Bake workers back into Australia's mutuals

By Melina Morrison

June 12, 2019

Picture: Getty Images

With the new federal ministry and shadow ministry sworn in, aspiration is the word on everyone’s lips.

For some, aspiration means seizing the opportunities of the free market; for others, it’s about ensuring even the most disadvantaged can aspire to a stake in society.

There is a middle way which does both.

Co-operative and mutual enterprises are nothing new, having been around for at least 175 years in Australia.

They are the original structures of aspiration – wealth creation, social care and service delivery for ‘people of common means’ and workers, who came together to help each other out.

A globally utilised business model

Co-operatives play a major role in other developed countries.

In the US, Co-operative Home Care employs nearly 2000 workers, around half of whom are worker-owners. The co-operative allocates 80% of its total revenue to the wage and fringe benefits costs of its home care workers — including comprehensive health and dental insurance benefit that does not require a financial contribution from employees.

In Spain, Mondragon Corporation employs 67,000 people in Spain, 78% of whom are worker-owners. The corporation maintains wage ratios between executive work and those on the lowest pay. On average, a general manager of a Mondragon co-operative earns no more than five times the minimum wage paid in their co-operative.

In the UK, John Lewis is owned by its 76,000 permanent staff. The department store has an ethos of putting people first, developing its staff and involving them in decision making.

Productivity is high in these businesses because employees are incentivised by the direct correlation between their labour and their share of productivity.

What helps the workers helps the firm’s bottom line.

Australia’s history in mutuals

Australia has always had a strong co-operative and mutual sector, though over the last decades a wave of short-sighted demutualisation led us to fall behind other nations.

Local life company AMP was a mutual – Australian Mutual Provident – before it demutualised in 1998.

AMP’s original sole purpose was to benefit its members by investing money and dividing the returns fairly among those members. And much of the difficulty that AMP has subsequently run into was created by management having to prioritise the provision of dividends to shareholders over the needs of policyholders.

But many of our most successful and loved companies are mutuals or co-operatives, though you might not know it. For instance, the profit-to-member superannuation funds have consistently outperformed the high-fee retail superannuation funds run by the big banks.

Others that you might be a member of include motoring organisations, credit unions and customer-owned banks and health funds such as HCF.

Rural industry is rife with co-operatives, most of them long established, such as the grain growers’ co-operative CBH (Co-operative Bulk Handling) in Western Australia.

CBH has been around since 1933. It is 100% farmer-owned.

Co-operatives and mutuals are our natural protection against the excesses of shareholder greed.

They help to create a balanced economy that works in the interests of the widest number of people.

Mutuals behaving badly

The Hayne Royal Commission uncovered a hornet’s nest of bad behaviour, particularly among banks and insurance companies, who put profit before people.

And we now know that the wave of demutualisations among insurers and others such as AMP produced a skewed outcome in that policyholders were “given” shares in the company in exchange for giving up their combined role of being a shareholder and a policyholder.

Former NAB chairman Ken Henry’s evidence at the Royal Commission pretty much cost him his job, but in between responses that were perceived by most watchers as arrogant, he made a very cogent point. Counsel Assisting Rowena Orr SC asked him to whom company directors should be accountable.

His response was that boards and their chairs should answer not only to shareholders but to the wider community that they serve.

Which is exactly what co-operatives and mutuals do.

We know how to do it

In worker-owned co-ops, the profits go back into the business or the worker’s pocket.

In producer (usually farmer) co-ops, profits go into new or improved marketing, supply chains and producing other benefits the producers agree on.

In member co-ops or mutuals (such as credit unions, health insurance mutuals, superannuation funds and motoring mutuals) the profit goes back into improved services and other initiatives beneficial to the community.

It is time workers were dealt back into the economy. The good news is, we have a tried and tested model to do it.

Melina Morrison is CEO of the Business Council of Co-operatives and Mutuals.

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