Democratic Business

Cooperative enterprise may help tackle some of society’s greatest problems, chief among them a constantly changing labour market. Traditionally, cooperative enterprise has played an important role in Denmark, but the business form is marginalized today. The IT University research group Reflection and Action (Reflact) is working on changing that.

Loss of jobs, the death of small communities, resource depletion in small-town communities, rising inequality, monopolization. These are all societal problems that employee-owned businesses may help tackle. For this reason, last year, the Danish government and a majority of parliament formed an expert taskforce to examine the conditions for cooperative enterprise in Denmark and to make recommendations for improvements. The recommendations were in part developed on the basis of research conducted by the IT University of Copenhagen’s research group Reflection and Action (Reflact), and its conclusions were significant.

» To many people, cooperative enterprise is a viable alternative to precarious conditions in the labour market. In a business that is owned and operated by the employees themselves, the responsibilities are shared. All owner-employees receive a wage and none of the profit is withdrawn from the business to outside stakeholders and investors.

Lene Nielsen «

Even though cooperative enterprise is part of Danish cultural DNA; in the 19th century the cooperative movement secured a higher standard of living in Denmark and became the basis for cooperatively owned dairy farms, slaughterhouses, mortgage providers, and grocery stores; many obstacles stand in the way of cooperative entrepreneurs today.

“Among other things, our report for the government taskforce concludes that there is a critical lack of knowledge about democratic entrepreneurship in society,” says Associate Professor at ITU, Lene Nielsen, who heads the project on democratic business ownership.

“The knowledge lack persists in education as well as among the authorities that advise entrepreneurs on starting and running businesses. Starting a cooperatively owned business requires substantial legal and financial consulting, and entrepreneurs are often met with a lack of understanding. We simply lack better support for democratic entrepreneurship.”

This is among other reasons why the research group founded the Forum on IT and Cooperative Governance (FITCG). The mission is to provide researchers and democratic business entrepreneurs with a forum where experiences and problems unique to the field can be addressed. The research group hopes to enable knowledge sharing and networking at events, and in October they hosted the first seminar for entrepreneurs and researchers – Danish as well as international – at the IT University.


A need for knowledge

“The seminar was a tremendous success. It provided us with a lot of insight into the obstacles that worker-owned businesses and startups are faced with,” says Lene Nielsen. Representatives from five businesses, involved with everything from communications to carpentry, were present at the seminar. “Research has confirmed that this business model is resilient in the face of societal and economic crises. Unfortunately, it seems that entrepreneurs in this field are more likely to experience stress, though.”

Lene Nielsen identifies the lack of a network in the form of business organizations which other industries benefit from as one of the main reasons for the prevalence of stress among cooperative business entrepreneurs. “We need authorities in the field who can facilitate and systematize knowledge sharing. As things stand, it is up to the more experienced actors in the field to provide startups with guidance. That is a lot of work to take on when you also have your own business to worry about,” she says.

Denmark is trailing behind many other countries with regard to organizing networks for cooperative enterprises, but also in terms of garnering political support. In Great Britain, the government has simplified the process of transitioning a normal business to a cooperative business when an owner retires. Among other things, this means that more businesses and jobs stay in the country.

“We need to incorporate many of these international experiences into Danish practices,” says Lene Nielsen.


Bipartisan support

There are many good reasons for enabling cooperative enterprise in Denmark. The labour market is currently undergoing great change, and as precarious and short-term employment has become more widespread the cooperative business model has proven effective in preventing instability in an otherwise volatile work life.

“To many people, cooperative enterprise is a viable alternative to precarious conditions in the labour market. In a business that is owned and operated by the employees themselves, the responsibilities are shared. All owner-employees receive a wage and none of the profit is withdrawn from the business to outside stakeholders and investors,” says Lene Nielsen. “The business is run collectively, and everyone has a say in how it is managed.”

Cooperatively owned businesses may also help engender economic growth in districts outside the major urban areas. That is one of the reasons why there is general consensus among political parties – from left to right – that cooperative entrepreneurship needs backing. However, politicians have yet to act.

“Both Norway and Sweden have legislation in place that makes it easier for cooperative enterprise to thrive. We need that in Denmark as well. It is simply too difficult for entrepreneurs to start cooperative businesses because it requires resources that startups do not have,” says Lene Nielsen.

“That is why we hope Forum on IT and Cooperative Governance can be an initiative for positive change and development.”

Author: Theis Duelund Jensen

Researchers: Lene Nielsen, Hanne Westh Nicolajsen, Vasiliki Baka and Fie Foged Victor.

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