So what’s this about cooperative councils?

I was talking earlier this week with the leader of a large local authority who, like his colleagues in some other Labour-controlled cities, has declared his council to be a ‘cooperative’ one.

He shared with me a number of  recent things his administration has been doing to try to live up to its pledge to be genuinely cooperative (or, as the slogan puts it, a ‘Brilliant Co-operative Council’). We talked of his desire to encourage what he called “active citizenry”, whether in the field of education (one community college is a cooperative trust, for example), through the city’s three community-led development trusts, or through the proposal to pass council-run open spaces into a new trust, an idea currently under consideration.

This is such a difficult time to be a local authority councillor, let alone the leader of a major city trying against all the odds to maintain services whilst having to make swingeing cuts, that I can only admire his tenacity. I last wrote about ‘Co-operative Councils’ in March in The Guardian (you’ll find a link on my website), since when the twenty or so councils involved have formed themselves into  the Co-operative Councils Innovation Network.  The Network offers the following informal manifesto for its work: “We believe that the unprecedented challenges facing the public sector and local communities mean that traditional models of top down governance and service delivery are no longer fit for purpose. We agree that we urgently need to create a new approach, and that the founding traditions of the co-operative movement – collective action and co-operation, empowerment and enterprise – offer a foundation for fresh and innovative solutions to help tackle the challenges of today in genuine collaboration with communities.”

It’s difficult to disagree with that, and I’m all for an end to top-downism and for genuine partnership between councils and their citizens.  Admittedly there can be problems in the implementation:  there have already been probing questions asked of the original ‘cooperative council’, Lambeth, in the way it has recently evicted members of short-life housing coops in the borough, an issue reported widely and covered again in The Guardian earlier this week.

More substantively,  I do have a worry over the idea that local authorities can genuinely claim the term ‘cooperative’. The core principle of cooperation is that people voluntarily choose to come together as members of a cooperative – membership is not something which can be imposed on them from on high. Local authorities can be (and should be) lots of things: democratic, accountable, responsive, accessible, good at cooperating.  I’m just not convinced they can be Cooperatives.

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New global coop ‘marque’ launched

coop_sml_logo 

The main road from the international airport in Cape Town is enlivened by flags showing the new global ‘COOP’ marque, launched on Saturday by the International Co-operative Alliance at its world conference in the city. It’s the first public outing of what the ICA hopes will soon become a familiar logo, one which will reinforce an international identity for the cooperative movement based on the slogan that ‘co-operative enterprises build a better world’.

If you visit the Guardian’s social enterprise site, you’ll find the piece which I filed this morning on the launch… and you’ll also see my comment that it appears unlikely that the UK’s Co-operative Bank – with only 30% cooperative control – will be eligible to use it.

The design work was undertaken by long-established workers’ cooperative Calvert’s and the design company’s Sion Whellens was at the conference today, explaining how the eventual logo came to be the one chosen.  His hope, he said, was that in due time the logo would be as familiar as the Fair Trade mark, which he described as something of an inspiration behind the project.

The Oxford-based cooperative advisory body Plunkett Foundation was quick off the mark and is the first organisation to be granted use of the marque, with the Co-operative Press and (of course) Calvert’s also already approved.  Coop federations in Canada and the US have also already been given the green light.

Details of the marque and how to apply to use it are at http://www.identity.coop/

What’s on the agenda for the international cooperative movement?

I’ll be blogging next week from the conference of the International Co-operative Alliance, taking place over the next few days in Cape Town.

The ICA came into being in the 1890s very much through the efforts of the British cooperative movement, and the Brits also played a big part in helping the organisation survive and regroup when it nearly went under a decade or so ago.  (Pauline Green, then head of Co-operatives UK, played a key role at that time and is now the ICA’s President).

Things have been looking up more recently, though there’s still plenty which a global cooperative organisation needs to be doing.  I’ll be looking out for the launch of the new ICA global ‘COOP’ brand, scheduled for tomorrow, and hoping to catch the session dedicated to cooperatives and sustainability on Monday.  I also await the launch of new guidance notes around three of the seven international cooperative principles and just hope I won’t be disappointed at what the ICA is proposing with regard to environmental and social business objectives, where at present the principles are very weak.

I also gather from the ICA’s Director-General Charles Gould that the ICA is establishing a Commission to explore new ways that cooperatives can find the capital they need (given that coops are generally not able to access equity capital without doing a Co-op Bank type deal).  The well-respected Kathy Bardswick, CEO of The Co-operators insurance company in Canada, is to chair this Commission, an appointment which bodes well for its work.

Can the Co-op Bank still legally call itself ‘Co-operative’?

Cooperative legal specialist Ian Snaith has raised the interesting argument in his blog that the continued use of the name Co-operative Bank, once it ceases to be majority owned by the Co-operative Group, could be legally questionable.

UK, European and international law sets out criteria as to what constitutes a genuine cooperative.  Ian’s view is that a plc which is only 30% owned by a cooperative body does not meet the criteria.  He also suggests that continued use of the name would be unethical.

He concludes his detailed review of the law with the comment:  “The new owners are welcome to choose a new name that expresses their ethical intentions and brand. There is no problem about making the bank sound “cuddly”. They can have an “ethical” board to try to keep the brand’s image. They can amend the Articles of Association. They must not say that it’s a co-operative when it isn’t. That is disreputable.”

There’s another interesting question linked to this.  The International Co-operative Alliance meets next week in Cape Town when it will adopt a new global brand for genuine cooperative businesses.  The logo, which is based on the letters COOP with the middle two letters interlocked, is intended as a universally recognisable way for the public to know that they are dealing with a business which meets the agreed international cooperative values and principles, including member ownership and one member one vote.  Will the Co-operative Bank in its new ownership form be able to use the brand? Logic would suggest that it won’t.

Coop bank difficulties… this time in Holland

As if one bad-news cooperative banking story isn’t enough for one week, the Financial Times reports today that Rabobank faces a regulatory fine of almost a billion US dollars.  Rabobank is a highly successful and well-capitalised Dutch cooperative bank with its roots in the farming sector.  The national Rabobank is effectively a secondary cooperative owned by a network of local cooperative banks across the country.  “In light of our cooperative mission, Rabobank elects to make the customer’s interest the starting point for its daily activities,” the bank’s website says.

The swingeing fine is for alleged manipulation of the Libor interbank lending rate.  In Britain, Barclays and RBS have also been fined for Libor manipulation.

I can’t help thinking that a billion dollars of Rabobank’s capital would have been mighty useful if it could have been invested instead in our own Co-operative Bank.

An audience at the Vatican

The Pope has an interest in cooperatives, or so I gather.  Pauline Green and Chuck Gould, respectively the Chair and Director-General of the International Co-operative Alliance, reportedly spent the best part of an hour with Pope Francis earlier this week discussing among other things the role which coops can play in development.  It probably helps that, as an Argentinean, the Pope comes from a country with a very strong cooperative tradition.

When coops bring in external investors

So imagine this:  you, your family and, let’s say, your three much loved cats have been living happily in your house for many years, regularly paying all the household bills and sometimes even having a little left over at the end of the month.  But then times get tougher.  Without some assistance with the bills, you may even find yourselves homeless.

But someone you meet down the pub offers to help.  They offer to pay 40% of your household bills. In exchange, they simply want to put a tenant in your spare bedroom and take the rent the tenant pays.

You’re not sure, but you need the money.  And the deal is done.

My story may not be exactly analogous but something very like this happens when a coop takes in external investors as minority shareholders….

…which of course is just what the Co-op Bank is about to do.

I wrote recently, both on this blog and for the Guardian,  on multi-stakeholder cooperatives, but since then I’ve been reading the excellent new Co-operatives UK booklet from Johnston Birchall, Good governance in minority investor-owned cooperatives.  This is an extremely valuable piece of work which I recommend without hesitation

Johnston Birchall explores in detail what happens around the world when cooperative bring in external investors as minority shareholders. He considers among other examples the ownership and governance arrangements at Crédit Agricole,  the Kenya Co-operative Bank, the Italian insurer Unipol, the Irish agricultural business Glanbia and the Swiss milk processor Emmi.  He also reminds us of the (problematic) route followed by Kent Reliance Building Society which chose to join up with a partner private investor in a holding company OneSavings.

Johnston Birchall’s conclusion is necessarily a cautious one:  “The conversion of cooperatives into hybrids that have a minority of investor owners has uncertain outcomes,” he writes.  There have been examples of cooperatives which have found the hybrid model too difficult and have tried to move back later into a purer coop format, he reports.  On the other hand, others have gone the other way: “Others find that the co-operative share is diluted over time so that the cooperative becomes just one institutional investor among others.  When the model works, it does seem to lead to a dilution of the meaning of ownership among cooperative members,” he writes.

My first encounter with these issues came in relation to the former workers’ coop Poptel, when it was forced to take in a minority external investor.  A little later, the minority investor became the majority investor. Poptel has now gone (though a little part of it was later absorbed into the Phone Coop),  but the story of its demutualisation, which I recounted at the time on my website,  was a regrettable one.  Partly as a consequence, I remain unconvinced that minority investor-owned coops are anything but an emergency measure when all else fails.  And the lesson I draw is the same one I reported on earlier this year in another Guardian piece: it is that the cooperative movement internationally urgently has to explore possible new capital instruments for large cooperatives which, whilst having some of the properties of equity capital, don’t allow investors to become cuckoos in the nest.