Recuperating Enterprises, Reviving Communities A Cross-National Assessment of Conversions of Investor-Owned Businesses in Crisis into Labour-Managed Firms1 Position paper and proposal for a research program by EURICSE (April 23, 2012) The Recuperation of Businesses in Crisis by Employees: Reviving Communities Recent evidence strongly suggests that cooperatives are showing much resilience in our current situation of global economic crisis. While unemployment continues to rise throughout Europe2 and in much of the global South, while business closures abound,3 and while recently proposed structural adjustment policies and other economic reforms may reduce the security of workers even more,4 cooperatives—and labourmanaged firms such as worker cooperatives, especially—are growing in numbers throughout the regions most affected by the crisis.5 In these critical economic times, the organizational model of the worker cooperative is particularly promising as a micro-economic counterweight to lost jobs and closed firms. The empirical evidence confirms that during economic downturns worker cooperatives fail less than conventional investor-owned firms, experience much less job loss, and respond better to economic troughs—for example, in how they take on flexible work hours and adjust salaries rather than reduce jobs, look for other business opportunities redeploy the firm’s capabilities for local needs or subcontracting, and commit to the wellbeing of members rather than the sole pursuit of profits.6 As France, Spain, and Italy have witnessed in the last four years, economically difficult times even see a growth in cooperative startups. These countercyclical trends have historically been the case with worker coops.7 Indeed, where labour-managed firms emerge, jobs are saved and the productive capacities of communities are preserved or enhanced. They contribute to the prevention of the ‘desertification’ of regions and act as shock-absorbers for the socio-economic needs of entire communities. One particular type of labour-managed firm that highlights these cooperative advantages are workerrecuperated enterprises. These are formerly investor-owned businesses that have experienced deep micro-economic crises and that are subsequently taken over or bought out by employees and reopened by them, usually as worker cooperatives. Given the rise of these conversions of businesses in crises by their employees in recent years in regions and countries particularly hard-hit by economic crises (such as Argentina, Brazil, Uruguay, Italy, France, and Spain, to name only a few),8 it behooves researchers, cooperative federations, unions, and policy makers at all levels to understand the process much better. Over the last dozen years or so, the European Commission has sensed the need to address and perhaps assist this phenomenon toward the EC’s greater aims of saving jobs and encouraging ‘sustainable employment,’ facilitating business restructuring, and for contributing to the social inclusion of more Europeans.9 But there is still much to learn about why, how, and where these business conversions happen, and what their organizational characteristics and challenges are exactly. CECOP-CICOPA Europe has very recently identified the gap between the possibilities for saving jobs and communities with these business transfers, and the general ‘lack of knowledge about the success rate of business transfers to employees and about the factors of success…from the European level down to the local level.’10 The European Research Institute on Cooperative and Social Enterprises (EURICSE) is well-positioned to begin to bridge this knowledge gap. A New Research Initiative for Better Understanding Business Conversions Taking up this challenge, EURICSE is set to launch a cross-national, interdisciplinary, and multi-phased research initiative with the aim of better understanding the practices of converting investor-owned businesses in crises into labour-managed firms, as well as their organizational make-up. In particular, this research initiative seeks to more deeply explore and better grasp (1) the socio-economic and political contexts, (2) the legal frameworks, (3) the organizational dimensions, (4) the worker motivations for, 1 Written and researched for EURICSE by Marcelo Vieta (marcelo.vieta@euricse.eu). Labour Market Fact Sheet (2012, April) ‘European Unemployment Continues to Rise,’ EU Employment Quarterly, http://tinyurl.com/82948gb. International Labour Office (2012) Global Employment Trends 2012: Preventing a Deeper Job Crisis, Geneva: ILO, http://tinyurl.com/87jthzz. 4 Consider Italy’s expected reforms of Article 18 and similar recent labour flexibilization initiatives in Spain, the UK, and other European jurisdictions. 5 Birchall, J. & Hammond Ketilson, L. (2009) Resilience of the Cooperative Business Model in Times of Crisis, Geneva: ILO, http://tinyurl.com/6p55zyu. CECOP-CICOPA Europe (2012, March) ‘CECOP Position on EC’s Green Paper: Restructuring and Anticipation of Change: What Lessons from Recent Experience?’ http://www.cecop.coop/IMG/pdf/cecop_position_green_paper_restructuring_en.pdf. 6 Birchall & Hammond Ketilson, 2009; CICOPA, 2012. 7 Birchall & Hammond Ketilson, 2009; Pérotin, V., (2012) ‘Workers’ Cooperatives: Good, Sustainable Jobs in the Community,’ paper presented at the Promoting the Understanding of Cooperatives for a Better World conference organized by EURICSE, San Servolo, Venice, Italy, March 15-16, 2012. 8 Vieta, M. (2010) ‘The Social Innovations of Autogestion in Argentina’s Worker-Recuperated Enterprises: Cooperatively Reorganizing Productive Life in Hard Times,’ Labor Studies Journal, 35(3), 295-321. 9 See the EC’s Employment, Social Affairs, and Inclusion’s ‘Progress Programme 2007-2013’ (http://ec.europa.eu/social/main.jsp?langId=en&catId=327) and CECOP-CICOPA Europe’s involvement with the Progress Programme (http://www.cecop.coop/Progress). Also see the EC-DG Enterprises and Industry’s 2012 study ‘Business Dynamics: Start-Ups, Business Transfers, and Bankruptcy’ (http://tinyurl.com/7eat6ea). 10 CECOP-CICOPA, 2012, p. 3. 2 3 1 and (5) the policy implications of the conversion of businesses in crises into labour-managed enterprises. The paths that employees take to convert troubled businesses are varied. At times these conversions take place as negotiated employee buy outs, for instance. At other times they unfold as more dramatic workplace takeovers by workers during moments of high conflict on shop-floors. They are, at the same time, influenced by national and regional contexts, the culture of labour organizing and cooperatives in these regions, the degree of support from unions and cooperative federations, the economic policies in place, the legal frameworks that assist or prevent such conversions, and knowledge of such a solution on the part of the legal and political system. As CECOP-CICOPA Europe has also recently stated, ‘The conversion of enterprises in crisis into healthy cooperatives requires a precise diagnosis’ and an ‘early diagnosis [regarding] the feasibility of transformation into cooperatives.’ We agree. We also agree with CECOP-CICOPA Europe when it suggests that, while ‘a considerable level of expertise’ already exists in this process from the collective experiences of workers, specific cooperative federations, and some regional governments, there is undoubtedly also a general lack of knowledge of the processes of business conversions and their viability as palliatives to economic crises, business failures, and job losses amongst professionals such as lawyers, judges, accountants, as well as at the level of regional, national, and European policy makers.’11 We believe the Recuperating Enterprises, Reviving Communities research initiative we are spearheading has much promise for bridging this knowledge gap, for tapping into the already-existing knowledge of workers and cooperative and labour leaders involved in these conversions, and for generating an accessible and comparative database of research that serves to increase our knowledge of these experiences and ultimately assist in streamlining relevant policy. A Brief Summary of EURICSE’s Research Initiative Capitalizing on EURICSE’s deep experience with similar, wide-ranging research projects in the field of cooperative and social enterprises, as well as our extensive network of university research centres, academic experts, cooperative federations, and policy makers, this research initiative seeks to bring together a transnational and interdisciplinary network of researchers and key stakeholders interested in this phenomenon. We believe this initiative is crucially important and timely for the reasons we have already proposed, and see it as particularly vital for: (1) establishing the first cross-national database of such experiences; (2) influencing regional, national, and perhaps even global labour, cooperative, and socioeconomic renewal policies; and for (3) promoting the creation of such firms and the wider diffusion of these experiences. Embracing both quantitative and qualitative economic and sociological analyses at the macro-regional level and at the micro-level of the firm, the research questions guiding this initiative include: (1) In what economic sectors and regions are these workplace conversions to be found, and what types of businesses are they? (2) Under what social, political, and economic conditions do these firms emerge and how? (3) What motivates workers to start labour-managed firms? (4) What organizational forms do these converted firms transition into (i.e., share or non-share worker cooperatives, sociedades laborales, partnerships, etc.)? (5) Why do many of them survive for many years, while some of them do not? (6) What challenges do workers face when embarking on self-managed production? (7) What innovations do these converted firms forge? (8) What legal and policy contexts facilitate or hinder the emergence of these firms? An Invitation for Partnerships in this Research Initiative There is, we are discovering, much interest in engaging in such a project at various universities, with cooperative federations and unions, and with policy makers. EURICSE’s role in this initiative is to propose, promote, coordinate, and co-develop this research agenda in conjunction with partnering universities, experts, and key stakeholders in each region where business conversions by employees are found. By coordinating and consolidating this broad research agenda, we believe we will bring together the first cross-national data-set of this phenomenon in order to facilitate the documentation, analyses, and comparison of the diverse regional, national, socio-economic, legal, policy, behavioural, and microeconomic dimensions of business conversions into labour-managed firms. For the first phase of this research program, we have preliminary commitments for collaboration from Italy’s Legacoop cooperative federation and Cooperazione Finanza Impresa (CFI) funding agency, from Argentina’s University of Buenos Aires, and from CECOP-CICOPA Europe. We will begin work on this initiative in the coming months with these partners in order to assess the data-sets we already have in place and to test our emerging methodology. We invite all interested individual researchers, research centres, universities, cooperatives, unions, cooperative federations, and policy centres from around the world to contact us if they would like to know more about this research initiative or to consider partnering with us in this research agenda. 11 CECOP-CICOPA, 2012, p. 3 2