The battle to maintain co-operative values in the Co-op Group begins
The Guardian, By Andrew Bibby
"Democratic, community, independent, passionate, ethical" – these were some of the words Co-operative Group members used when asked to describe co-operatives at the recent half-yearly group meeting.
The general public, looking in from outside at the worst crisis the British co-op movement has faced for years, might choose different words. "Disorganised, poorly governed and unprofitable" spring to mind. And this draws a veil over the extraordinary revelations of the personal life of Paul Flowers, the Co-operative Bank’s former chairman.
All the old guard has now gone. The appointment of Ursula Lidbetter this week as the new chair of the Co-op Group’s main board completes a root-and-branch overhaul of the senior management teams of the bank and the group as a whole. Lidbetter, the chief executive of the independent Lincolnshire Co-operative, replaces Len Wardle, who had previously said he would step down next year. The group’s new chief executive Euan Sutherland (recruited from the Kingfisher group) came in last May to replace the controversial incumbent Peter Marks. The Co-op Bank’s board of directors has also been almost completely reformed, and a new chief executive installed, ready for its anticipated future as a quoted company.
Sutherland has a challenge on his hands, given that the Co-op Group turned in a very poor trading performance earlier this year. Almost all parts of the sprawling business empire saw sales fall in the first half of 2013 compared with 2012 (only the funeral division did well). The trading situation means that there is no autumn dividend this year for the Co-op Group’s seven million individual members.
Sutherland has warned that, under his leadership, the Co-op Group will need to change. "Walk into one of our outlets and evaluate our offer to our customers and members. Ask yourself honestly: are we really that different? The truth is we stopped being different many years ago," he told his audience at the half-yearly group meeting. He added that the group was not prioritising the needs of its customers and members.
Improving the trading position of the Group, and in particular offering shoppers better value for money, is one task. At the same time, Sutherland has called for a refocusing of what the group’s co-operative structure and principles actually mean, and how its mutualism can be made more relevant to young people. The Co-op Bank fiasco, which called into question the role played by elected directors, has led the group to launch a governance review, announced at the half-yearly group meeting. The review’s recommendations will be presented at the next group AGM in May 2014.
The group currently has 20 people on its board, 15 of whom are indirectly elected by members (all those shoppers who carry the yellow membership card), via a complicated series of intermediary regional boards and area committees. The other five directors represent Britain’s diminishing number of independent co-operative societies. This multi-stakeholder structure reflects the fact that one of the group’s predecessor bodies, the old Co-operative Wholesale Society, was a secondary co-operative owned by the independent societies. Lidbetter is therefore in the somewhat curious position of having executive management responsibility for her own autonomous society. (The Lincolnshire has a strong local reputation and, unlike the Co-op Group, has reported an increase in sales this year and an £18m profit.)
The current governance review is designed in part to address criticism that a democratically elected board does not necessarily have the competence to oversee a multi-billion pound business (a criticism implicitly made by some Conservative members of the Treasury select committee). But the group’s difference from commercial retailers lies exactly in the fact that it is run for the benefit of members rather than shareholders. Moves away from democratic governance risk moving the group away from the very thing that ultimately could give it unique competitive advantage.
It is clear that the next six months will be crucial in deciding whether the Co-op Group can pull off the challenging trick of strengthening its governance while maintaining its democratic principles. Co-operative activists are already mobilising to engage in this debate. An open conference, called by Co-operative Business Consultants (CBC) together with the Society for Co-operative Studies and Suma Wholefoods co-op, has been fixed for 17 January in Manchester. "The effective demutualisation of the Co-operative Bank and exposure of difficulties at the Co-op Group is giving the co-op movement’s enemies a field day," says CBC’s Jo Bird, one of the organisers. One conference aim, she says, is to respond by launching a charter for accountable member control for large co-ops, based among other things on the experience of other large democratic organisations such as trade unions and credit unions.