OCCASIONAL DISCUSSION PAPER - 96/1
This study by Prof. Dr. Eberhard Dülfer, analyses the relationship between industrial relations and cooperatives as phenomena of industrialized society. Although both phenomena have always been of major interest to the International Labour Organization (ILO), they have, nevertheless, seldom been studied or discussed together. This is basically due to the differences in the history of their development and in the inherent characteristics of each. However, in recent years important changes have occurred which have affected the relationship between industrial relations and cooperatives.
Prof. Dr. Dülfer's study was commissioned by the Cooperative Branch of the ILO for the preparations of the Meeting of Experts on Cooperative Law held in Geneva from 22 to 26 May 1995. Some parts of the study were integrated into the background report to the Meeting on agenda item 1, "The impact of labour law, industrial relations system and international labour standards on cooperatives and cooperative law". The Meeting, which was attended by experts from 16 countries, employers' and workers' representatives and a number of observers, discussed the question of industrial relations under this agenda item. During the discussions it was noted that further attention and research should be devoted to the question of industrial relations and cooperatives, particularly considering the present trends towards more self-employment, contracting out or sub-contracting of services. The Cooperative Branch therefore decided to publish the full text of Prof. Dr. Dülfer's study in order to stimulate further discussion and research on the subject matter.
J. Fazzio, Chief, Cooperative Branch
Contents
Foreword
1. Purpose and Subject of the Study
2. Current Scientific Concepts of Industrial Relations
3. Dunlop's Industrial Relations System
4. Modification of Dunlop's Model regarding Developing Countries
5. Special Aspects of the "Actors" in Developing Countries
5.1 Employers
5.2 Employees and workers
6. Cooperatives
7. Different Cooperative Structures
8. Industrial Relations in Cooperatives
9. An Industrial Relations System for Cooperative
10. "Rules" in Cooperative IR-Systems
References
1. Purpose and Subject of the Study
Industrial Relations on the one hand and cooperatives on the other, are very well known to the International Labour Organization and its secretariat, the International Labour Office, since their foundation in 1919 as phenomena of the industrial society. Both subject matters are very relevant within the framework of the ILO's policy. Thus, it is surprising, that the relationship between the two phenomena and their interdependence as they influence policies in the two areas have hardly been discussed in literature and neither studied in any detail.
This scientific as well as practical lacuna has evidently several reasons: The technical term 'industrial relations' (in German 'Arbeitsbeziehungen') has been formulated with respect to the special social relationship of individuals which results from a labour contract, i.e. from the incorporation of the individual as an employee into a labour relationship to an employer which is determined by the legislator in the national context. This legal interpretation corresponds more or less to the economist's point of view which stresses the linkage of the individual with the labour market and its regulations as they are determined by collective bargaining of the social partners or by governmental influence.
In the light of the world-wide activities of the ILO which include also less developed countries of the third world, it would seem to be important to stress that industrial relations only arise in an employment relationship outside the subsistence and family economy. No industrial relations exist where the individual is still part of the subsistence production of the extended family where the work to be done is identified and distributed by the family organization and where the conceptual and the temporal separation between the working time decided by the employer and the leisure time of the employee is not known.
The development of cooperatives is based on a completely different motivation. They are in a certain sense a continuation of the common self-help and group subsistence production outside the family. Under such an arrangement an employer/employee relationship in the sense of labour law, including the usual right of command and duty of obedience between both partners does not exist. Instead, the principle of common interest in the group with democratic decision making on an egalitarian basis is adopted.
This fundamental difference between both phenomena and between the history of their development and their essential characteristics explains at the same time why they have been attached to different departments in the ILO and why they are separately studied and discussed even outside the ILO.
Without pre-empting a more detailed discussion it can be stated that both societal phenomena have come closer to each other in a certain way since World War II. The pure employer/employee relationship of the early industrial era which is in line with the then existing social conditions was characterized by the strong confrontation between capital owners and workers and has, in the course of time, developed in a more participatory sense. A general tendency to diminish the contrast of interest to avoid the basic social conflict within the employer/employee relationship can be stated in different political systems although for very different reasons. Nevertheless, governmental interventions into the system of industrial relationship continued in different ways because the societal tendency gains momentum before everybody is personally convinced. This is evident by the fact that at the foundation of the ILO, the delegations of the member states have been composed of the three societal forces which later became the actors of the industrial relations system: The representatives of the employer organizations, the representatives of the worker organizations and the representatives of the responsible government authorities.
In the course of further developments in several countries and most pronounced in the FRG very detailed regulations were adopted concerning the constitution of the enterprise, the co-determination patterns etc. These changes in the company law influenced subsequently also the labour law. Thus, Beuthien even speaks of the new labour law as being influenced by company and enterprise legislation. The resulting mainly participatory structures within the enterprise which have clearly harmonizing effects on collective bargaining beyond the level of the individual enterprise are based on the concept of a certain common interest and the utility of an almost cooperative collaboration. Such a harmony approach is in a sharp contrast to the classical Marxist approach, starting from a natural unalterable and inevitable conflict in the labour relationship.
As to the cooperatives, on the other hand, a contrary tendency could be felt. Here, cooperatives have gradually developed from former traditional pre-industrial family and village structures, having partly also elements of guilds. In these cooperatives, the members are either owners of the enterprise and at the same time users of their services and activities or while being co-owners are also workers in the enterprise. In the latter case, members have usually entered into an ordinary labour contract with the cooperative as a legal person. Then the original real joint production cooperative changes into an enterprise with staff share holding. In both cases, the original model of joint and group based self help based on the egalitarian principle has changed in the direction of an organizationally formal separation between the cooperative enterprise, on the one hand, and the individual worker as member or non member on the other.
Summarizing, one can state that industrial relations are existing, too, in cooperatives and similar organizations. Thus, it would seem to be necessary to study whether there are special particularities of industrial relations due to their intra-cooperative character.
2. Current Scientific Concepts of Industrial Relations
It seems to be useful to refer to earlier reflections on structure and regulation of industrial relations as a societal phenomenon in order to answer the above mentioned question. This implies first to look for a theory of industrial relations or at least a collection of doctrines concerning industrial relations. Baser on the contents of these the second question has to be discussed, namely whether a special feature of cooperative industrial relations results from such theories or whether such peculiarities could be subsumed under the existing theoretical approaches.
Industrial relations as a typical social phenomenon of the early industrial society with division of labour was soon discovered as an interesting study subject by different scholars. The earlier studies, e.g. by Beatrice and Sydney Webb(1) are mainly found in the Anglo-Saxon world where industrial relations were understood relatively early as a separate subject of social science research. In the German-speaking area, the relationships between employer and employees were also examined in the context of studies of the "social question" by scholars of economics and sociology. However, no special study subject or degree-course was created as it has been the case at English universities. The phenomenon was completely ignored in Germany between 1933 and 1945. After the foundation of the Federal Republic of Germany, the relationships between employers and workers have been subsumed under the wider complex of problems of company constitution and regulations of co-determination. Studies were mainly of a legal nature in connection with the developing legislation and jurisdiction in these areas.
As of 1970, a small group of scholars of economics, management science, law and social sciences formed the German section of the International Industrial Relations Association which was co-operating closely with this international organization, very much linked to the ILO. In 1991, the section was officially recognized as a part of the IIRA. In 1985, this group of researchers published a first "Handbuch der Arbeitsbeziehungen" (Compendium of Industrial Relations) for the German-speaking countries (Germany, Austria, Switzerland).(2) Although industrial relations are for the time being not yet recognized as a study subject in the economic and social degree courses of German universities, in some degree courses, industrial relations can be chosen as a voluntary subject, yet under different titles. It is therefore not surprising that the development of theories in the area of industrial relations is on a relatively low level compared with other disciplines. It was only during the seventies, when the until then harmonious relationship between the collective bargaining partners became more conflicting as a consequence of the economic depression that it was found interesting to deal also theoretically with the topics of industrial relations. But even then, scholars referred mainly to Anglo-Saxon approaches. The classification by Schienstock published in the above mentioned Handbook in 1985 can be seen as valid even now. According to him, one has to distinguish between three fundamental approaches to industrial relations:
The systems approach,
The action-theoretical (interactionistic) concept,
The Marxist approach of political economy.
The systems approach had been formulated by Dunlop (1985), and was later on modified by the "Oxford Approach".(3) The further development by A. W. J. Craig(4) goes in the same direction. It was the merit of the systems model by Dunlop that for the first time the industrial relations between the relevant actors were convincingly grasped and presented. This explains that his model based on a more institutional approach deals more with the fundamental relationships than with the processes of their creation and subsequent changes.
The criticism of this aspect of the model led to the development of an action-theoretical approach in the sense of the inter-organization theory. (5) The emphasis of this study was on the explanation of the behaviour of the interaction partners in the bargaining process. In this context, one referred to the wage theory of Hicks. Other authors, however, criticized the one-sided view of the distribution struggle and drew attention to the much greater complexity of the bargaining processes. Finally, Walton and McKensie pointed out that also within the actors themselves processes of decision making were existing which influenced the bargaining processes between the actors. Thus, Schienstock concluded that in spite of the fact that many interesting single aspects of this phenomenon existed, in summary, the action-theoretical approach had only been developed fragmentarily. The Marxist analysis of industrial relations has been presented by the Britain Hyman during the second half of the seventies. He inevitably starts from the hypothesis of a fundamental conflict in the industrial relations and opposes logically all integration models. From his point of view, the concrete structures of labour relations and the forms of conflict settlement can only be explained in an appropriate way on the basis of the political economy of Marx and Engels. This linking of the approach to the theorem of an fundamental antagonism of classes hampers, however, the study of the relevant prerequisites and processes of societal integration, even from the point of view of the trade unions.(6) Therefore, we will refer to the systems approach in dealing with the special question of this study concerning the particularities of industrial relations in cooperatives and related organizations. The Dunlop-model of industrial relations system is appropriate as a basis for a suitable extension. By simple modifications of the model's structure the particularities of cooperatives can easily be explained.
3. Dunlop's Industrial Relations System
Dunlop starts from the idea that industrial relations are those relations and "rules", which exist or are agreed upon between the three (from the point of view of ILO: classical) actors. The three actors are the employers, the employees and workers and the state, i.e. legislators and agencies responsible for the relations between both. This tripartite relation is located in an environment (from the point of view of the system approach: in a supra-system) which is reduced by Dunlop to three kinds of factors:
market conditions and budget constraints
state of development of technology and
distribution of power in the larger society
Furthermore, he states that all three actors are operating on the basis of certain values which he calls "ideology" ( Fig. 1).
Finally, Dunlop is of the opinion that this tripartite system is valid at all hierarchical levels, i.e. in the workshop, in the enterprise, in the economic branch, in the economy as a whole and internationally. Dunlop's model has found world-wide diffusion, although his assumptions are very simplified in several regards. First, it seems to be problematic to believe that the whole environment in which the relations of the three actors take place could be reduced to only three context factors, particularly when thinking of an international enterprise. In this connection a much more detailed investigation of the environmental influences on the actors and their interactions would seem to be required, e.g. by applying the strata-model of environmental considerations.(7) Already in 1983 Staehle pointed out that the assumption of a homogenous value system for all three actors respectively groups of actors was illusory. According to him this assumption was a reflection of the American situation at the time of the publication of the book when a special integration effect affected society as a consequence of the Korean War. Such a pure harmony approach seems to be unrealistic in the same way as the Marxist pure conflict approach.
Furthermore, the actors in the Dunlop model are supposed to behave as homogeneous groups as regards their interests and their bargaining behaviour. This assumption does not correspond to reality, too, in which remarkable differences in interests and even conflict positions can occur in individual groups of actors.
Finally, the tripartite relation must be seen as a pure formal pattern when applying it to all hierarchical levels, because the factual quality of relations and processes at these levels can be very different, even contradictory.
In the light of these arguments, the international application of the Dunlop system needs to be critically viewed even in the case of industrialized countries because:
the actors do not start from the same basic assumptions and values;
the diversity in the position of the actors to each other is blurred,
the divergence inside the individual actor groups cannot be grasped;
the dynamics of structural relations (particularly in the development process) is not sufficiently presented and
the model is not equally valid at all organizational levels of the national economy (as Dunlop supposes).
4. Modification of Dunlop's Model regarding
Developing Countries
The application of the Dunlop system to developing countries necessitates a rather wide interpretation of the model as Dunlop himself concedes expressis verbis. It is valid already for the term "rules" with respect to the communications between actors in developing areas. The term actor, too, can be applied in a narrower sense only to employers and workers, while the position of the state as actor is somewhat doubtful in developing countries. In this context we can refer to a supplementary remark of Dunlop(8) himself when he alludes to the possible passivity of an actor. "Actor" therefore means generally: "Subjects responsible for interpersonal relations in connection with human work".
The criticism of neglecting internal divergence and differences within the actor groups which has been expressed in relation to industrialized countries, is even more valid for developing countries. It cannot be assumed that all employers and workers show the same behaviour. The same is true for the governmental agencies. This aspect of the internal divergence of the groups is of special importance in developing countries.
Finally, the term "industrial relations" itself has to be interpreted in a wide sense, e.g. "All conditions, which exist in or result from the employment (of human beings)." (9) Fürstenberg tends also to such a wide interpretation; from his point of view, the term industrial relations "characterizes the factual area of all relations between employers and workers to each other, their consequences and their influencing factors".(10)
The limitation of environmental factors to the three context factors mentioned and criticized above is specially problematic in the case of developing countries. The state of technology, for example, is depending to a high degree on the level of vocational education of the actors. This in turn is conditioned by the general level of scientific knowledge in the respective society. The ability to understand reality and the development and application of related technologies is in permanent interaction with the "culture-based values" and religious beliefs of individuals in the respective society, particularly in developing countries. There are interesting examples for this also in the European history (Kopernikus, Darwin). These culture-based values are themselves prerequisites for the creation of social entities with their characteristic social relationships and commitments. As such it is evident that the aspect of ideology mentioned by Dunlop is neither an independent nor a stable factor outside the context factors. On the contrary, it is in a permanent interaction and exchange with other environmental influences. This phenomenon is logically more typical in countries like Burkina Faso, Indonesia or Honduras than in the USA.
The distribution of power in a society, mentioned by Dunlop as a further context factor, is conditioned by the above mentioned social relationships and commitments which can be multi-layered as a result of historical events, e.g. ethnical or colonial superimposition. This distribution is consolidated by the different legal and political norms which result from such events. These again form the framework in which the three actors interrelate with other economic institutions. All this is not sufficiently covered by Dunlop's market conditions and budget constraints. In the literature this is described as the task environment. In addition it has to be considered that all man-made factors mentioned above are influenced by the "natural conditions" (e.g. climatic conditions) under which they have developed. In a global context this plays a special role in developing countries particularly in connection with technology transfer.
Summarizing, the situation of the three actors involved in the bargaining process under given environmental conditions can be shown in the following way by modifying Dülfer's "strata model of environmental consideration": The three actors transact their communication processes in the larger framework of the "task environment" in interaction with other social entities. In this process all parties concerned are influenced by the lower strata of the global environment. This happens in two ways. In the short run the different context factors influence at the same time both the actors themselves and their communication partners (illustrated by arrows from the lower layers). In the longer term there is evolutionary influence from below. This explains the arrangement of the different factors in layers in the model.
In the meantime, numerous empirical studies have been undertaken which deal however with individual aspects of the context factors of industrial relations in developing countries. It must, however, be taken into consideration that all empirical research results from the Third World can only be seen as snapshots which relate to specific periods within an accelerated process of social and economic change. The nature and speed of such changes differ from country to country and from region to region due to the different qualitative constellations of influencing factors.
Compared with the original, relatively homogeneous initial situation the context conditions have become rather heterogeneous in the course of development and this applies as well to the labour relations themselves. The situation becomes clear if one compares Taiwan, Singapore and the Republic of Korea with Mali, Honduras and Bangladesh. However, at a higher level of organization and industrialization one can observe that the socio-economic factors approach each other again.
Mainly four phenomena are to be taken into consideration, if we consider the rather different intermediary stages in the process of economic and social change in the third World.
(a) In most developing countries there is not a homogeneous national economy but a dualistic economic structure. It consists of a traditional sector with a dominant subsistence economy including all the consequences such as the attitude towards labour and the organizational structures of labour and of a modern sector which fundamentally shows the same structures as in industrialized countries.
(b) The characteristics and particularities of the subsistence economy affect all mixed forms which develop and produce phenomena changing from case to case.
(c) The attitude of the individual towards labour as a phenomenon originally integrated and organized within the family is based on the experiences from the subsistence economy and influences his role as a worker and his attitude towards work even during his later life. The resulting behavioural attitudes are often interpreted from an European point of view as an indicator of a lack of motivation or even conscious obstruction .Such behaviour affects the rhythm of work which in the subsistence and largely agricultural economy is determined by cyclical ups and downs in contrast to the linear time concept in the industrial economy with its division of labour.
(d) There are other particular factors in developing countries besides the special cultural influences on the values and the behaviour of individuals which result from former colonial domination. This consisted, indeed, not only in the imposed introduction of a foreign governmental system, but also in the subordination of the existing cultural system under an authority coming from outside and being itself an element of a system with very different values and taboos. The division of the now mixed population resulting from this process was reinforced by physical-racial characteristics which made clear to which the group of population everybody belonged.
The resulting fundamental consequences for the whole societal system concerned inevitably also the area of industrial relations. The rank differences between the group of colonial rulers and the indigenous population which originally had only a governmental administrative importance were personalized under the given circumstances in a way which affected every kind of inter human communication yet with a different degree of intensity. For example the relations between the early colonists in the Southern States and the slaves imported by them were quite different from those between the British administration and the Indian upper classes. Nevertheless, certain psychological consequences are basically the same and are being felt until now. From the point of view of the Dunlop System, incompatible value systems of the different actors are existing side by side a situation which hampers a process of harmonization. The cultural dualism on which it is based is not restricted to the "structure of consciousness" (Fürstenberg) of the actors but finds its concrete expression in different layers of social groupings and diverse legal systems. Since this could lead to a situation of legal insecurity work is going on to develop "hybrid" forms of legal norms which integrate both elements. This is particularly important in the field of industrial relations.
5. Special Aspects of the "Actors" in Developing Countries
Against the background of the special environmental influences on industrial relations in developing countries the particularities of the different actors have now to be considered.
5.1 Employers
It has been made clear, that employers even of the same branch or in the same firm may show very different attitudes and behaviours in the interaction processes of industrial relations, because of different environmental influences particularly of the divergence in the religious-based values. The employers must therefore be distinguished according to:
type of enterprise, branch, legal form, operational size;
whether they belong to the traditional or to the modern sector;
their general social status within the traditional society in comparison with their position in the enterprise;
ethnic and tribal background of the employers in comparison with that of the workers;
whether they are natives or foreigners (possibly from former colonial power)
The combination of such different characteristics produces typical influences on the industrial relations (mainly in Africa and Asia) and they concern the relations between:
the workshop-colleagues of an equal or similar social ranking,
managers and subordinated staff members,
members of management teams.
The traditional component in leadership relations usually implies a tendency towards hierarchical structures and authoritarian paternalistic leadership styles. This, however, implies also the obligation to promote the younger generation both through training and financially.(11)
Mainly in management teams with heterogeneous personal structures conflict potentials can arise through
diverse patterns of thinking as a consequence of different language systems in the respective mother tongue;
diverse attitudes towards work and different ways of life;
diverse opinions about appropriate leading behaviour (i.e. different role understanding and leadership style);
divergence between the importance of the functional position within the enterprise and the social status of the person outside the firm;
formation of dependency relationships within the enterprise;
distribution of leading positions in relation to national or racial-ethnic proportions independent of the professional qualification;
shortcomings in the ability to communicate in private and social life combined with the tendency to project group or nationality based clichés and prejudices on the partner".(12)
5.2 Employees and workers
The above mentioned consequences of the subsistence economy play also a role in industrial relations as regards the actors "employees and workers" although perhaps with a different intensity. This is particularly valid in cooperative enterprises in Asia and Africa and in connection with the great migrations from the rural areas into the industrial centres at the coast mostly dating back to the colonial period . This has to be distinguished from the general phenomenon of rural exodus leading often to a creation of slums.
There are strong differences between the unskilled seasonal workers and the well-trained specialists within the industrial enterprises in developing countries. The difference is reinforced if the specialists are Europeans or North-Americans. Given the increasing professional qualification and educational level of the indigenous elites the potential conflicts between middle-managers from the country or from abroad are often aggravated by the application of different incentive systems (wage, housing). This is particularly the case in connection with the training of counterparts for foreign managers (the latter with special allowances for working abroad). Conflicts can also arise by employees insisting on certain religious rites, e.g. the Islamic prayer-cycle. The resulting divergence among the employees as a whole could be a hindrance in the development of extended trade unions.
Trade unions as representatives of employees' interests in the framework of industrial relations have only a short tradition in many developing countries. The first trade unions were founded at the end of the 19th century in Latin-America, in Asia and Africa only just before the World War I. In the beginning they were pure imitations of existing organizations in the mother countries without a clear self-understanding. The authentic development of trade unions in Asian and African developing countries began only after World War II and was an essential element of the independency movements of these countries. On the other hand economic goals have temporarily been put into the background. It is a special phenomenon of the developing countries in this connection that many political leaders have emerged from the trade union organizations. That explains that trade unions in some countries are considered as instruments of the development policy of the government. Sekou Touré and Tom Mboya are examples for this kind of personal union.
In Latin-America, the early situation was closer to the European example, but the politization of trade unions started earlier, too. Trade unions were even founded by political parties as their express instrument. This was in contrast to the principle of political neutrality as it was emphasized in Europe. In fact trade unions became often the homestead of the political left. This frequently leads to a sharp confrontation with the small group of rich landlords often also very engaged in the urban economy, and with the local firms of multinational enterprises. There are cases of a complete prohibition of trade unions by military governments as well as temporary coalitions of trade unions with local entrepreneurs or the industrial middle classes.
In most developing countries, there is no organized institutional relationship between the trade unions as representatives of workers and employers' organizations in the sense of collective bargaining partners, as it is common for example in Germany.
The relevance of the state in developing countries is frequently based on its role as employer or by enjoying a similar position as being responsible for a centralized price and wage policy. The governmental policy with respect to industrial relations is therefore not the result of a unified theoretical or economic concept. This facilitates on the other hand the tendency of trade unions to influence politics.
Besides the government mainly multinational enterprises are dominating as employers. Their policies and possibilities of action are always discussed at a political level in contact with governmental agencies.
The activity of the state as legislator in connection with the regulation of industrial relations is of relatively little importance in developing countries. There are no co-determination laws; Works Council Constitution Acts are existing in only few countries (e.g. Tunisian, Pakistan, Mexico). Nevertheless, there are regulations for the protection of workers against dismissal in nearly all developing countries often prescribing indemnification. Norms of labour-law, e.g. of accident-protection, of child and women labour, of old-age-pension etc. are inspired by European and American examples. They are, however, mostly only applied in the modern economic sector.
Recent development trends are transferred via international contacts, especially through the membership and co-operation in the International Labour Organisation. In this connection one can observe tendencies for a gradual assimilation of labour legislation (e.g. special IR-Act in Zambia, 1971).
In this context, however, the above mentioned dualistic law-structure is of utmost importance. The existing divergence between the modern commercial and labour law on the one hand and the traditional custom law on the other hand gives the respective actors a wide scope for argumentation with relatively few possibilities of control.
6. Cooperatives
Cooperatives have taken on very different forms during their 150 years of development since the social reform concepts of the Rochdale pioneers as well as of Schulze-Delitzsch and Raiffeisen. Nevertheless, their basic structure is well defined by four characteristics(13):
Characteristic 1: Group of persons
There is a conscious association or grouping of individuals, united by at least one common interest.
Characteristic 2: Group self-help
The members of the cooperative group want to attain their objectives through joint actions and mutual support to improve their economic situation.
Characteristic 3: Operating unit - cooperative establishment
For that purpose they make use of a jointly established or maintained economic unit, often called the cooperative enterprise.
Characteristic 4: Promotion relationship or mandate
In line with the self-help principle the cooperative enterprise maintains an economic relationship with the member economies or households through which it provides services to them.
Right from the beginning there was a fundamental difference between those cooperative enterprises which were oriented towards the provision of services to the individual business or households of the members (promotion cooperatives) and those operating a production establishment in which the members themselves were working (production cooperatives).
Both types of cooperatives existed during the Cold War in the Western as well as in the Eastern hemisphere. In the latter case under the rule of the 'Real Socialism' they have been compulsorily integrated into the centralized planning system of the national economy. The cooperatives in the former socialist countries are now in a process of transformation into enterprises operating in a market economy. The following reflections are equally valid for them.
The joint production cooperatives have been misused in the socialist countries for purposes of forced collectivization. Their transformation into enterprises operating in a market economy has been only partly successful until now. However it is not any more possible to maintain that the joint-production cooperative could not be effective in a competitive environment. Examples in the new federal states of Germany (former GDR) have proved the contrary.
7. Different Cooperative Structures
As regards service cooperatives, different organizational structures have developed in industrialized countries as well as in developing countries:
In both cases there is still the classical type of traditional cooperative which orients its services completely towards the needs of the members.
If the cooperatives are in a strong competition with non-cooperative undertakings of the same kind their entrepreneurial policy must be more adapted to the market conditions. This can lead to a certain conflict of interests with the members, the consequence of which could be a division between the cooperative management and the membership which would seek support and services also from other enterprises. These cooperatives are called "market-linkage-cooperatives".
Finally, there are cooperatives of agricultural or artisanal producers which try to defend the market position for their small member establishments in competition with industrial and rural large-scale enterprises. In these cases members must be able to rely upon the know-how and the leadership qualities of the cooperative management. This may lead to a form of group management where decision-making is being transferred to a central group even concerning matters of direct interest for the individual establishments of the members. In this case one speaks of an "integrated cooperative".
In case of the traditional cooperative the enterprise is usually relatively small. The managers are doing their job very often in an honorary capacity and only few non-members are employed in the cooperative enterprise. The activities are determined by the relations between the member clients respectively member suppliers and the cooperative management. In the case of the market-linked cooperative the relations between management and members are relatively loose and correspond to a pure client relationship while the usual industrial relations exist inside the cooperative enterprise.
In the case of the integrated cooperative there are ordinary industrial relations, too, within the cooperative enterprise. There is, however, the particular relationship between the group management and the members in their quality as owners of the enterprise and simultaneously managers of their individual establishments. The middle managers in the cooperative central enterprise and the individual members often enter into a special consultative and cooperative relationship.
Since these additional internal cooperative relations can give rise to conflicts and this in spite of a basic desire for harmony they should to be integrated into an enlarged system of industrial relations.
8. Industrial Relations in Cooperatives
The preceding explanations on the different categories of cooperatives have made evident that the phenomenon of tripartite industrial relations exists in promotional service cooperatives as well as in joint-production cooperatives. It became evident, too, that in addition an important relationship between the management of the cooperative enterprise (as an ordinary employer) and the members in their quality as clients or workers has to be taken into consideration. This management-member relation is unique in the cooperative - different to other legal forms - because the members are not only owners of the enterprise but simultaneously involved in the business operations as suppliers or clients of the cooperative enterprise or as workers in the establishment ("principle of identity").
The significance of this management-member relationship has logically produced particular legal problems. The relation is determined by a number of provisions in the cooperative law or in some countries in company law which includes regulations concerning cooperatives. These regulations sometimes touch upon the labour law and the social security legislation. Particularly in the case of joint-production cooperatives the question arises whether the cooperative members in their capacity as workers in their own cooperative enterprise have to be considered as co-entrepreneurs in the sense of the company law or whether they are subject to the labour law and the social security system in their capacity as workers.
This question has not yet been completely answered neither in industrialized nor in developing countries. In France, the latter view is held in the case of joint-production cooperatives. In Austria a pragmatic solution has been chosen by treating the cooperative members in joint-production cooperatives as workers, although the legal provisions would not allow that. It was a decision taken for political reasons and it is still valid since nobody went to court.
In Germany, particularly after the transformation of numerous joint-production cooperatives in the new federal states (former GDR) the problem has been dealt in a formal way:
Because a cooperative is a legal entity according to the German cooperative law there is no obstacle for a member who works in the cooperative enterprise to conclude an employment contract with the cooperative as a legal person. On this legal basis a wage can be agreed as a prepayment to be charged against the expected profit. All other entitlements based on the labour law and the social security system are available for the cooperative members as for any other employee.
A problem, however, remains in so far as it can not be assured in advance that the sum of agreed prepayments will in fact be earned in course of the year. The employment contract therefore must allow eventually a reduction of wages depending on the annual result. Otherwise the risk has to be faced that through overpayment a possible insolvency of the cooperative will be precipitated. The pre-payments, of course, must be entered into the accounts as costs and diminish logically in advance the possible annual result. The main problem of this regulation is whether all the members agree to the method of prepayments for the work of a member possibly on the basis of the usual methods of labour-evaluation although the inherent logic of such a type of cooperative society is based on an equal participation of all members in the final result.
In summary, there are two different ways in which the member participation in the results of a joint-production cooperatives can be formulated:
(a) If the equality principle is observed all members independent of their functions and services receive an equal monthly prepayment to be charged against the total result. These payments can be entered in the books as costs of personnel or as withdrawals on the capital. In the latter case the totality of the prepayments (i.e. of withdrawals) must be deduced from the balance profit and be returned to the equity account. The rest can be distributed per capita. In the first case, the whole balance profit can be distributed per capita because the prepayments have been considered as costs and therefore already been deducted from the final result.
This procedure is in full accordance with the constitutional logic of the joint-production cooperative because all members receive an equal part of the final result independent of their contributions (egalitarian principle). The members must however make supplementary payments in case of a loss in order to preserve the equity capital.
(b) Another possibility is to fix the amounts of the prepayments in accordance with usual methods of work evaluation. These prepayments must be entered into the accounts as expenses. At the end of the year, the balance profit has to be determined and to be distributed per capita.
In this case, the egalitarian principle has not been followed as regards wages in order to retain the motivation of the employees. This can only be taken care of through the distribution of the final profit. All members must make supplementary contributions (to the equity) in case of a loss in order to avoid an early insolvency of the cooperative. This pragmatic procedure is very widespread in practice.
While in the case of joint-production cooperatives mainly problems of labour law and social security occur, in the case of service cooperatives as integrated cooperatives problems related to competition laws may arise. In Germany, these problems have been discussed intensively and certain procedures of group management have been instituted which are still in accordance with competition law. In other countries where the antitrust or competition regulations are less stringent, cooperative face no special problems.
In conclusion, it is evident that the relations between employers and employees or workers in joint-production cooperatives can be quite different depending whether the workers are members or non-members. In addition it is evident that all these relations are influenced by governmental regulations or interventions in the different legal fields. Therefore, it would seem to be useful to enlarge the original industrial relations concept (of Dunlop) by introducing a fourth actor, namely "members" (Fig. 2).
Obviously, the effects of such a broadening of the Dunlop model can be very different and depend on the particular case especially as regards the inter-relationship between the four actors. It matters:
whether the cooperatives are in industrialized or in developing countries;
under which cultural and natural environmental influences the cooperatives operate;
whether the cooperatives are in the modern or in the traditional sector;
whether they are joint-production cooperatives or promotional service cooperatives;
whether they are traditional, market linked or integrated cooperatives.
It could be a task of economic and social research to study empirically these different forms through field research and to classify them accordingly.
9. An Industrial Relations System for Cooperatives
The enlarged industrial relations system presents itself in the following way: As actors are taken into consideration:
(1) The state Acts in industrialized countries as well as (principally) in developing countries and in post-socialist democracies mainly in a capacity as legislator and for purposes of legal supervision by the responsible authorities. In our case, the activity of the legislator concerns the area of the cooperative law and in some countries in which no special cooperative law exists in the area of company law. Furthermore labour law and the social security law are concerned and those countries were such regulations already exist the works council constitution act, the co-determination law and the competition law (antitrust law).
In developing countries and in the framework of the economic political transformation of some post socialist countries, the state intervenes also more directly, through especially appointed authorities where this goes beyond a certain degree that critics speak of a harmful "officialization" of cooperative policy.
(2) Employer is in the case of cooperatives the cooperative society as a legal person, but represented by the board, usually called management of the cooperative enterprise.
(3) Employees or workers are the persons working in the cooperative enterprise without being cooperative members. A special case is given when members of the cooperative have an employment contract with their joint-production cooperative and are thus becoming employees in the strict legal sense.
(4) The cooperative members have to be considered as a fourth actor because in promotional service cooperatives as well as in joint-production cooperatives they have a remarkable influence on the industrial relations. This influence results from regulations in the cooperative law which give the management of the cooperative enterprise the mandate to provide services to the members and which accord in this way to the members certain rights in relation to the management of the cooperative and entail certain expectations vis-à-vis the workers in the cooperative establishment.
10. "Rules" in Cooperative IR-Systems
How to identify the "rules" produced (according to Dunlop) by the communication between actors in such an industrial relation system of cooperatives shall be demonstrated on the example of Germany, because there the legislation influences industrial relations in a more detailed way than in other countries. In the general cooperative model presented below (Fig. 3) the following types of relations can be identified:
(1) A relationship determined by labour law exists between the cooperative management and the employees or workers who are not members; it is regulated by the employment contract according to the norms of labour law.
(2) The relationship between the cooperative management and the employees or workers not being members is governed by the regulations for works constitution and for certain operational sizes according to the co-determination laws. The subjects covered by these regulations concern policy questions of the enterprise where top management on the one hand and the works council on the other have to inform each other and arrive at joint decisions.
(3) A relationship between the cooperative members (as owners) and the cooperative management (as employer) is created by the cooperative. This relationship can be regulated in different ways, e.g. in the form of an hierarchical structure based on the principal agent concept. In Germany however the cooperative law stipulates that the board manages the cooperative society under its own responsibility (§ 27). The supervisory board and the works council are only allowed to "supervise" the board of directors. Nevertheless paragraph 1 of the cooperative law states that the cooperative enterprise is principally directed to further members' economy and income. Thus, the freedom of action of the cooperative management is restricted in a certain way by this regulation and eventually by further provisions in the by-laws.
(4) A particular relationship exists between the employees or workers who are not members of the cooperative members. This relationship is not determined by the cooperative law but it rather can be conditioned by provisions of the company law and - in case of large-scale enterprises - the co-determination law. It relates for example to the participation or even equal representation of workers in the supervisory board a body which originally had been instituted by the cooperative law.
(5) A special relationship in the sense of labour law exists between employers or workers and the cooperative members in joint-production cooperatives. This is particularly the case when members have also an employment contract with the cooperative society. Then the member takes on a dual role and becomes two actors in one person. The purpose of such a construction is to give the cooperative member who is co-entrepreneur and co-owner according to the cooperative law the advantages of employee protection and social security coverage through the employment contract.
(6) The relations of the state as an actor with all the other actors are based on the possibilities to take influence as a legislator. In the cooperative law, it concerns the relations between the members and the managers, because the state is in the position to modify the duties and rights of these persons by legislative action. In many countries there exists in addition a special legal supervision.
As regards the relations to the employees or workers these are determined by labour and social security legislation. Finally the state is able to modify the position of employees or workers in relation to the employers and the cooperative members through provisions of the works council constitution act and the co-determination law.
(7) A special relationship must be mentioned which applies in the case of integrated cooperative. Here problems can arise because of the delegation of decision making power on behalf of the members' individual economies to the cooperative management. That makes an additional relationship between the actors "cooperative members" and "employer = cooperative management" which may restrict competition in the market and thus fall under the provisions of the Act Against Restrains of Competition (GWB). As such it is a further legal relationship between the state as actor and the two other actors.
(8) A last relationship has to be mentioned which only exists in some countries with a special trade union law. This law can influence the relationship between the managers of cooperatives on the one hand and the employees and workers on the other.
The totality of these relationships is subject to manifold environmental influences, as mentioned above in the critical remarks about Dunlop's model. The task is now to describe them in a much more detailed way, as illustrated in the "strata-model of environmental consideration" (Fig. 4).
It can be seen in this model that all the four actors are influenced in their interactions and their behaviour through the components of the "global environment". This seems to be very important when these questions are considered in a global context, since these influences are effective in the different cultural areas and in the different countries in very different ways. They can only be identified in some detail through empirical country studies.
Figure 4 shows which kinds of influences exist and how they interact. It has to be considered that the influences between the different 'strata' are going bottom-up in the long run, but are completed by certain feedback relations top down between single strata in the short run. Furthermore, it is evident that the "ideology" considered separately by Dunlop has to be integrated in a more appropriate way into the total context of environmental factors.
In summary, we can say that there are very diverse and relevant connections between the two traditional fields if interest for the ILO, industrial relations on the one hand and cooperatives on the other.
These relations have been considered in this paper only at the level of the individual primary cooperative Similar considerations can be made as regards secondary cooperatives and possibly cooperative federations.
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