A view from the States on the Co-operative Bank/Group affair

There may be some who read this blog, particularly from the UK, who would prefer not to be reminded of the Co-operative Bank and Co=operative Group meltdown of 2013-2014. However it is important that the lessons from this affair are properly learned, both by the coop movement in Britain and elsewhere in the world.

A useful aide memoire of the whole sorry business, including key dates and events, has just been written by US-based coop writer David J. Thompson in the magazine Cooperative Grocer.  It’s worth a read.

Cooperative democracy, Canada style

Canada’s powerful cooperative banking and insurance federation Desjardins is currently in the thick of an election campaign. Its current President and CEO Monique Leroux is coming to the end of her (maximum) two terms of office, each of four years,  and a new President to lead the cooperative will be chosen on March 19 and will take over on April 9.

Desjardins is a federation of self-managing credit unions (caisses) and the Group’s top executive is democratically chosen by an electoral college of 256 delegates, primarily representing the federated credit unions. The college meets behind closed doors to take its decision, in a procedure slightly reminiscent of the way the Vatican chooses a new pope (no white smoke, though). In 2008 Monique Leroux was one of eight candidates and obtained the majority vote after six rounds.

This time there are just three candidates. Guy Cormier and Robert Ouellette are both currently Desjardins Senior Vice-Presidents. The third candidate, unusually, is external to the cooperative. He is Daniel Paillé, a former politician who led the separatist Bloc Québécois.

One of these three men will shortly be in charge of a very influential internationally-minded cooperative. We’ll find out who it is very shortly.

Here’s my suggestion for the Cooperative Risorgimento

There’s a lot I find valuable in Lord Myners’ report. But I have one difficulty with his approach – his proposals are focused solely on a top-down approach to governance reform.

If the Co-operative Group is to change, there also needs to be bottom-up reform. The Group’s shops need to be radically different in their relationship with their customers than the competition.

I see a lot of my local coop. I shop there pretty well every day (it’s my corner shop). I chat with the staff. I bump into friends. I sometimes bemoan the stocking disasters (there was even a time when the shop ran out of potatoes). But my close relationship with my shop does not have any link to my distant relationship as a member with the Group.

Here’s my suggestion: Area Councils should go. Members should be invited to identify with their local shop. There should be meeting of member-shoppers at least every year, where we’d be given crisps and something to drink and get to talk to the store manager and an appropriate more senior member of staff. We’d probably moan a bit, but we’d also contribute good ideas, which would make the shop better. And we’d feel engaged.

I’m proposing to call my idea the ‘Cooperative Risorgimento’: it sounds better than ‘cooperative resurgence’. (And maybe if it happens Garibaldi biscuits will come back on the shelves, too).

 

First thoughts on the Myners report

I am going to resist the temptation to pronounce immediately on the Myners report on the Co-operative Group’s governance. I downloaded it this morning and have read it quickly right through. I now want to give more time to the report.

But I am going to offer some immediate thoughts. Firstly, I think it will be hard to fault the critique of the Co-operative Group’s current governance arrangements which Lord Myners puts forward. He is right to remind us that it was the Group Board who led the business into its present plight (perhaps ‘led’ is the wrong word: the Board has clearly not been great at strategic leadership recently).

I think Myners is right to draw attention to what he describes as the ‘practice of hiding behind ‘values’ in order to deflect or stifle criticism and protect self-interest’. Calling yourself a guardian of cooperative principles doesn’t necessarily make this the case.

It is Myners’ proposed remedies which should be the real issue of debate. There are numerous ways in which a very large cooperative business could make itself accountable to its members, and Myners has very firmly plumped for one particular solution. His proposal, as well as other possible solutions, needs proper discussion.

Lord Myners does seem to have damaged his case somewhat by managing to unite against him both the more radical wing of the movement (those who ought to have been his natural allies for democratic rejuvenation of the institutions) with the traditionalist and often uninspiring contingent who are there in the Group’s democratic structures. I would hate to have to spend the time necessary to play the internal political game at the Group, building alliances and offering reassurances, and it would seem that Myners feels much the same way as me – but if reform is to be achieved that is probably what he should have tried to do.

I have signed up for the public webinar next Monday evening when Myners will be answering questions. I am not sure it has been widely publicised, so will give you the link: http://www.co-operative.coop/MynersReview/webinar/

On corruption and delusion

As I think I’ve mentioned, I’ll be at the cooperative conference in Manchester on Friday May 16th, called by Co-operative Business Consultants and others in the movement to help pick up the pieces and rebuild.

I’ve begun to think about the presentation I’ve been asked to do for the workshop which bears the title corruption v. transparency. I’ve said before that a very valuable – if depressing – piece of work for a cooperative historian would be track the story of corruption in cooperative societies from the nineteenth century through the dog days in the second half of the last century and up to our own times. Why would this be valuable? Because it would warn us how not to repeat the mistakes of the past.

Jo Bird, one of the conference organisers, drops me an email to discuss the workshop and makes a very valid observation. She writes of Johnston Birchall’s recent report for Co-operatives UK on governance in large co-ops which lists several examples of corruption in UK coops: “Corruption and malpractice is not talked about enough. Birchall’s list was such a contrast to the unwritten but prominent co-operative value of delusion . Delusion manifests in attitudes such as ‘we are all good guys and rarely do wrong’,” Jo says. I think she’s right.

Today’s FT coverage of the Co-op Group: why I’m sceptical

The Financial Times runs a front-page story today on the Co-operative Group which lays into the Group’s governance structures.

But I’m sceptical about the accuracy of the journalism. The story begins “At this month’s Co-operative Group board meeting to approve the 2013 accounts, its executives were braced for a grilling over the disastrous £2.5bn pre-tax loss. Instead, the members’ opening questions had a rather more banal flavour: the quality of groceries. “When will the Co-op start stocking Fairtrade bananas?” asked one member. “Why doesn’t it sell eggs laid by ‘happy chickens’,” said another.”

Why am I sceptical? Because almost exactly the same story (right down to the mention of the alleged happy chickens) emerged several months ago, in a leak designed to cast doubt on the qualities of the Group’s democratic governance arrangements. And – as anyone with even a smattering of knowledge of cooperatives would know – the Co-op Group has sold fairtrade bananas for many a long year and (like every other major supermarket) also sells free-range eggs.

So, pretty clearly, I would say that the FT is wrong. These questions were not asked at this month’s Board meeting (or at least not in those terms).

It’s possible that the FT writers could have confused the ordinary members’ meetings which take place around the country and which are open to all seven million or so of the Group’s card-carrying members (I blogged on the one for my area last year), where questions like this could conceivably have been posed. It’s rather more likely that the FT is talking of recent Boardroom discussions where Board members have presumably raised with senior executives how the Co-operative Group can more effectively harness its residual reputation as an ethical retailer to achieve competitive advantage – and where discussion about the quality and supply chain provenance of the food being sold is absolutely a legitimate matter for boardroom attention.

So we have to assume that today’s FT piece is mischievous. A pity, because the FT has previously offered some good objective reporting on the Co-op Group story.

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.