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A Co-operative Model for the Royal Mail

September 15, 2010 Leave a comment

With the announcement that there could be a partial sell-off, partial mutualisation of the Royal Mail the Oldfield-Pike Project thought it apt to throw it’s weight into the ring and firmly fighting for a co-operative model for the Royal Mail.

There is no single definitive co-operative model and each model is broad and changes btween industries, even within industries. There is a general model which is more the principles of the co-operative than an actual economic model.

The principles, broadly, are the common ownership of the means of  production by the stakeholders – more often than not the workers but can also be extended to incorporate the users of the service. Two good examples of the two commonly used co-operative models are John Lewis, whose stakeholders are the workers, and the Co-operative Group, whose stakeholders are the workers and the customers.

Of these two models, either can be applied to the Royal Mail. The worker stakeholder model would mean a higher productivity in the workforce as the profits would be reinvested in the company and renumeration would increase, thus driving the productivity cycle. However, to make the Royal Mail profitable it will have to diversify its business, which can be discussed by the workers themselves, and, most probably, increase service charges. The increase in service charge could drive business down as individual and corporate customers look elsewhere.

This leads onto the second proposed model, the worker-customer stakeholder model. This model will increase productivity and renumeration of the workforce, but not to the extent of the previous model as renumeration is also shared by the customers. However this will offset a decline in business due to ensuring brand loyalty through the renumeration of customers thus offsetting the increase of service charges.

But how does one tackle to Royal Mail pension deficit? There are a few ways to do it: 1) sell off assets and pensions; 2) incorporate a Third Party stakeholder, or; 3) let the workers decide how to do it with more options available to them.

Option 1 is what could be expected if the Royal Mail was sold off and privatised. It is also a quick and easy opption without any long-term viability.

Option 2 would require a third party stakeholder, such as a bank or the government, to inject capital into the pension fund in return for renumeration and/or capital gains from the pension fund. Whilst this would be a viable solution to the pension deficit, it is also quite possible that it would reduce the productivity of the workforce due to a reduced share, if any, of profits in favour of an external party. It is not what is best for the long-term strategic aims of the Roya Mail as a co-operative.

Option 3 involves even more options but it is, potentially, a fairer and more democratic process. They have options 1 and 2 available to them. They also have the option to overhaul their pension system so that it is applicable to the workers and not what a Chief Executive would want for the,. They can also choose to input their own benefits into the pension deficit to ensure a good quality of life in retirement, not just as individuals but as a collective too. The emphasis on option 3 is that the workers decide how to deal with the pension deficit – not the government and not an overpaid executive.

In conlusion, the Royal Mail should be set free from State control and turned into a co-operative based on the worker-customer stakeholder model. As detailed earlier, it will increase overall productivity and profitability of the company while ensuring brand loyalty from customers. In dealing with the pension deficit, option 3 should be employed as a broad framework as it fits nicely within any co-operative model.