When coops decide to merge

Once upon a time Britain had over 1400 local cooperative societies.  Now we have around twenty and with the recent ScotMid take over of Penrith and the current Midlands/Anglia merger the number is going down further.

I explore some of the issues around cooperative mergers (which, as we now know from the Co-op Bank/Britannia affair, can sometimes turn out to be bad ideas, not good ideas) in a piece written for the Guardian’s social enterprise pages.  It was posted today and you’ll find it here.

Incidentally the Guardian’s headline might suggest on casual reading that the piece is about a decline in coop societies’ performance or profitability. It’s not:  the decline I’m talking about is simply numerical. Sometimes, though, mergers can simply be nodded through by members.  I try to suggest that, within the coop movement,  we should have more of a discussion of merger pros and cons.

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The low-down from inside the Co-op Bank

For those interested in the British cooperative movement, the must-see website at the moment is that of the Treasury select committee.  This is where you can access the transcripts (and the video recordings) of the interviews that the select committee is conducting with key past senior managers of the Co-operative Bank and Co-operative Group.

The draft transcription of the encounter last Tuesday with the Bank’s former CEO Barry Tootell has now appeared on the select committee’s website, and together with the interviews with Peter Marks (ex CEO, Co-op Group) and Neville Richardson (Barry Tootell’s predecessor at the Bank) provide a real insight into life at the top at the Co-operative Bank in the past five years.

I have to say that I think Barry Tootell performed very well and I find his account of the merger with the Britannia Building Society convincing.  We now know that the Britannia bequeathed a shed-load of bad debts to the Co-op, but I’m prepared to accept that at the time the Co-op did do the appropriate degree of due diligence.

There’s an interesting comment from Barry Tootell when he was asked for his impressions of the Bank when he first was employed there in 2007.  He replied: ”It was a business that had historically operated with a high degree of competency. I was quite impressed in joining the Co-operative that not only did they have a culture within the business that was hugely collaborative and very , very open and non-political and a great place to work, but also with very high calibre people recruited into some of the key roles. I was quite pleased when I joined the business that they were not — it is a slightly disrespectful view — sleepy and backward looking as I might have thought they were.”

Although the Bank has its own Board of Directors (with five ‘professional’ non-executives) The Co-operative Group, the Bank’s parent, operates with a twenty-member Board directly elected by the Group’s members.  I detect implicit criticism of this arrangement (a cornerstone of cooperative corporate governance)  from some members of the select committee, and it’s interesting that Barry Tootell did not take the easy way out and collude with their criticisms.  Instead he said: “I think we have genuinely benefited from the diverse opinions that we see in our boardroom. We have the represented views of the broader membership of the Group sitting in our boardroom and playing a part in the debate that we have as directors. Whether that be bringing the ethical card to bear or whether that be representing the broader view pf the membership, it is a helpful check and balance to some of the decision-making we have undertaken. I do not think we have fallen short by having that broader democratic representation in our boardroom.”

As I’ve suggested in a previous blog, I have a real concern that the Co-operative Group will respond to its present woes by moving away from member representation in its management.  There may be a battle ahead here.