A View from Slovenia: Employee-owned companies and left-wing organization

June 10, 2016 by  

by Tibor Malinovič, »Iskra« student society, Slovenia

The article is a translated combination of two previous articles, written in 2014 and 2016 for the student movement’s publications.

In this article, I will explore an important aspect of organisation: organisation of feasible alternatives in the economy. One topic that is important for left-wing politics is the question of control over resources that people use and work with to create new wealth (i.e. control of the means of production). Socialist theory usually proposes that the control of the means of production transfers into the hands of the working class, the workers, which would allow a vast portion of the producers of social wealth to gain economic as well as political power.

Political movements that want to achieve such goals might be interested in contemporary examples of enterprises which are already owned and controlled by workers through direct democracy and/or elected management. These enterprises include democratic forms of worker cooperatives, Employee Share Ownership Programs (ESOPs), employee-owned private limited companies etc. In such enterprises, workers have a large degree of democratic control over their workplace, financial and other questions and take part in business decisions. These enterprises represent a form of either private ownership (each worker has his/her own share) or collective ownership (the enterprise is owned collectively, e. g. by a cooperative) of the means of production. To unite all these examples into one term, I will refer to such companies as “workers’ companies” or “workers’ enterprises”.

Why are such companies so important and interesting? Here are a few reasons:

– they already represent (in the present) a feasible alternative to “conventional” capitalist enterprises and show examples of how to organise work in a different way,

– workers who work in such companies have more decision-making power and have a larger control over their working and living conditions,

– workers have direct benefits from the results of their labour (they are company owners at the same time), more equitable distribution of salaries and profits, improvement of workers’ material conditions, increased workplace safety (workers are their own bosses),

– under workers’ control, goods and services can be produced and offered in a way that is more directed towards fulfilling material, economic, social and cultural needs of employees and the community they live in, instead of only maximising profit for private owners,

– workers learn democratic decision-making, more equal and democratic relationships arise between them – this can be reflected not only in the company itself, but in the society in general,

– worker-owned enterprises have demonstrated stronger resilience towards economic crises: their mode of operation is not strictly oriented towards maximising profit, which allows them to avoid excessive risks that many “conventional” capitalist companies take to maximise profits, they have also adapted to economic crises in ways that have reduced harm for the workers.

Therefore, for many on the Left, worker-owned and worker-controlled enterprises represent a positive example of a “transitional” or “parallel” economy where new forms and relationships in production are already arising, in a similar way capitalism once started to arise in feudal society. Karl Marx also described worker cooperatives in a similar way in Das Kapital:

The co-operative factories run by workers themselves are, within the old form, the first examples of the emergence of a new form, even though they naturally reproduce in all cases, in their present organization, all the defects of the existing system, and must reproduce them. But the opposition between capital and labour is abolished there, even if at first only in the form that the workers in association become their own capitalists, i.e., they use the means of production to valorise their labour.” (Marx III: 571).

Formation of workers’ enterprises on a large scale could be treated as a possible foundation for a future economic order that offers more economic democracy and more equitable distribution of wealth. But it should be noted that establishing such enterprises will not automatically solve all problems that have a systemic nature. Right now, I will give just two examples that illustrate a few of such dilemmas: in the context a global free market system, democratically controlled enterprises can experience too strong competition from competitors that exploit cheap labour and consequentially run out of business; positive social implications of democratically controlled enterprises could be used as an excuse to reduce the welfare state, which could harm wealth redistribution within society at large and increase general inequality. To maximise empowerment and the well-being of the people, worker-owned and worker-controlled companies should be accompanied by proper systemic actions as well.

Nowadays, at least in Slovenia, cooperatives and other employee-owned and employee-managed enterprises are often (incorrectly) mixed up with “Social Entrepreneurship”. The latter term denotes private businesses that are formed to deal with a certain social problem or work in economic sectors that are not interesting for most entrepreneurs due to low profitability (typical examples include employment of disabled persons, eco-friendly food production etc.). “Social enterprises” can also be managed in a “conventional” capitalist manner and do not represent workers’ companies automatically. Although employee ownership is common in social enterprises, these terms do not have the same meaning and must not be used interchangeably.

Many »workers’ companies« already exist across the globe, proving that such ideas are feasible in practice. A lot worker-owned and worker-controlled enterprises can be found in different countries: Spain, Italy, France, United Kingdom, USA etc. The European Confederation of Cooperatives and other worker-owned companies active in industry and services (CECOP) is comprised of about 50000 companies with 1,3 million employees from 15 European countries.[1] Basque County is the home of the largest network of democratically-controlled cooperatives in the world – in 2010, the Mondragon Corporation was comprised of 110 different cooperatives with 85000 employees (Sanchez Bajo & Roelants, 245). The Mondragon cooperatives work in many economic sectors, from industrial production of car components, white goods and office supplies to construction, education and banking, to name a few examples. Basque County hosts the largest number of worker cooperatives in Europe, followed by Emilia Romagna region in Italy. In this millennium, worker ownership and control has rapidly expanded in Argentina: since the economic collapse of 2001, workers have took control of many bankrupt factories and restarted production in what is known as the »fábricas recuperadas« (»recovered factories«) movement.[2] Similarly, last year, workers took over and restarted production in the Dita factory in Tuzla, Bosnia, the famous detergent producer of the Yugoslav era. These days, the Kurdish region of Rojava (Northern Syria / Western Kurdistan) can be put in the spotlight as many cooperatives have been established there during the process of the ongoing social revolution.

What about Slovenia?

Despite the historical experience of a system that was based (at least theoretically) on workers’ self-management, such enterprises are relatively unknown and unpopular in our area and only a handful of examples can be found. In the 1990s, workers had large shares in Slovenian companies thanks to a special form of post-socialist privatization through certificates, but they eventually sold off most of them and lost ownership as well as potential control over company management. Consequentially, ownership has concentrated in the hands of a smaller number of capital owners and managers. Why has this happened? There are many reasons: workers were poorly informed about organisation of shares, the meaning and benefits of taking part in company ownership and control, workers sold off their shares to earn some money in the short term, collective organisation of employees’ shares was too difficult and too expensive because of poor legislation, there was a lack of political and union support for employee ownership and participation etc. With the end of Yugoslav socialism and the transition to capitalism, private ownership became popular, trade unions moved to their traditional bargaining role, while there were no strong political initiatives for workers’ self-management or employee-owned companies. In some cases, workers’ participation and employee ownership were also treated as a negative remnant of the former socialist system.

The Domel manufacturing company from Železniki, which produces electric motors, is a rare exception of a Slovenian enterprise that is owned by the workers. Domel, which employs about 1000 people, is owned by 645 employees, former employees and retired workers[3], who elect the company’s management at shareholder general meetings, while the employees participate in management through a workers’ council. The decision to retain the company in workers’ hands was actually a reaction to a hostile takeover attempt from Ametek, an American multinational and a rival on the European market. Managers, privatisation funds and some economists actively supported American takeover, while the workers feared lay-offs and the abandonment of their development department – later in the future, their fears were proven to be true as Ametek bought a similar company in Italy and took similar steps that Slovenian workers feared. The management was replaced by people who supported employee ownership. In 1998, the workers, former employees and retired workers united together and collectively bought 42% of Domel’s capital through a “proxy company”, to protect Domel from outside takeovers. Through the years, they were expanding their share and eventually became 100% owners in 2007. In the same region, another worker takeover has succeeded in 2013, when the journalists in Kranj bought off their Gorenjski glas newspaper and granted themselves the autonomy of content through majority ownership.[4]

In 2011, the M Tom Ltd. manufacturing company was founded in Mokronog, producing living room furniture. The company started “from scratch” after the collapse of a former company that was deeply indebted by its former managers and got bankrupt after the start of the economic crisis. Nowadays, about 20 people work there and all decisions in the enterprise are made democratically on collective meetings. The company is experiencing slow growth with minimal surpluses, newly employed workers are gradually becoming co-owners. In 2015, after several years of failure, M Tom succeeded in buying off the former company’s production hall that was held by banks since the bankruptcy (most recently, by DUTB, the Slovenian »bad bank«) and for sale at a price unaffordable for the workers – the price was, after several years, eventually lowered to an affordable one. The youth have managed to create a few small cooperatives in different economic sectors, examples include the Soglasnik [“Consonant”] translators’ cooperative, a number of small cooperatives in CAAP [“Centre for Alternative and Autonomous Production”] in Maribor etc.

Nevertheless, in Slovenia, the most common are the negative stories of unsuccessful worker takeover attempts: Armal, Novoles, Večer, Fructal, Svea, Adria Airways Tehnika, Mercator, Vesna, to name a few examples. In most of these cases, workers tried to restart companies through a worker cooperative or a buy off of shares. Workers have had problems with obtaining new funds, as they themselves usually do not have enough capital for such investments. For such initiatives, there have been big problems with finding alternative sources of funding, a problem that is largely connected with Slovenian legislature and the fact that such companies are virtually unknown in the area. By law, cooperatives cannot apply for state entrepreneurial grants and have experienced problems with formal registration, workers’ initiatives could not obtain state guarantee for financial loans, state representatives and liquidators were sceptical of such initiatives and rather sold off companies or assets of bankrupt companies to other private owners, even when the latter offered less money (such attitude can be found in the Adria Airways Tehnika and Novoles examples). In some cases, there was also a certain reluctance towards employee-owned companies with claims that they are too “socialist”. In late January 2016, the Slovenian media reported on a story of DEWEsoft in Trbovlje, a successful producer of measuring devices (the list of their costumers also includes NASA, the American space agency). The two founders are trying to transfer the ownership of the company to their employees, but are unable to complete the transfer due to bureaucratic complications.

The above-mentioned barriers might disappear in the future. In late January 2016, a few members of the Social democratic party prepared the new Worker Buy-Off Act, which could remove the aforementioned obstacles and will be discussed in parliament by summer. If the proposal’s content actually fulfils its promises and if the law will really be put into force, this might give a new opportunity to organise democratic alternatives in the economy, thanks to new sources of financial resources and institutional support for such initiatives. But of course, for such alternatives, the legislature is not enough – what will also be needed is conscious organisation in such a direction.


[2]An interesting sociological study on the »recovered factories« movement can be found here: https://www.academia.edu/9113063/Workers_Selfmanagement_Recovered_Companies_and_the_Sociology_of_Work

[4]Due to the lack of funds, the journalists in the takeover were financially helped by the forementioned Domel, with which they formed a consortium. Thanks to their experiences, Domel also helped with internal organisation and is now gradually selling its share to the journalists.

 

Cited literature:

Karl Marx. Capital, vol. 3. London: Penguin, 1981.

Claudia Sanchez Bajo & Bruno Roelants. Kapital in past zadolževanja: Zadružništvo kot alternativa. Ljubljana: Modrijan, 2015. [English version: Capital and the debt trap: Learning from Cooperatives in the Global Crisis. Palgrave Macmillan, 2011]

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