The Co-op pays a high price
Reform must maintain cooperative principles
— Even for a seasoned cooperator it can be difficult to have faith that the Co-operative Group can survive its latest setback – another £400m black hole in the Co-operative Bank books revealed last month.
With 70 per cent of the bank now owned by hedge funds, the chief executive of the group jumping ship within a year of taking over (despite a £3.6m pay package), and the financial pressures on it, there is no doubt the board of the Co-operative faces challenges.
Cooperatives were never a proxy for being unbusinesslike and all who support the Co-operative Group should back steps towards reform, but not at the cost of its cooperative principles. It is not a PLC.
An ethical ethos must go hand in hand with being good at what you do. I joke to staff in my own local Co-op store about the scribbled, tatty paper signs about forged £5 notes, advising you can only use credit cards at the service till, and the well-used one saying ‘out of order’. And, dare I say it, my local Tesco Metro has shorter queues and working tills. This matters.
The Co-op should have had an inbuilt advantage as it always had a strong convenience store presence and, conversely, few high street bank branches but good telephone and internet banking. In its grocery stores you could always be sure that products were fair trade, British farmers were paid a fair price and that decisions were ethical. But the Co-op needs to provide good value as well as being ethical and focused on members.
In the firesale of assets the cooperative principle must not be lost: farms and pharmacies are being sold off to the highest bidder, but tenant farmers and local cooperatives might be keen to buy these and maintain the principle of mutual ownership for mutual benefit. Given the Co-operative Group’s roots in assuring quality in food in an era where adulterated goods are commonplace, supporting quality from field to store should be a priority. This does not mean giving away assets at a knockdown price but at a fair price to those farmers it has worked with for years. It is ethical business practice and would maintain a good supply chain.
There are also challenges about leadership and governance. Former City minister Paul Myners became a director and was tasked with a review of governance to report in May. After the chief executive of the Co-operative Group, Euan Sutherland, quit, Myners rushed out a progress update calling for two parallel boards – one fully made up of executives and one of elected members representing the different regions and local cooperatives of the group. The current board does include members who run large Co-op businesses (including vice-chair Ursula Lidbetter, chief executive of Lincolnshire Co-op), but Myners was scathing about the elected members and democratic structures.
The Cooperative Commission, which reported in 2001, made a number of recommendations about group governance that were not followed through, including the appointment of external directors. Change must be done with members, not to them, so why not revive the commission and work with expert cooperators rather than leave the job to one man?
The board of the Co-operative Group is under pressure to push through rapid change, but it must not have its hand forced by those outside the cooperative sector. It needs to be confident in its values. Let’s have an honest review, not one forced on us by PLC chiefs. Moreover, some in the group want to cut its bank links and let it sink or swim as a PLC. But the high street would lose a richness if customer choice was between the large banks and the few remaining building societies. It is important to fight for the alternative.
I have been heartened by ordinary bank customers and Co-op members up and down the country keen to fight for ‘our Co-op’. These are not activists but citizens trying to make the right choice about what business they support. Multimillion-pound executive pay and the push to become a PLC does not go down well with them. The new management needs to recognise that part of its brand is ownership by members. It ditches this at its peril.
Meg Hillier is member of parliament for Hackney South and Shoreditch
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Co-operative Bank, Co-operative Group, Meg Hillier, mutualism, Paul Myners