where there is "... a notably low, managed level of farmer-mill conflict".

ABC Radio Australia News quoted Clive Hildebrand on 29 June 2002, as saying that "... I've offered farmers an opportunity to have a share of a larger farm rather than 100% of a smaller farm. ... If they want to lower their costs then one way to do this is to enter a co-operative arrangement." News.com.au reported Clive Hildebrand as stating that "... a move towards co-operatives, whereby farmers could gain income, while not necessarily having to run their own properties, was an option for rationalising the industry." For more details, please visit http://www.affa.gov.au/sugar.

Delivering the inaugural lecture at the Monash Governance Research Unit, David Knott, Chairman, Australian Securities and Investments Commission (ASIC) said that "... regulatory responsibility often sits uncomfortably alongside the profit motive". He was referring to the Australian situation, where the Australian Stock Exchange (ASX) demutualised in 1997 and became a 'for profit' corporation. Mr Knott questioned whether the role of ensuring a fair, orderly and transparent share-market could be combined with the ASX's 'for profit' business model. Richard Humphry, ASX Managing Director, rejected any suggestion that its supervision of the market is influenced by ASX being a listed company.

Several co-operative organisations have lodged submissions to the Federal Government's review of the Trade Practices Act.

These submissions argue for a greater understanding and acknowledgment of the role and operation of co-operatives, by the Australian Competition and Consumer Commission (ACCC). It is understood that the NSW Co-operatives Council is also preparing a submission for the TPA.

The collapse of HIH and One Tel in Australia and Enron and WorldCom in the US has focussed attention on issues of corporate governance and organisational structure. Directors' accountability to both shareholders and the broader community has been questioned; indirectly querying the core values of business corporations.

World Council of Credit Unions, Inc. (WOCCU) President and CEO, Arthur Arnold has reinforced the underlying values of credit unions - that they must honour the trust of their members by focussing on transparency, full disclosure and accountability. He states that "Credit unions are naturally positioned as trustworthy institutions in the market, because they are member-owned, democratically based and member services-driven institutions". The WOCCU press release is available from their website.

Shann Turnbull's A New Way to Govern: Organisations and society after Enron, questions whether private ownership and/or market forces can reliably sustain a business, let alone increase its efficiency and effectiveness. Dr Turnbull of Macquarie University, states that the problem is "... exacerbated by society becoming too complex for a single CEO to manage (and it is) impractical for company directors to monitor and direct activities with due diligence and vigilance as required by the law". Dr Turnbull's paper was commissioned by the New Economics Foundation and is available from their website.

Warren Weir, Coordinator of Graduate Aboriginal Business Education Programs, College of Commerce at the University of Saskatchewan, addressed the 6th World Congress of the Australian and New Zealand Academy of Management and the International Federation of Scholarly Associations of Management (ANZAM/IFSAM), held on the Gold Coast in July.

His paper, titled Indigenous Land Claims: From Contention to Negotiation and Enterprise, was co-authored with Robert R. Anderson, Associate Professor, Faculty of Administration at the University of Regina. It examines the shift in the policies of Australian, New Zealand and Canadian governments from contesting Indigenous claims to land, resources and some form of 'nationhood' to a policy of negotiation and enterprise development.

Warren's work is now focused on Aboriginal co-operative development in Canada. He believes that there are key lessons to be learnt from Aboriginal Co-operatives in Australia. During his visit he met with staff at Tranby Aboriginal College, which is part of the Co-operative for Aborigines Ltd; located in Glebe. He also met with senior research staff at ACCORD, who provided him with information regarding co-operatives in Australia. Warren plans to return to Sydney in the near future, to continue his comparative research on Indigenous co-operatives in Australia, New Zealand, Papua New Guinea and Canada. For links to Warren's work, please click here.

The US Government has boosted funding for the Federal Department of Agriculture's Rural Co-operative Development Grants by 23%. The grants provide critical support to co-operative development centres that offer technical assistance and help farmers in rural American communities to start new co-operative businesses. In 2001, the program funded 18 Centres that offer business-planning services. Since 1993, the program has provided more than $28 million to assist with co-op development.

There are 48,000 co-operatives in the US and 120 million co-operative members. About 30% of farmers' products in the U.S. are marketed through 3,346 agricultural co-operatives. There are approximately one million co-operative housing units and insurance companies owned by, or closely affiliated with co-operatives, serving over 50 million Americans. Co-operative health maintenance organisations provide health care services to nearly 1.4 million American families.

A Colloquium on Contribution of the Co-operative Sector to Housing Development was held on 26-28 June 2002 in Turkey. Maria Elena Chavez, Acting Director-General, ICA, in her opening remarks, noted that governments have recognised co-operatives as important actors in promoting sustainable human settlements in the Habitat Agenda and the global plan of Action. The need for housing co-operatives to develop new concepts of joint and individual property and use rights, and of voluntary, democratic forms of co-operation was recognised by participants as key issues. Several models of housing co-operatives, targeting current needs, were outlined.

5. "Co-ops a flexible alternative" - Video Launch

The NSW Minister for Fair Trading and Minister for Land and Water Conservation, John Aquilina, launched a new promotional video, "Co-ops: a flexible alternative" on 11 July 2002 at the Bega Cheese Heritage Centre.

Deputy chair of Bega Cheese Co-operative Society Ltd, Max Roberts said that the co-operative's members had great pride in the co-operative and that the "... co-operative structure does work. It's worked well for us and has created employment in the Valley for 475 people." In launching the video, the Minister acknowledged the importance of co-operatives and said, "... co-operatives improve quality of life and generate wealth for the local community". He added that Bega Cheese was evidence of the effectiveness of the co-operative model despite many people still believing that co-ops have a restricted role to play in our society. The Minister commented, "... it is important to get the message across that there are alternative ways of doing business and that profits go back to the people that matter".

The video covers the role co-operatives play and provides case study material on Hastings Co-operative Limited; Curious Art Minus Zero - No Limits Co-operative Ltd; Yeoval Community Hospital Co-operative Ltd; and Clarence River Tea Tree Co-operative Ltd. The video has been distributed to business enterprise centres (BEC). Readers interested in seeing the video can contact their local BEC or the Registry of Co-operatives on (02) 6333 1400.

The residents of Claymore, a suburb of Campbelltown, are an excellent example of people working together, against difficult odds, to achieve a better quality of life and improve their local environment. In the past, Claymore was marred by high unemployment, high crime rates and poorly maintained housing and public areas. Ninety percent of its residents are public housing tenants and the official unemployment rate is 58 percent.

The community has been unwilling to accept this as a fait accompli for their neighbourhood, and through significant community action, Claymore has become a safe place where families today are proud to live. In July 2001, a community workshop identified that a focus on creating local employment opportunities; real jobs, based on the need for maintenance of housing stock and beautification of the estate, was the major area for development. The Claymore Community Employment Co-operative (CCEP) was the result of these consultations, and CCEP is now well on the way to achieving its target of creating 50 new jobs for local people.

Noeline Nickolson, Jessica O'Donoghue and Keshna Gates from the Claymore Catering Co-operative
Photo taken by Chris Lane, courtesy of MacArthur Advertiser

Ted Smeaton, Community Engagement Strategist from the Benevolent Society, which auspices the project, said he is delighted with the progress so far: "The most exciting employment initiative to date is CCC Catering Service. The business employs 15 local people and is proving so successful and popular, that it is often booked out. In the first month, without any advertising, the business turned over more than $6,000". Other co-operative businesses underway include a handyman/ maintenance service, and cleaning and furniture removals.

The CCEP is a partnership between the community and a number of community organisations. It is an innovative response to unemployment by building on the assets of the Claymore community and the creativity and skills of its residents. To read more, Please click here.

Brett Fairbairn, a well known Canadian co-operative researcher and Director of the Centre for Co-operative Studies, University of Saskatchewan, noted memory, in many ways is identity. We are, he observed, what we remember. It is difficult to conceive of a sense of self, of identity, of pride or self-confidence, without a memory of past experiences. Reflecting on this he comments that in times of challenge and change, co-operative movements, like people, need a secure sense of their own identity, of past accomplishments and lessons learnt.

Historical impact of co-operatives has been significant in the Illawarra area. Evidence of how dairy co-operatives and co-operative stores assisted the community is available in a recent publication by Jim Hagan and Henry Lee: A history of work & community in Wollongong. "In good times, the co-operative store, owned and managed by the miners and their families, would keep down the cost of groceries and other basic goods; in bad times, it would advance them credit until the men returned to work".

A number of social histories have been written about co-ops in Australia.Ricegrowers Co-operative was one of the first to commission Dr Gary Lewis to write their history. ACCORD is planning to compile a bibliography of published co-operative histories. We invite co-operatives that had their histories published to send us details publication in future ACCORD News.

The Ethical Superannuation Fund, the first of its kind in Australia, was established in 1993 by Foresters ANA Friendly Society Ltd. The fund, a public offer superannuation fund, managed by Foresters ANA invests in projects and companies that protect the environment and help people improve their quality of life. Only 15 per cent of its funds are invested in the share market.

Foresters ANA funds projects such as, housing for the disabled, solar water systems, credit unions operating in remote areas where banks have either withdrawn services or are not interested in setting up business.

Richard De Simone, Director of Foresters ANA, says, "Clients of many major funds are not laughing now they're seeing negative returns on their investments. Not only are our members' funds protected from the massive fluctuations in the share market, they get the sort of dividends you can't achieve from investing in banks and mining companies - the knowledge that they're making a contribution to their future and their kids' future".

At the 2002 State Conference organised by the Co-operative Federation of Queensland, Kerry Adby, Partner, Copernican Consulting, highlighted some of the benefits of using a co-operative structure. She stated, "that when properly managed, co-operatives have distinct benefits; they provide greater control over destinies, by supporting regional communities in ways that a corporate body cannot".

The same topic is covered in a publication by the Centre for Co-operative Studies, National University of Ireland: The Competitive Advantages of Co-operatives by R. Briscoe and M. Ward. The authors claim that there are only two types of business; one is capital-controlled and the other is people centred. The people centred business exists to serve the needs of the people who are users of the business, instead of placing emphasis on getting a satisfactory return on invested capital. To read more, and to see Kerry Adby's PowerPoint presentation please click here.

One of the major issues facing co-operatives worldwide, especially agricultural and processing co-operatives, is their ability to access capital to expand or enhance activities. In the US, Wyoming State recently adopted the Wyoming Processing Co-operative Statute, which permits co-operatives to maintain two primary member categories: patron-members and investor-members. Other states are considering enacting similar legislation to permit co-operatives to attract outside equity.

The United States Department of Agriculture Rural Business-Co-operative Service warns about these changes in co-operative law. It claims, that a business formed under the new Wyoming co-operatives law can have several traits that are at odds with those usually associated with being a co-operative. Under this law, a co-operative can have an unlimited number of investor, non-patron members, with an unlimited number of votes, while patron members are limited to one vote each. The National Council of Farmer Co-operatives has a different view. The Council considers, that the accumulation of investment capital is "... a fundamental flaw in the way co-operatives are set up" that needs to be addressed.

While the US legislates for dilution of member control in some co-operatives, the UK Parliament has passed laws to protect mutuals, giving greater protection to mutual organisations against carpet bagging. The Act safeguards the mutual status of a wide range of organisations including co-operatives, housing associations, social clubs and football supporters' trusts. To read more, please click here.

Co-operative sponsored teams have turned in an impressive performance in the recent Tour de France. On 28 July, the Tour de France ended in Paris at the Arc de Triomphe. A team sponsored by the Basque co-operatives, ONCE/Eroski team from Spain, won the team title award. Winning the team title is the result of the 9-member team tactically working as a group in the Peloton. ONCE/Eroski team members included three of the top ten individual winners (#2, 5, 6) the most of any team.

Eroski, a supermarket chain, is the retail division of the Mondragon Co-operative Corporation. Eroski began in the Basque country in the 1960's and has now become the largest Spanish owned retailer. Eroski co-sponsors the team with ONCE, the Spanish national organisation for the visually impaired.

Two other teams representing co-operatives competed in the Tour de France; Rabobank from the Netherlands (a locally based national federation of agricultural co-operative banks) came in #6 and Credit Agricole, with Australian Stuart O'Grady riding, came in #17. There is a Credit Agricole co-operative bank in every town the Tour visits in France.

The Canadian Co-operative Association (CCA) has provided its members with a "toolkit" in its series of e-newsletters and toolkits on corporate social responsibility and community involvement. Canadian co-operatives and credit unions now have the backing to become leaders in social reporting and social audits.

In 1985, the Co-operative Union of Canada (forerunner of the CCA) published Social Auditing: a Manual for Co-operative Organizations.

In subsequent years, a number of credit unions and co-ops conducted social audits. The toolkit provides an overview on how a small co-op and large credit union have approached social auditing.

While co-ops and credit unions will have to address issues relevant to their particular industry, there are many areas where common indicators can be developed, particularly in areas related to member ownership and democratic governance. For more details, please visit CCA website.

One of the leading New Generation Co-operatives (NCG), Dakota Pasta Growers recently announced that it had converted to a for-profit company structure. The Chairman, Jack Dalrymple, explained that the change was due to the need to attract new investors and additional capital. Mr Dalrymple continued, "... the dynamics of the pasta industry have changed dramatically from 10 years ago when Dakota Growers entered the market. We missed out on some very appealing opportunities in the past year ... It's important that Dakota Growers continue to make operational investments to remain competitive."

Michael Werner, Director of Dakota Pasta Growers Co-operative, jointly presented a paper with Prof Mike Cook, University of Missouri, on NCGs at an ACCORD seminar in 2000. For more information visit Dakota Pasta Producers site. Also, NGC's have been the focus of much research in recent years.

The UK government has committed itself to building a stronger social enterprise sector. In Social Enterprise: A Strategy for Success, released last month by the Department of Trade and Industry, the government outlined its vision of "dynamic and sustainable social enterprise strengthening in an inclusive and growing economy".

The government sees social enterprises as having a key role in driving up productivity and competitiveness; in contributing to socially inclusive wealth creation; and in enabling individuals and communities to work together to regenerate their local neighbourhoods. The document contains many case studies on social enterprises.

The report lists a series of actions and administrative arrangements to be taken by the government to ensure that expected growth occurs. A Social Enterprise Unit is to be established within the Department of Trade and Industry. For more details please click here.

Trusts for soccer clubs are currently the fastest growing sector in the UK mutual and co-operative movement. Essentially, they are co-operatives set up by fans wanting to buy into clubs, elect directors to Boards and, in some cases, transform the clubs into co-operatives largely run or entirely owned by themselves. Many just want to protect their club from a take-over by commercial interests, whose ulterior motive is seen as development of property assets owned by clubs.

The first trust was established in Northampton Town in 1992 and the number has grown rapidly over the past two years resulting in the establishment of Supporters Direct to support and advise football fans and supporters groups. The older co-operative establishment is still involved and is working with the UK Co-operative College to develop training and educational material for trust members.

Australian audiences can understand the need for fans and supporters to protect their club's assets. A case in point, is the passion with which fans and the community showed their support for the South Sydney Rugby Leagues Club's fight to retain its position in the Australian Rugby League competition. In the Australian context, the support action was organised on an ad hoc basis rather than through an institutionalised system as in the UK. .

Tourism and Adventure Travel Co-operatives in British Columbia by Mia Reimers

The British Columbia Institute for Co-operative Studies, Canada has released a report on a new phenomenon: tourism marketing co-operatives in British Columbia. In the last three years, several tourism co-operatives, focussed on eco-tourism and adventure travel, have been formed with many more groups in the process of forming co-operatives. The report will be useful to groups wanting a co-operative model for tourism and is available from the BCICS website.

Bologna and Emilia Romagna - A Model of Economic Democracy by Robert Williams

A paper published by the Canadian Co-operatives Association - British Columbia region, provides an overview of how the Emilia Romagna region in Northern Italy used co-operative models to succeed in the global marketplace. With barely 4 million people, Emilia Romagna has 90,000 manufacturing enterprises. In contrast, New York State, with over 18 million people, has 26,000 manufacturing enterprises. The Emilian Model primarily refers to the region's diverse entrepreneurial structure, and its systems for supporting co-operative relations among small firms producing goods and services for the global market. A copy of the paper can be obtained from the Association's website along with another paper by John Restakis titled The Emilian Model - Profile of a Co-operative Economy.

The New Economics Foundation and Mutuo set up a website to develop ideas around public service reform through user involvement. The website was a 'virtual think-tank'. The work done through the website had a direct influence on government thinking, first in health with the proposal for foundation trusts, and in education, local government services and more. The publication outlines the principles, models and opportunities for the mutual state. The publication can be downloaded from link to publications at http://www.neweconomics.org.

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