The issue we have to get right: governance in cooperatives

Expect yet more headlines about the Co-operative Group this week, as Lord Myners’ report on corporate governance in the Group is published.

Pretty well everyone involved in the cooperative movement thinks that the Group’s governance structure needs reform, but that’s about as far as consensus goes at the moment. One of the problems is that many activists fear that governance reform is effectively a euphemism for a comprehensive sell-out of cooperative principles, leaving management in charge of a business which would rapidly become almost indistinguishable from a plc. Some of the voices raised after Myners’ initial report come from this perspective. These get muddled, though, with special pleading from cooperative apparatchiks who have spent their lives working their way through the democratic ranks and now have much to lose (in terms of both power and money) if their role in the Group’s governance is reformed.

An intelligent debate becomes more difficult when the enemies of the cooperative movement are also actively at work in the media and elsewhere in trying to do down the whole idea of a democratic cooperative business model.

What’s the right way forward? Personally, I am rather more interested in the idea of a dual governance structure for the Group, with a members’ supervisory board and an executive board, than the Board of the independent Midcounties society (a group who are usually at the more radical end of things, but who are leading the battle against this proposal of Myners). There are, I think, some successful examples of dual board structures working well for larger cooperatives abroad, where the members’ board acts as the guardian of the organisation’s strategic adherence to cooperative principles. And just consider Britain’s building societies for a moment: isn’t it possible to imagine that a large society such as Nationwide might actually be more accountable to their members if its board had a members’ supervisory board watching over its actions – and the scale of its directors’ remuneration?

Britain’s cooperative movement has become remarkably insular and is almost entirely ignorant of how coops abroad do these things. So an absolute must-read in Johnston Birchall’s latest report for Co-operatives UK, The Governance of Large Co-operative Businesses. As Birchall says in his report “we need to engage in some serious mutual learning on the question of how to ensure member-centred governance in very large co-operatives”.

I concur. And we urgently need much more research work undertaken internationally. Even with Birchall’s considerable academic knowledge, I still feel that we aren’t yet at a position where we know just how well the managements of large coops around the world are working to meet their members’ needs. Some of the coops mentioned in his report have, I suspect, governance structures just as rackety as the Co-operative Group’s own practices

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