How to empower your money

An old friend, someone I first got to know a long time back when we both lived in the same housing cooperative, has emailed. She and her partner are currently in the middle of running a community share issue, where they’re hoping to raise the money to buy a much-loved local pub as a jazz music venue. They’re at the nerve-racking stage when they’re very close to raising the amount of money they need and have their fingers crossed that the final amount they’re after will come in.

I know the feeling: the town where I live has a little local pub renowned for its atmosphere and real ale, which the community has recently rallied round to save through a successful community share issue. The pub is due to reopen under cooperative ownership in a matter of days.

It’s important that we discuss ways that we can empower our money, in order to ensure that it is put to work for the same goals as we ourselves have, and I therefore welcome the growth in the community share movement in recent years. I’m not sure I can do a direct plug for my friend’s initiative (journalistic ethics and all that) but I can certainly help by mentioning the Microgenius website  which acts as the central point of contact for all current community-led share offers. Microgenius is worth bookmarking and checking regularly.

What makes – or should make – a coop ethical?

I’ve been thinking about what we should, as communities and societies, expect of cooperative businesses when it comes to their social and environmental performance.

Cooperatives want to claim the ethical high ground – but in fact if you look at the current internationally-agreed Co-operative Principles, it’s only the last Principle, number 7, which asserts that cooperatives are something more than businesses run in order to maximise economic returns. And the way this is worded (“Co-operatives work for the sustainable development of their communities through policies approved by their members”) is, let’s be honest, pretty woolly.

The International Co-operative Alliance, the custodian of the Co-operative Principles, has agreed that each of the seven Principles should be accompanied by much more detailed Guidance Notes and it is currently inviting comments and responses for the three Guidance Notes already in draft form, including that for Principle 7. You’ll find the information on the ICA’s website here.

I’ll admit that, as it stands, I’m not wildly impressed by the draft Note for Principle 7. But rather than carping from the sidelines, I thought I ought to get stuck in and offer some thoughts of my own on what such a Guidance Note should contain.

So that’s what I’ve done. My submission to the ICA is focused on the concept of the triple bottom line (social and environmental as well as financial performance) and I try to offer a number of very practical proposals for ways that cooperatives worldwide should be encouraged to meet social and environmental objectives. For example, I propose that cooperatives should commit to meeting the ILO Declaration on Fundamental Principles and Rights at Work (this includes the elimination of discrimination at work and to the right of employees to trade union representation). In relation to the communities in which they operate, I argue for a commitment that cooperatives undertake to pay the full corporate tax due in the country/countries in which they operate, and to formally renounce measures to reduce their tax liability. Some suggestions for good practice in relation to supply chains and to socially responsible investment are also in there.

In relation to environmental good practice, again I’ve tried to suggest a series of practical measures which can be recommended to cooperatives. I also propose that, if a commitment to environmental sustainability is to be core to a cooperative’s business operations and more than ‘greenwash’, it needs to be directly ‘owned’ by a cooperative’s Board of Directors.

If you’re interested, you’ll find my ICA submission on my website here. I also hope you’ll thin of making your own contribution to this debate and consultation. The ICA is giving us a real opportunity to hold a wide-ranging debate about exactly what an ethical cooperative business should mean. It would be a shame to miss the chance.

On capital and cooperatives

My series for the Guardian on the theme can coops compete? comes to an end today, with the final piece now published (here).  It’s about the often tetchy  relationship between coops and capital.

As you’ll see,  I begin the piece with a quote from coop pioneer George Holyoake who wrote in 1878 that “Capital is like fire, or steam, or electricity, a good friend but a bad master”.  The problem of capital  – as we saw last year when the Co-operative Bank had to nuzzle up to the hedge funds – remains as acute today as in Holyoake’s time.  How do you satisfactorily defend member self-determination in cooperatives when investors are there as well, wanting their share of the cake?  How do you fill the capital gap, if you can’t access equity?  (Is the – highly controversial – answer in fact to accept investors as fellow-stakeholders in the business and devise a multi-stakeholder coop model which gives them membership rights too?)

I’ve felt for a long time that the big issue facing the cooperative movement at the moment is this one of capital, and I’m pleased that the International Co-operative Alliance has recognised this in its strategic Blueprint for a Co-operative Decade.  I’m currently playing a small part in relation to a UK working party that’s exploring capital solutions internationally for cooperative banks and insurers, which we hope will feed in to the ICA’s recently established ‘Blue Ribbon’ commission on capital.

The Guardian piece explores some of the possibilities around member-provided capital.  And I also float the idea that cooperatives need to develop financial instruments to tap into the growing pool of ethical/socially responsible investment capital, most of which (ironically) currently finds its way into plcs.

Yes, there are cooperative success stories out there

A small workers’ cooperative in the town where I live asked me over the weekend if I would write a short article for their forthcoming customers’ newsletter.  They were concerned that the media coverage of the Co-operative Group’s trading and governance problems would be encouraging the idea that all cooperatives were badly run. Could you point out, they asked me, that workers’ coops are still an excellent business model?

I’ve been happy to send across a short piece which I hope does what they’re after.  Because they’re right: it is very important that the message gets through that the Co-op Group is only one of around six thousand coops in Britain, even if it is far and away the largest.

We don’t knock the whole plc model just because a company like Woolworths hits the buffers, and we shouldn’t allow the cooperative business model to be dismissed on the back of the Group’s shortcomings. (But having said that, the Group should make us think very carefully about how management and corporate governance is to be organized in coops.)

I’d define a well-governed coop as one which is true to its cooperative principles, one which gives its members real engagement in its strategic management, and – not least  –  one which also is successful in trading terms.

There are, I’m pleased to say, quite a few cooperatives which could make a case for being in the short-list when it comes to being well-governed.  I’m going to mention one, and it’s not because they bribed me with a free vegetarian lunch when I visited their headquarters at Elland just off the M62 a week or two back.

Suma, the wholefood wholesaler which operates as a workers’ coop, had its most successful year in its thirty-something year history last year, increasing turnover from £30m to approaching £34m.  Net profit was up too, so the coop was able to pay its members a significant bonus. (Suma practises wage parity, by the way).

There’s clearly some entrepreneurial flair at work, and I was interested to be told of the way they are working to grow their export trade which is now responsible for more than a tenth of turnover.  But they also have worked hard to make their strategic management structures work, without having other obvious models to follow. Suma’s six-strong management committee is responsible for the strategic direction of the coop: members are elected to serve a maximum of two two-year terms, and there is built-in gender balance.  Operationally, Suma has Function Area Co-ordinators, responsible for the different areas of the business.

Suma talks of its aim being to provide a high-quality service to customers and a rewarding working environment “within a sustainable, ethical, co-operative business structure”.  It looks like they’re not doing too badly in meeting these aims.

The Co-op Group and the way ahead

My post this morning about the Co-operative Group has brought in an interesting response from Nick Money of Co-operative Business Consultants, which I’d encourage you to read.  (You click the ‘comments’ link to the side of the original piece; I’m sorry responses don’t immediately show up).

Nick’s comments permit me to expand a little on the question of the Group’s 2013 trading loss.  It is a familiar tactic, if you’re going to make a loss, to try to see if it’s possible to pile as many of the losses as you can into one financial year – it all helps later on when profits are made, when you can demonstrate just how cleverly you’ve turned things around.  So I think there may well be an element of this in the Co-op Group’s case – and, as Nick says, the Bank will be contributing a major part of the 2013 headline losses.  But I am not convinced that the Group’s core retail business is on an even keel yet.  My own local store does not precisely exude an air of strong management input.

The Group at present is a conglomeration of businesses, in many cases accumulated by the coop movement over more than 100 years.  Converting the ‘non-core’ businesses (pharmacy or insurance, say) into separate independent coops is an interesting suggestion. And why not, whilst we’re at it, arrange to have strong employee input in these new coops’ governance structures?

Sustainability and cooperatives

Given the goings-on over the past forty-eight hours in the UK with the Co-operative Group, this may not be the most ideal time to invite you to step back to think more broadly about the coop business model.  But never mind: let me mention that the latest in my series of articles on the theme ‘Can coops compete?’ has just been published by the Guardian (the link is here).  The theme this week is sustainability, and as you’ll see the piece offers a relatively upbeat message.

Next week’s article, the last of the series of six, will tackle the tricky issue of capital in coops, one on which there’s plenty to say. ( It’s time, in fact, to stop blogging and to start writing it.)

On the Co-op Group and its little local difficulties

I didn’t spend several hours of my life yesterday at an emergency Board meeting, for the obvious reason that I’m not a member of the Co-operative Group’s Board of Directors.  Instead I spent around five minutes late in the evening talking to the BBC Radio 5 Live presenter Phil Williams and his listeners, discussing what we should make of the current troubles at the Group – or the ‘chaos at the Co-op’, as The Guardian puts it today.

It is never good news for a business when a chief executive and his or her Board disagrees on strategy, and ultimately if you’re in the top job and your directors don’t like what you’re proposing to do, you go.  But Euan Sutherland’s resignation from the Group yesterday clearly compounds the problems facing the organisation.

There are three major problems. Firstly, the business is suffering severe trading difficulties. Last year’s loss is not yet formerly announced, but we are told to expect it to breach the £2bn mark. Secondly, the Group is short of capital. And thirdly, there is no-one at the helm – the Group’s finance director is holding the fort pro tem, but the Group now has to find a suitably qualified chief executive for an organisation which has been unhelpfully described by the exiting chief executive as ungovernable.  I’m not sure that this will be a particularly easy job for the head-hunters.

Big problems. And big problems not only for a particular trading business but, because of the Co-op Group’s size and influence, for the whole cooperative movement in Britain.

So will this turn out to be the end-game for the Co-op – or could it just be the start of something new and better? 

The Co-op is not alone in struggling in today’s retail climate. Morrisons is not in a happy state and even Tesco is finding the times challenging. But it is possible to turn businesses in difficulties around: it wasn’t so long ago that Marks & Spencer, for example, was considered a basket case.  Even John Lewis had a wobble a few years back.

Let’s recall, too, that the cooperative business model is successfully bringing home the bacon in many other parts of the world.  As it is in Britain as well: several of the regional independent societies are not doing at all badly at the moment. So the answer for the Group isn’t necessarily to become a pretend-plc.

One issue for the Group, however, is that almost all senior executives with retail experience will be coming from the plc sector – and so unless the Board has a clear vision as to how a major modern consumer cooperative should be different from the rest, the tendency will be to drift increasingly towards being just another business. I confess I see this as the most likely outcome.

A second scenario is that the Co-op Group does what cooperatives have over the past fifty years done only too well: muddle through, gradually shedding assets along the way.  I think muddling through is no longer a realistic option, however.

A third scenario, probably (regrettably) an unlikely one, is that the Group rebuilds itself by doing something very different from the rest of the pack – that it, by redefining what should be different about a cooperative business, and using this to gain both ideological and business advantage.  The Group successfully did this to a limited extent twenty years ago in its emphasis on ethical banking and fair trade retailing.

This would definitely be the most interesting outcome and it might necessitate all sorts of radical changes.  I’ve been intrigued, for example, by the suggestion floated recently by Vivian Woodell of the Phone Co-op that the Group could de-merge itself into a number of independently run regionally-based coop societies.  It’s a back-to-the-future type approach which just might be the right way forward. There certainly needs to be more debate about the various options.

You’ll have noticed I’ve not said anything today about executive pay in the Group, the issue which began the present crisis when Sutherland’s remuneration package was leaked last weekend.  I’ve already blogged previously on executive pay in coops – and it’s an issue which I  want to return to soon.