DEMOCRATIC COMPANIES IN DENMARK ARE STABLE AND PRODUCTIVE

The democratic ownership model has played a significant role in Denmark’s energy and heating sector. Democratic companies are common in various sectors in Denmark. The sheer size of the democratic sector in Denmark means that almost every Dane is a member (or co-owner) of a democratic company.

By Magnus Skovrind Pedersen, CEO at Demokratisk Erhverv

Published in Hot Cool, edition no. 2/2023 | ISSN 0904 9681 |

Democratic companies in Denmark are stable, rarely go bankrupt compared to other companies, and have a high level of investments compared to other companies. These are the conclusions in a mapping conducted by The Danish Research Institute for Democratic Businesses. Other findings suggest that Danish Consumers prefer democratic companies to other companies, especially consumers aware of their membership or role as co-owner.

But the upsides of the democratic sector and democratic ownership need to be communicated on a broader level to confront undocumented myths and ensure that the members and co-owners know their influence in democratic companies.

Democratic enterprises in Denmark

The tradition of democratic companies goes far back in the history of Denmark. Democratic companies have their roots in the cooperative movement, which flourished in Denmark from the mid-1800s. In Thisted, establishing the first Danish consumer cooperative made it possible for workers to reduce prices on basic consumer goods. The idea was then – as it is today – that consumers who form a cooperative as equal co-owners get better and cheaper goods.

There is a clear line between what happened in the mid-1800s and the largest Danish retailer of consumer goods, Coop, which still is democratic with almost 2 million members. The cooperative movement up through the 1800s and 1900s played a significant part in developing the agricultural sector, the residential rental market, the financial sector, and the energy sector.

Many Danish companies across industries are still managed and owned democratically. Today the term “democratic company” covers a broader range of democratic ownership models. But all democratic companies stand out by having broad and inclusive ownership and democratic control of the decision-making processes, based on the principle of “one member, one vote.”

The definition of a democratic company – used by The Danish Research Institute for Democratic Businesses: independent business organization governed by the articles of association ensuring a democratic assembly according to the principle “one member, one vote”, or where a minimum of half of influence and/or ownership derives from democratic assemblies. Members can be organizations, producers, consumers and others private individuals, and the membership must be relatively open.

Today 20,336 companies in Denmark are either directly democratic or where a democratic organization has over half the ownership. Democratic companies in Denmark have a significant influence on the Danish economy. Based on data from the Danish statistics bureau, Danmarks Statistik, democratic companies make up almost 10% of the accumulated revenue of private Danish companies.

Furthermore, a large part of the Danish population has contact and/or a connection to the democratic sector at some point throughout their working life. On top of that, every 15th employee in Denmark works in a democratic company, which makes up to 6,3% of Danish employees in total.  

Democratic companies contribute to the Danish economy in several sectors. Within the residential rental market and the financial sector, democratic companies have around half of the market shares. In addition, within the total energy sector, they account for roughly a quarter of the turnover. Other sectors where democratic companies contribute separately are water supply, trade, industry, health, and education.

Danes want to have influence.

Almost all adult Danes are co-owners of companies within banking, pensions, insurance, mortgages, cooperative and rental housing, retail trade, and consumer good. The Danish Research Institute for Democratic Businesses shows this in thelatest report on member democracy. 

The Danes, aware of their co-ownership and opportunities to gain influence, generally have a positive view of democratic companies. Those who use the opportunities for influence are particularly positive. This is expressed in their perception of the companies’ services and product quality and their assessment of the companies’ contribution to society.

33% of Danes prefer to use a democratic utility company rather than a company that is not democratically managed or owned. 25% of Danes are so happy with their democratic suppliers that the price is not decisive. They are happy to pay extra to use companies where they are co-owners and can influence the companies’ values and products.

The rapport underlines that Danes are motivated by direct influence. Many would like to make a difference in specific matters of importance or get involved to achieve personal gain. And personal gain does not only have to do with money. It can also be experienced just as valuable to be part of a community, to be useful, or to gain new skills.

On the downside, the report shows that over half of Danes know nothing or little about the democratic companies they are part of, and only about half know they are co-owners or members of a democratic company. This dramatically influences Danes’ ability to use their democratic rights and influence the companies they co-own or are a member of. And more importantly, it shows the need for democratic companies to be more proactive and vocal about the fact that they are democratic.

Democratic companies are productive and stable.

The development in productivity is an important factor in the extent to which Danish companies create growth and prosperity in Denmark. Common myths about democratic companies are that they are less productive and so enclosed with bureaucracy making them unable to make decisions efficiently. These claims are, however, no more than misconceptions based on ideological and false myths.

Our analysis shows that democratic companies have on average, a high level of productivity, and democratic ownership does not seem to stand in the way of growth and development in the business world – it rather seems to be the contrary.

Studies conclude that the productivity of democratic companies meets the productivity of other companies and even, on some factors, exceeds the productivity levels of other companies. Furthermore, democratic companies are more stable and rarely go bankrupt. Finally, studies show that democratic companies reinvest a higher percentage of their profits compared to other Danish companies. 

The high productivity of democratic companies is even more remarkable because democratic companies tend to be evaluated based on alternative factors and other advantages (social and environmental, for example). Our studies underline that not only can they be compared to other companies’ productivity they also exceed them in some areas. 

The case of the democratic district heating

The conclusion above has underlined some of the advantages of democratic companies and established that prejudices stating that democratic companies are unproductive or unstable are just that, groundless prejudice. Within the energy sector, turnover accounts for around a quarter of the total turnover of Danish companies.

If one looks even closer into the energy sector, democratic district heating plays a significant role in Denmark. The district heating sector in Denmark has a unique international position as a result of the special democratic organization and regulation that has made comprehensive energy efficient and made expansion of the district heating network possible.

A report conducted by the center-left think tank CEVEA, 2018 concludes that the consumer-owned district-heating suppliers in Denmark offered lower prices than the privately owned suppliers.

Info Box

About The Danish Research Institute for Democratic Businesses

The Danish Research Institute for Democratic Businesses promotes and unites democratic companies so that the Danish business community supports an engaging democracy and becomes the solution to contemporary economic, environmental, and social challenges.

We do this by producing knowledge, participating in the public debate, and creating networks in the democratic sector. The Danish Research Institute for Democratic Businesses is financed by member organizations, all of which are democratic companies.

Info Box

About Danish District Heating

The Danish district heating sector provides 64% of all Danish households with district heating. This makes Denmark one of the countries in Europe with the most developed district heating supply networks.  A large proportion of Danish district heating companies are operated as cooperatives. This means that the cooperative is owned by its customers and works to promote their common interests.

Alongside the non-profit principle, this creates an efficient heat supply at the lowest possible price for the end-user.  The extensive reach of the district heating grid bears witness to the comprehensive welfare system present in Denmark. District heating is a collective solution to the provision of heating, and the benefit of this scheme is that the more households are attached to the grid, the cheaper the heating costs will be.

By being both collective and efficient, district heating is creating values beyond the short-term, economic ones, contributing to the importance of district heating in the Danish energy framework. Today the Danish District Heating Association (Dansk Fjernvarme) is very much focused on developing and using the democratic ownership-model to strengthen and broaden district heating even further in Denmark.

For further information, please contact: Magnus Skovrind Pedersen, magnus@demokratiskerhverv.dk