There have been debates on how much to pay managers and wider staff in the co-operative sector right from the early days.
As perhaps with any issue of economic fairness, there have tended to be two schools of thought. The first is that there might be a universal standard of fairness, that a co-operative can embrace. The second is that what matters is ‘process fairness’, in which executive pay is considered openly and appropriately by members, reflecting the democratic governance model of member-owned coops.
An example of a universal approach may be, for example, that you get out what you put in. The training co-op Zebra Collective has a flat management and pay structure, and pay is decided according to how much training and how much administration staff members do. Or it may be an egalitarian principle of equal pay. At SUMA, the wholefood co-operative, all staff are paid an equal salary and share from success in an equal way through dividends. Others, like Co-opportunity, have equal basic pay but pay a large divided based on a series of weighted factors which differ between individuals.
With the Spanish worker co-operative Mondragon, winner recently of an FT global business award, there has long been a ratio set between top and bottom pay. The original ratio was up to 1:6 and was chosen as a way of encouraging managers to raise pay if they needed a pay rise themselves. In the 1980s, the ratio grew to 1:15 – as too many managers were being lured away by higher pay elsewhere. Fairness, after all, in a competitive market sits alongside the test of effectiveness. Alongside this, pay at Mondragon is set according to measures which include productivity and absenteeism and measures of how well staff members get on with other people (constituting 20 per cent of the pay decision).
There tends to be something of a difference, though, between worker-owned co-operatives on the one hand and consumer-owned and enterprise-owned co-operatives on the other. The member benefit for one is about fulfilling work, including earnings, while for the other it is about the gains of trade – and executive pay, including valuing the role of executive leadership, is part of a primarily commercial set of judgements on how to achieve that.
So, there is no single right answer. What matters is that there is an open conversation with members on these issues – executives are paid with members’ money and what is paid to them to get the job done, whether too much or too little, is ultimately down to members. These are not issues hidden away from sight – in fact, there has been healthy and lively debate within the member governance of The Co-operative Group in recent years around issues of pay and co-operative values, from exploring the living wage through to details in the accounts on who among senior staff was paid what when they left. Debate like this can be a sign of strength.
But when you run a democratic model, process matters. The last period has seen what from the outside has sometimes looked like a trickle of media comment that reflects one group of decision-makers criticising another and vice-versa. That is no way to operate, let alone co-operate.
In Mondragon Co-operative, salaries are called anticipos, because they are intended to be seen as advances on future wealth creation. That must be right. Rather than talk about executive pay in the distorted frame given to us by mainstream business, of ‘compensation’ and ‘entitlements’, the focus should be on what will deliver success for members, in line with their values, over time.