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Employee ownership stalling 15 January 2015

Posted by cooperatoby in cooperative, EU, Social enterprise.
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EO in Europe 2007-14Employee share ownership is almost the other side of the coin from the investor-led type of ‘social business’, in that it addresses the third dimension of social enterprise – participation – rather than a company’s objective (social or not) or profit distribution policy.

It is based primarily on an individualist model and is conceived of as giving individual workers an incentive to work harder, by sharing the returns with them through the payment of dividends, thus increasing returns for investors too. But it can have a collective dimension, as in the case of ESOPs, where worker shareholdings are held and voted by an employee trust. It is also generally held to improve the efficiency of work organisation. There is some overlap with the social economy in the case of Spain’s 11,500 sociedades laborales, in which pubic authorities can invest for local economic development purposes.

Employee ownership has progressive intents in that it shares the fruits of labour more equitably, and also deters hostile takeovers (though it does not prevent corporate takeover as in the case of Britain’s bus companies). Many governments have therefore enacted measures to encourage it, and until 2011 it has been steadily growing. The European Federation of Employee Ownership (EFES) annual survey reports that in 2013 8.75 million employees 31 European countries held fractionally under 3% of company capital, worth in total €267 billion (an average holding of €30,000). However its latest annual survey finds that although in 2014 this total rose to €310 billion, the number of employee shareholders has now stopped:

For the third consecutive year in 2014, the number of employee shareholders decreased in Europe. This should be a warning signal for everyone. In fact, the number of employee shareholders in continental Europe decreased by 500.000 persons (-8%) from 2007 to 2014, while the number increased by 200.000 persons in the UK (+8%). These changes are clearly related to the regressive fiscal policies in many European countries, while in contrast, the UK chose to double the fiscal incentives for employee share ownership, considering it is a key element of recovery and an investment for the future.

Employee ownership is one the tools we need to transform the economy, so the reversal of this growth trend is worrying as well as surprising.

Inclusive entrepreneurship lives 10 December 2014

Posted by cooperatoby in EU.
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Just as the COPIE website is about to disappear from cyberspace (but many of its results are preserved for posterity on Wikipreneurship), the European Employment Policy Observatory has published a report on start-up incentives across the EU which finds that they can have a positive effect on inclusion:

“Start-up incentives are more effective in reducing unemployment than other ALMP policies. Moreover, the positive effects seem to be particularly beneficial for the low-skilled.”

However the potential for scaling up these measures seems to be limited:

“Start-up measures tend to be small in scale with limited potential for a large-scale impact on the unemployment register.”

See: Activating jobseekers through entrepreneurship: Start-up incentives in Europe – EEPO Review

See also: OECD page on inclusive entrepreneurship, including policy briefs

This nonsense about uncertainty 14 September 2014

Posted by cooperatoby in Uncategorized.
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IMG_1714 In de War, Warmoesstraat crVoltaire: Le doute n’est pas un état bien agréable, mais l’assurance est un état ridicule. [letter to Friedrich Wilhelm I of Prussia, 1770]

I’ve been irritated recently by the chorus of business leaders (seemingly organised by the ‘No’ campaign) who have opined that a Scottish vote for independence on Thursday will be bad for the economy because it will create “uncertainty”. It seems to be taken as axiomatic that business dislikes uncertainty. This is at most a half-truth.

Business opportunities only come about through uncertainty. Someone with both information and imagination spots a need which they can satisfy and for which people are willing to pay. It’s a gap in the market. It’s otherwise known as risk. The entire justification for profit-making is that it involves risk. Financiers demand a “risk premium”. Risk-taking is seen as that grand thing, an entrepreneurial mindset, and tolerance of ambiguity is a political and diplomatic necessity.
Business can’t have it both ways. Either they are not taking risks – in which case the justification for taking profits disappears – or they are taking risks, in which case a bit more uncertainty is a good thing as it opens up entrepreneurial opportunities.
What these business leaders are saying is that they like the cards stacked in their own favour, just like they have always been. They don’t want the apple cart to be upset. They only want to deal with uncertainties that they have already analysed and assessed. They don’t want the bother of having to adjust their spreadsheets, set up new lobbying operations, do new market research or pay attention to new voices of citizen and consumer representation.
Uncertainty shouldn’t induce paralysis, but a search for new paths – the much praised activity of innovation. If people are poorer, that is a market opportunity, as discounters like Aldi have correctly deduced. The media industry thrives on uncertainty – without it there would be no demand for newspapers or television current affairs programmes. Uncertainty is the consultancy industry’s bread and butter. There is enormous growth in online information services that feed on uncertainty by advising us how to avoid bad weather or traffic jams. This market exists because we humans are quite risk-averse ourselves – we all want to know that is likely to happen next. And we all love a good thriller – the hero of Breaking Bad is even nicknamed Heisenberg, presumably after the inventor of the Uncertainty Principle.
So this outbreak of uncertainty-mongering must be code for something else, some other underlying fear. By voicing their fear of uncertainty, business leaders are unmasking their true nature as conservative rent-seekers, seeking to preserve their privileges – and this is hypocritical because their public stance is that they are agile and responsive to changing market demands. In principle, they should welcome change, as it opens up opportunities for innovators to make the system more efficient in meeting consumer needs.
The veiled threat is that business people will refuse to invest unless they can be sure of a predictable return. So what they are saying is that they are not entrepreneurs, just managers. They are not in business to take risks – only to preserve profits.
What’s fascinating and heartening about the Scottish referendum debate is that it has finally let out the pent-up anger at the way the City of London establishment has messed up. Their complaints about uncertainty are not only hypocritical, they are discredited. Anyway, an independent Scotland will be full of entrepreneurial opportunities.

The individualist fixation of inclusive entrepreneurship 21 November 2012

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Another day, another seminar. This Monday’s was the Commission’s conference on job creation through inclusive entrepreneurship – and what a change has been wrought over policy since the Mutual Learning seminar 2 years ago. Back then, the people on the platform seemed to view self-employment as very much the poor relation – something that only losers would choose to do.

Panel 1. L-R: Max Uebe, José Compagnon, Aida Ben Amara, Patrick Sapy, Marek Jabek, Horia Paralan, Victor Navarro

This time round, the panel was occupied by successful minority entrepreneurs, and expertly facilitated by Patrick Sapy of microStart and Martin Jung of Evers & Jung. Full marks to Andrea Maier of EMPL/C3 and her colleagues for putting it together.
There was, perhaps inevitably, a fly in the ointment. This is the apparent inability of policy-makers to recognise the existence or value of collective entrepreneurship. Whilst it is welcome that the role model of the entrepreneur is now more rounded and includes Tunisian women and French gens de voyage, it is still way too individualistic. There’s something of a schizophrenia that sees small business as being economic and solitary, and partitions this from cooperatives which are collective and social. And never the twain do meet. In this way, policy comes to mirror the divisions within the institutions that make it – the silo effect.
What is entrepreneurship for?
But in the real world, motivations are mixed and human links are fluid. Entrepreneurship is a social construct, and economics itself is behavioural, as is beginning to be widely recognised. Entrepreneurship policy-makers must therefore maximise the role of the social movements that promote business creation among the population – and these include not just community organisations among women or ethnic minorities, but also co-operative movements. At the moment, the accent is on individuals, but if you can get a coop started, you are creating several jobs at the same time, so it’s effort well spent. Also at the moment the emphasis is on creating debt – offering microloans with which people can start businesses. This overlooks the much sounder long-term strategy of savings-based community finance institutions such as credit unions. We must always keep in mind the question What is entrepreneurship for? It is clearly about creating prosperity and welfare, so it clearly matters who is doing it and who benefits from it.
There are tools that use social capital to help business start-ups. The simple tool of a community guarantee, through which a group of friends and supporters club together to guarantee a loan, brings with it two pieces of added value. First, the guarantors represent successful market research – they wouldn’t contribute if they didn’t think the business had a future. Secondly, they represent mentors – they won’t be frightened to offer advice if the entrepreneur gets into difficulties.
In his opening speech, Koos Richelle, Director-General of EMPL, noted that he wants to establish a concrete action plan for the care sector (and for the green and IT sectors too). Let’s hope that at least here the co-operative sector is given the requisite recognition.

The futility of trying to pin down social enterprise 21 November 2012

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Interreg capitalisation
On Friday I was at the INTERREG capitalisation seminar on entrepreneurship, where 8 partnerships met to share what they’d leant about this topic. The quality of the facilitation made it an entertaining day, and I ended up on the panel judging the pitches on why public authorities should promote entrepreneurship. I was impressed by the non-nonsense way in which INTERREG counts up how many good practices have been transferred between partners (202 in fact, among the 204 projects). I wondered why we didn’t apply a similar metric to EQUAL, but then realised we were dealing there with 3,500 development partnerships and 1,100 transnational partnerships, with a much more bottom-up methodology. INTERREG takes a somewhat more professional approach. They commissioned some great real-time cartoons of the event too (from Drawnalism).
The deceptive lure of definitions
Midway though I admit I was totally distracted by a comment from Michael Guttmann from Hannover, who took part in the PASE project. He concluded by saying that social enterprise needs to have a common definition.
Now this is the sort of question that makes me freeze in my tracks. It’s not that it’s a stupid question but it is a Pandora’s box of a question. it’s the sort of question that once you start on it destroys any chance of making substantive progress, because you end up going round in circles debating definitions – and that is not what social enterprise is about.
Part of this is to do with principles. People who are keen on social enterprises hold their principles dear, so it’s natural they should want to defend them. Social enterprises do business with a higher purpose, so the business vehicle they choose has not just to be efficient at the mechanics of corporate governance but also to be coherent with the ethics of the business it encloses.
Yet as the world evolves, the identity of social movements has to evolve too, so it is right that they devote effort to defining how much change they will tolerate – how permissive or how restrictive they are and where their boundaries lie. The pace of evolution is particularly fast in social enterprises, because they are juggling so many different environmental factors: not only changes in consumer markets and macroeconomic conditions like most businesses, but also social transformations and the social policies that react to them. For instance demographic ageing and medical advance have created a vast demand for care, but budgetary pressure on the welfare state is reducing the resources available to meet that demand.
The notion of social enterprise is already a hybrid – it uses economic means to achieve social goals (and that is part of the difficulty that policy-makers have in giving it a fair crack of the whip). And it goes through constant cycles of hybridisation. If we combine a worker’s co-operative with a voluntary association we get a social co-operative; if we combine a workers’ co-op with an employment agency we get an activity co-operative etc.
This protean shape-shifting behaviour may be a bit confusing, but it’s a strength, because it is the result of inventive minds addressing social problems. I feel it would be a mistake to try to tie social enterprise down and define it once and for all.
Creative tension
Like all good ideas, everyone wants to have a part of social enterprise. There are essentially two underlying ideological views:
• that SE should be essentially non-profit-distributing (but allowing the payment of small amounts of interest on co-operative shares) – i.e. it has the lofty ideals of a charity but gets its hands dirty in the marketplace to achieve them;
• that SE should offer a ‘blended return’ – i.e. it is normal business but with some demonstrable social value on top (not just meeting a solvent market demand, which all businesses do).
I feel the term ‘social business’ is indicative of this latter tendency, because if you put ‘business’ first then you inevitably end up with money taking pride of place in the discussions – as indeed seems to be the case with the Social Business Initiative.
The massed ranks of the social economy, supported by the EESC, think that a more articulated definition is a good idea – presumably because they fear that their thunder is being stolen. But I think that so long as we are clear what we are talking about, there is room for a collective noun to describe a broader church.
In this respect I think that the Commission trod the tightrope of definition very deftly when it devised its loose definition, which insists that:
• the social objective must be primary
• surpluses are largely reinvested
• governance is participative
These are the key elements. I don’t think it will be productive to try to be more restrictive. However much you try to write principles into rules, with enough bad will they can be circumvented. Asset locks for instance are there to be used where public assts are concerned, but there are types of social enterprises that do not require them.
Social innovation begins with the social economy
However policy-makers should not go on to make the mistake of confusing product with process. Even if we should not be too prescriptive in laying down what a social enterprise is, we should pay due attention to its social nature and its social origins. We should not expect to be able to extract the social added value that they create without investing in the social capital that makes it possible. A ‘social clause’ in a procurement contract can deliver the product – jobs for unemployed people – but the process of inclusion is much deeper and depends on long-term social networks and trust. This is the great value of the organised social economy. Social enterprises normally grow up through processes of networking among value-led individuals who are members of broader social movements, such as charities, co-operatives, associations and trade unions. These are the ‘incubators of social innovation’ that are so much in demand. If policy-makers want social innovation, then they should start by encouraging those organisations where these innovators are already coming together.

Paradigm shifts and the certainty of failure 12 October 2012

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The inclusive entrepreneurship industry preaches that we should all take a more open-minded attitude to risk, but is it responsible? The certainty is that if we take enough risks, one day one of them is bound to go sour. If it’s big enough, it will be our last.

It’s a niggling thought that first came to me about 20 years ago when a friend of mine called Dave came back from San Francisco to Leeds and promptly started an internet business. His express objective was to make a lot of money, which I thought simple-minded. (I worked in an equal-pay common ownership co-operative after all.) His attitude to risk seemed to be based on an elementary mathematical error. I thought back to the history of my own father, who had risen from an elementary education through war service to running his own company manufacturing medical electro-acoustics, and made it onto Tomorrow’s World, the BBC television programme on innovation. An achievement, by the way, of which I was insufficiently admiring at the time. Both these innovative business ventures went bust: my parents lost their house and Dave eventually died of a massive heart attack.

You can have two theories of progress through life, as John Naughton points out in a recent article on Thomas Kuhn in the Observer. Following the first model you beaver away solidly at a career, salting away the proceeds in a pension fund and retiring blamelessly and in comfort. By contrast in the second model, you go through a series of uneventful periods broken by massive dislocations or ‘paradigm shifts’.

My professional life involves the promotion of what we have dubbed ‘inclusive entrepreneurship’ – the opening up of access to self-employment and business creation to anyone in society. This starts with promoting positive role models of business in schools, and carries on by removing the benefit trap, offering business advice that is culturally appropriate, training that is easy to access, incubators, microfinance, the Dragon’s Den and so on. The hyper-fashionable idea of social innovation springs from the same meme – that this financial crisis demands that we rethink the way we do things radically.

You must be clackers!

Now, what should our approach be to new ideas? Dad used to comfort himself with the saw that ‘the man who never made a mistake never made anything’ – and venture capitalists are reputed to invest in a man who has a couple of bankruptcies behind him (it’s irrelevant to them who was hurt by the fallout). If your theory is that if you take enough risks then one of them one day is bound to pay off – then statistically the reverse is the case. It’s like swinging a weight on the end of an elastic band like a set of ‘Clackers’ – as the oscillations get larger, the band will eventually snap. As an entrepreneur accumulates experience and resources in successive business ventures, (s)he will be able to take bigger and bigger risks. It starts with swapping marbles in the playground, moves up a notch to trading on eBay, and leads eventually to a fully-fledged stock-market flotation. I know business people who have succeeded, built up a big business and sold out at profit on the back of winning a juicy contract. But what do they do then? They can’t resist having another go. And the sad logic of it is that if you take enough risks, one day one of them will turn sour – and that will be the last risk you take. So you have a 100% chance of failure. This is a mathematical certainty. One day the rubber band will snap.

So we should be very wary of taking a cavalier attitude to bankruptcy, slashing the welfare safety net, and ditching the social economy in favour of social business!

GEM overlooks value-based entrepreneurs 7 April 2011

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At the COPIE mid-term event Kick-starting Economic Recovery in Berlin on 31 March, Professor Rolf Sternberg of Hannover University talked about the economic effects of necessity entrepreneurship. Professor Sternberg is part of the team that produces GEM, the Global Entrepreneurship Monitor, which has just published its 2010 report.
In his allotted 10 minutes, he explained that GEM divides the world into two types of entrepreneurs:
– opportunity entrepreneurs: “I am involved in this firm to take advantage of a business opportunity”
– necessity entrepreneurs: “I am involved in this form because I have no better choices for work”
GEM’s research shows that necessity entrepreneurship is more economically relevant than they expected, and is getting more so. About 2 million Europeans are necessity entrepreneurs. Greece has 2.3% of adults in this category, while Denmark has only 0.2%. Unspoken message: self-employment makes you poor.
I didn’t find myself anywhere in this classification – yet I am undeniably an entrepreneur in a small way, or at the very least self-employed. GEM’s oversimplified picture leaves out all those people who go into business as away to meet needs that are higher up the Maslow’s hierarchy of needs than the search for profit or power. Two major motivations in this category are:
– to change the world for the better – leading to social enterprises
– to gain control over one’s own working life – leading to worker’s co-operatives.
If we fail to recognise these value-based motivations for self-employment, then we will fall into the trap of censoring the message that self-employment can be fun – so we will end up with fewer entrepreneurs and a more ossified society.
Professor Sternberg said that GEM has developed a more sophisticated typology of entrepreneurship. I’m not sure it’s published, but it deserves to be.

Network employment & collective self-employment 22 February 2011

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I went to the European ‘Mutual Learning’ seminar on self-employment last November, and felt a bit like a specimen in a jar, or Banquo’s ghost at the feast. All around me academics and employment service officials, employers and trade unionists were trying to make sense of this strange species of self-employed people. The tools they have to understand us are not up to the job.
The way they look at us is that we are poor failures who can’t hack it in the world of being employed. People only become self-employed for short periods between ‘proper jobs’, and they only use the term as a figleaf to disguise the shameful fact that what they are is actually UNemployed. The fact that there are people who have been happily and productively self-employed for decades seems to have escaped their notice entirely.
I spoke up about this, as the token self-employed person in the room. Perhaps naively, I was surprised that my version of reality didn’t appear in the minutes of the meeting.
This is anomalous at a time when the European Commission is trying to stimulate entrepreneurship; indeed immediately after the thematic review on self-employment came the launch of the European Progress Microfinance Facility, which is designed to encourage more self-employment. Yet there still seems to be a terrifyingly corporatist view – that self-employment is somehow abnormal, and even maybe a bit shady.
Grey zone
Theorists seem to want to divide the world of work into two species: employers and workers. They are thought to have different motivations – employers love innovation, create wealth and jobs, and have to be incentivised with tax breaks, while workers are stick-in-the-muds whose wage demands have to be held in check. I don’t feel that I fit into either of these catgories. I have about 30 customers or employers, with whom I have long-term relationships and who use me for jobs from time to time. It’s not an anonymous red-in-tooth-and-claw spot market. By some version of the 80/20 rule, at any one time a handful of these account for most of my time. Both parties treat this relationship as a long-term one, and there is considerable loyalty on both sides, even though there is no contract that enforces it. It is a voluntary collaboration that can be dissolved at any time. It suits both sides because the ’employer’ can tailor its freelance workfroce to the fluctuating work in hand, and the freelance can gain varied experience by working on different projects, and can pick and choose to fit their ethical beliefs and preferences. I think we need a new concept for this: I would propose ‘network employment’.
Collectives too
There’s another positive aspect of self-employment that seems to be largely off the policy map, too. This is the way that groups of people in search of self-actualisation can gain control over their working lives by setting up worker co-operatives. This sort ofcollective self-employment is longer lasting than the individual type.

Postscipt – second thoughts

Finally, three and a half years later, at an EU research seminar on self employment on 21 May 2015, Patricia Leighton describes the rise of the independent professional in a recognisable way that makes it sound fun!

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