From: E.F. Schumacher, _Small is Beautiful: Economics as if
People Mattered_ (London: Blond & Briggs Ltd), 1973.
[The quote is from the Harper & Row paperback edition.]
The Scott Bader Commonwealth
Ernest Bader started the enterprise of Scott Bader Co.
Ltd. in 1920, at the age of thirty. Thirty-one years later,
after many trials and tribulations during the war, he had a
prosperous medium-scale business employing 161 people,
with a turnover of about 625,000 a year and net profits
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exceeding 72,000. Having started with virtually nothing,
he and his family had become prosperous. His firm had
established itself as a leading producer of polyester resins
and also manufactured other sophisticated products, such
as alkyds, polymers, and plasticisers. As a young man he
had been deeply dissatisfied with his prospects of life as an
employee; he had resented the very ideas of a "labour
market" and a "wages system," and particularly the
thought that capital employed men, instead of men
employing capital. Finding himself now in the position of
employer, he never forgot that his success and prosperity
were the achievements not of himself alone but of all his
collaborators and decidedly also of the society within
which he was privileged to operate. To quote his own
words:
I realised that - as years ago when I took the plunge and
ceased to be an employee - I was up against the capitalist
philosophy of dividing people into the managed on the one
hand, and those that manage on the other. The real obstacle,
however, was Company Law, with its provisions for dicta-
torial powers of shareholders and the hierarchy of manage-
ment they control.
He decided to introduce "revolutionary changes" in his
firm, "based on a philosophy which attempts to fit industry
to human needs."
The problem was twofold: (1) how to organise or combine
a maximum sense of freedom, happiness and human dignity
in our firm without loss of profitability, and (2) to do this
by ways and means that could be generally acceptable to
the private sector of the industry.
Mr. Bader realised at once that no *decisive* changes
could be made without two things: first, a transformation
of ownership -- mere profit-sharing, which he had practised
from the very start, was not enough; and, second, the vol-
untary acceptance of certain self-denying ordinances. To
achieve the first, he set up the Scott Bader Commonwealth
275
in which he vested (in two steps: ninety per cent in 1951
and the remaining ten per cent in 1963) the ownership
of his firm, Scott Bader Co. Ltd. To implement the sec-
ond, he agreed with his new partners, that is to say, the
members of the Commonwealth, his former employees, to
establish a *constitution* not only to define the distribution
of the "bundle of powers" which private ownership implies,
but also to impose the following restrictions on the firm's
freedom of action:
First, the firm shall remain an undertaking of limited
size, so that every person in it can embrace it in his
mind and imagination. It shall not grow beyond 350
persons or thereabouts. If circumstances appear to de-
mand growth beyond this limit, they shall be met by
helping to set up new, fully independent units organised
along the lines of the Scott Bader Commonwealth.
Second, remuneration for work within the organisa-
tion shall not vary, as between the lowest paid and the
highest paid, irrespective of age, sex, function or ex-
perience, beyond a range of 1:7, before tax.
Third, as the members of the Commonwealth are part-
ners and not employees, they cannot be dismissed by
their co-partners for any reason other than gross personal
misconduct. They can, of course, leave voluntarily at
any time, giving due notice.
Fourth, the Board of Directors of the firm, Scott
Bader Co. Ltd., shall be fully accountable to the Com-
monwealth. Under the rules laid down in the Constitu-
tion, the Commonwealth has the right and duty to
confirm or withdraw the appointment of directors and
also to agree to their level of remuneration.
Fifth, not more than forty per cent of the net profits
of Scott Bader Co. Ltd. shall be appropriated by the
Commonwealth -- a minimum of sixty per cent being
retained for taxation and for self-finance within Scott
Bader Co. Ltd. -- and the Commonwealth shall devote
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one-half of the appropriated profits to the payment of
bonuses to those working within the operating company
and the other half to charitable purposes outside the
Scott Bader organisation.
And finally, none of the products of Scott Bader Co.
Ltd. shall be sold to customers who are known to use
them for war-related purposes.
When Mr. Ernest Bader and his colleagues introduced
these revolutionary changes, it was freely predicted that a
firm operating on this basis of collectivised ownership and
self-imposed restrictions could not possibly survive. In
fact, it went from strength to strength, although difficul-
ties, even crises and setbacks, were by no means absent. In
the highly competitive setting within which the firm is
operating, it has, between 1951 and 1971, increased its
sales from 625,000 to 5 million; net profits have grown
from 72,000 to nearly 300,000 a year; total staff has
increased from 161 to 379; bonuses amounting to over
150,000 (over the twenty-year period) have been dis-
tributed to the staff, and an equal amount has been
donated by the Commonwealth to charitable purposes
outside; and several small new firms have been set up.
Anyone who wishes to do so can claim that the com-
mercial success of Scott Bader Co. Ltd. was probably due
to "exceptional circumstances." There are, moreover, con-
ventional private enterprise firms which have been equally
successful or even more so. But this is not the point. If
Scott Bader Co. Ltd. had been a commercial failure after
1951, it could serve only as an awful warning; its undeni-
able success, as measured by conventional standards does
not *prove* that the Bader "system" is necessarily superior
by these standards: it merely demonstrates that it is not
incompatible with them. Its merit lies precisely in the
attainment of objectives which lie outside the commercial
standards, of *human* objectives which are generally
assigned a second place or altogether neglected by ordi-
277
nary commercial practice. ln other words, the Bader
"system" overcomes the *reductionism* of the private
ownership system and uses industrial organisation as a
servant of man, instead of allowing it to use men simply
as means to the enrichment of the owners of capital. To
quote Ernest Bader:
Common Ownership, or *Commonwealth* is a natural devel-
opment from Profit Sharing, Co-Partnership or Co-Owner-
ship, or any scheme where individuals hold sectional interests
in a common enterprise. They are on the way to owning
things in common, and, as we shall see, Common-Owner-
ship has unique advantages.
While I do not intend to go into the details of the long
evolution of ideas and new styles of management and
cooperation during the more than twenty years since 1951,
it is useful here to crystallise out of this experience certain
general principles.
The first is that the transfer of ownership from a person
or a family - in this case the Bader family - to a collectiv-
ity, the Commonwealth, changes the existential character
of "ownership" in so fundamental a way that it would be
better to think of such a transfer as effecting the *extinc-
tion* of private ownership rather than as the establishment
of collective ownership. The relationship between one
person, or a very small number of persons, and a certain
assembly of physical assets is quite different from that
between a Commonwealth, comprising a large number of
persons, and these same physical assets. Not surprisingly,
a drastic change in the *quantity* of owners produces a
profound change in the *quality* of the meaning of owner-
ship, and this is so particularly when, as in the case of
Scott Bader, ownership is vested in a collectivity, the
Commonwealth, and no individual ownership rights of
individual Commonwealth members are established. At
Scott Bader, it is legally correct to say that the operat-
ing company, Scott Bader Co. Ltd., is owned by the
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Commonwealth; but it is neither legally nor existentially
true to say that the Commonwealth members, as indi-
viduals, establish any kind of ownership in the Common-
wealth. In truth, ownership has been replaced by specific
rights and responsibilities in the administration of assets.
Second, while no one has *acquired* any property, Mr.
Bader and his family have nonetheless deprived them-
selves of their property. They have voluntarily abandoned
the chance of becoming inordinately rich. Now, one does
not have to be a believer in total equality, whatever that
may mean, to be able to see that the existence of inordi-
nately rich people in any society today is a very great evil.
Some inequalities of wealth and income are no doubt
"natural" and functionally justifiable, and there are few
people who to not spontaneously recognize this. But here
again, as in all human affairs, it is a matter of scale.
Excessive wealth, like power, tends to corrupt. Even if the
rich are not "idle rich," even when they work harder than
anyone else, they work differently, apply different stand-
ards, and are set apart from common humanity. They
corrupt themselves by practising greed, and they corrupt
the rest of society by provoking envy. Mr. Bader drew
the consequences of these insights and refused to become
inordinately rich and thus make it possible to build a real
*community*.
Third, while the Scott Bader experiment demonstrates
with the utmost clarity that a transformation of ownership
is essential - without it everything remains make-believe
-- it also demonstrates that the transformation of owner-
ship is merely, so to speak, an enabling act: it is a neces-
sary, but not a sufficient, condition for the attainment of
higher aims. The Commonwealth, accordingly, recognized
that the tasks of a business organisation in society are not
simply to make profits and to maximise profits and to grow
and to become powerful: the Commonwealth recognised
four tasks, all of equal importance:
279
______
(A) The economic task: to secure orders which can be
designed, made, and serviced in such a manner as to make
a profit.
(B) The technical task: to enable marketing to secure
profitable orders by keeping them supplied with up-to date
product design.
(C) The social task: to provide members of the company
with opportunities for satisfaction and development through
their participation in the working community.
(D) The political task: to encourage other men and
women to change society by offering them an example by
being economically healthy and socially responsible.
______
Fourth: it is the fulfilment of the social task which
presents both the greatest challenge and the greatest
difficulties. In the twenty-odd years of its existence, the
Commonwealth has gone through several phases of consti-
tution-making and we believe that, with the new constitu-
tion of 1971, it has now evolved a set of "organs" which
enable the Commonwealth to perform a feat which looks
hardly less impossible than that of squaring the circle,
namely, to combine real democracy with efficient manage-
ment. I refrain here from drawing diagrams of the Scott
Bader organisation to show - on paper - how the various
"organs" are meant to relate to one another, for the living
reality cannot be depicted on paper, nor can it be
achieved by copying paper models. To quote Mr. Ernest
Bader himself:
I would very much prefer to take any interested person
on a tour of our forty-five-acre, ancient Manor House
Estate, interspersed with chemical plants and laboratories,
than to laboriously write [an] article which is bound to
raise as many questions as it answers.
The evolution of the Scott Bader organisation has been --
and continues to be a -- *learning process*, and the essential
280
meaning of what has been happening there since 1951 is
that it has enabled everyone connected with Scott Bader
to learn and practise many things which go far beyond the
task of making a living, of earning a salary, of helping a
business to make a profit, of acting in an economically
rational manner "so that we shall all be better off."
Within the Scott Bader organisation, everybody has the
opportunity of raising himself to a higher level of
humanity, not by pursuing, privately and individualisti-
cally, certain aims of self-transcendence which have
nothing to do with the aims of the firm -- *that* he is able to
do in any setting, even the most degraded -- but by, as it
were, freely and cheerfully gearing in with the aims of the
organisation itself. This has to be learned, and the learn-
ing process takes time. Most, but not all, of the people
who joined Scott Bader have responded, and are respond-
ing, to the opportunity.
Finally, it can be said that the arrangement by which
one-half of the appropriated profits must he devoted to
charitable purposes outside the organisation has not only
helped to further many causes which capitalist society
tends to neglect -- in work with the young, the old, the
handicapped, and the forgotten people -- it has also served
to give Commonwealth members a social consciousness
and awareness rarely found in any business organisation of
the convcntional kind. In this connection, it is also worth
mentioning that provision has been made to ensure, as far
as possible, that the Commonwealth should not become an
organisation in which individual selfishness is transformed
into group selfishness. A Board of Trustees has been set
up, somewhat in the position of a constitutional monarch,
in which personalities from outside the Scott Bader orga-
nisation play a decisive role. The Trustees are trustees of
the constitution, without power to interfere with manage-
ment. They are, however, able and entitled to arbitrate, if
there should arise a serious conflict on fundamental issues
281
between the democratic and the functional organs of the
organisation.
As mentioned at the beginning of this account, Mr.
Ernest Bader set out to make "revolutionary changes" in
his firm, but "*to do this by ways and means that could be
generally acceptable to the private sector of industry.*" His
revolution has been bloodless; no one has come to grief,
not even Mr. Bader or his family; with plenty of strikes
all around them, the Scott Bader people can proudly
claim: "We have no strikes"; and while no one inside is
unaware of the gap that still exists between the aims of the
Commonwealth and its current achievements, no outside
observer could fairly disagree when Ernest Bader claims
that:
______
the experience gained during many years of effort to estab-
lish the Christian way of life in our business has been a great
encouragement; it has brought us good results in our rela-
tions with one another, as well as in the quality and quantity
of our production.
Now we wish to press on and consummate what we have
so far achieved, making a concrete contribution toward a
better society in the service of God and our fellowmen.
______
And yet, although Mr. Bader's quite revolution *should
be* "generally acceptable to the private sector of indus-
try," it has, in fact, not been accepted. There are thou-
sands of people, even in the business world, who look at
the trend of current affairs and ask for a "new dispensa-
tion." But Scott Bader -- and a few others -- remain as small
islands of sanity in a large society ruled by greed and
envy. It seems to be true that, whatever evidence of a new
way of doing things may be provided, "old dogs cannot
learn new tricks." It is also true, however, that new
dogs" grow up all the time; and they will be well advised
to take notice of *what has been shown to be possible* by
The Scott Bader Commonwealth Ltd.
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