Capital for coops: not a chocolate biscuit

Journalistic integrity demands that I admit to a mistake.  I was wrong when, in my last blog,  I described the new initiative on capital for cooperatives from the  International Co-operative Alliance as their Blue Riband Commission.  Chuck Gould their director-general has put me right.  The ICA have named it their Blue Ribbon Commission.

And when I admitted to Chuck that I wasn’t really any the wiser, he told me that this has traditionally been a US term for a high-level enquiry led by experts.

So I hope that helps put things right. The substantive point remains that this is potentially a very valuable initiative.  See below!

 

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Never another Co-op Bank… can we develop coop-friendly ways to find capital?

So, OK, let’s pretend to turn back the clock and discuss what the Co-operative Bank could have done differently.

More broadly, let’s discuss how a large cooperative organisation that finds itself undercapitalised, for whatever reason, can access the capital it needs in ways which don’t put at risk the key cooperative principle of delivering benefits for members rather than for investors.

It would have been nice to think that other cooperative banks and financial institutions around the world could have stepped in and joined the Co-operative Group as co-shareholders in the Bank.  It didn’t happen, although I understand that the Bank’s then Chair Paul Flowers did have early discussions with major coop banks in both Europe and North America.  For whatever reason, no deals were done and instead the hedge funds came storming in.

But there’s a more fundamental reason why this didn’t happen, and that’s because the international cooperative movement hasn’t really developed yet the sophisticated financial instruments which would enable coops with capital to invest to be able to put their money into coops which need capital – or for that matter how institutional investors such as pensions funds could also invest easily in coops.

The good news is that the International Co-operative Alliance is now taking a serious interest in this issue.  There was an excellent session at the ICA’s Cape Town conference this morning to launch what the organisation is calling its ‘Blue Riband’ commission, specifically to address issues of capital for coops.  The Commission’s Chair Kathy Bardswick (CEO of Canadian insurers The Co-operators) led the discussion, claiming that every coop at some stage of its life needs to find business capital. “How do we ensure that there is reliable and available capital without having to jeopardise the concept of member control?” she asked. She admitted that at the moment there are more questions than answers.

She has some of the best global cooperative talent working with her on the Commission:  Tan Suee Chieh of the Singapore cooperative confederation NTUC Enterprise, Bill Cheney of the US credit union organisation CUNA, Arnold Kuijpers the Director for Corporate Affairs of Dutch coop Rabobank and Monique Leroux of Desjardins (Canada). But Kathy Bardswick also called on the broader cooperative movement to feed in their questions, ideas and suggestions. Already I gather that Co-ops UK may be interested in supporting some serious work in the UK around cooperative capital, revisiting perhaps some of the early research which led to the book Co-operative Capital ten years ago, which you’ll find on my website

The Co-op Bank disaster has surely taught us of the urgency of this issue – but also of the need to address this internationally, rather than at national level. It is too late to save our own Co-op Bank, but not too late to develop innovative capital solutions which could yet ensure that other cooperative institutions don’t end up demutualising.

I have only one question:  why the name ‘Blue Riband’ for this Commission?  Wasn’t Blue Riband a type of chocolate bar?

Sneezing in Manchester: the wider effects of the Co-op Bank’s difficulties

There’s a twitchy feel at the moment around Manchester’s cooperative quarter, where I was this morning.  This is the historic area near Manchester’s Victoria station where many of the most important institutions in the British cooperative movement (including Co-operatives UK, the Co-operative College and the Co-operative Press) have their offices… just down the road from the Co-operative Group’s sparkling (hubristic?) new office block.

The twitchiness comes of course from the Group’s current financial plight, brought about by the capital shortfall faced by its subsidiary, the Co-op Bank. The Bank will be going public soon on the precise deal it is proposing to its corporate and private bondholders.  But there is an expectation that the Group will be entering a period of considerable retrenchment – and that this will directly affect many other parts of the coop movement which directly or indirectly rely on the Group’s support.

This is the drawback of having the ‘one big society’ which the British coop movement talked about and debated for almost a hundred years before finally the Group came together at the start of this century.  When things go well, big can be beautiful.  But having all your coop eggs in one basket means risking much more when things go wrong.  As a senior figure in the movement put it to me today, “When the Group catches cold we all sneeze”.

Talking of the Bank and its need for private capital, Co-ops UK has moved quickly to commission coop historian and academic Johnston Birchall to write a report on experiences elsewhere in the world where cooperatives have brought in external minority investors.  Johnston’s report Good governance in minority investor-owned co-operatives is out today, and looks very valuable.  I hope to read it and offer some comments tomorrow. In the meantime Co-ops UK’s Ed Mayo has a thoughtful blog on the same subject.  Well worth a look.