The Cooperative scandal, it’s got the lot.
Sex + drugs + religion + money = media feeding frenzy.
Liberals mustn’t join in too much. Especially where mutual ownership and public services are concerned.
Like the Cooperative Bank, most mutuals and co-ops operate in market conditions. Unlike it, most are small. In public service, as free collaborations, mutuals provide an alternative to collective state monoliths. In commerce, properly run, they avoid public companies’ shareholder short-termism. Indeed, in some ownership models, they confer real power on consumers. The Cooperative Party gives Labour significant reach across mutual enterprises. But it doesn’t control all of them and mutualism sits uncomfortably with Labour’s centralising reflex. Indeed, pre-election triangulation saw Tory Francis Maude adopt mutuals for public service reform.
Tory mutualism has gone the way of the Big Society, Green Conservatism and Phillip Blond. Yet this is natural Liberal terrain. As Jo Grimond and others understood, mutuals incarnate our beliefs in private enterprise, fair shares, and the dispersal of power.
Maude was onto something. Commercially driven, but not shareholder-focused like ordinary outsourcing, mutuals could transform the public sector. Stakes owned by employees would create personal incentives to deliver high-quality outcomes.
The Cooperative Bank scandal shows how amateurism and unaccountable size weaken governance. But most analysis has been circular – the Co-op could’ve avoided aping bad bank practice by appointing bankers – or negative – co-ops/mutuals don’t work. This is like writing off capitalism because of Enron.
Mutuals can succeed. So can building societies and credit unions. Public company scandals in the 1990s led to reformed company boards. Liberals should use the spotlight mutuals/co-ops to eradicate their weaknesses – cronyist tendencies, Labour dominance – and promote their virtues. Mutuals and co-ops are sometimes messy, even eccentric. Some are weak. Some fail. Freedom and localism are often like that. And if they get too powerful, as we have seen, they can become corrupt. But better with appropriate safeguards to press on with Post Office Counter mutualisation than to rerun the arrogant statism and under-pricing shambles of Royal Mail privatisation.
Modern mutuals and co-ops don’t all resemble saintly George Bailey’s Building and Loan in It’s a Wonderful Life, though with support and reform more could aim at that sort of ideal.
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16 Comments
A lot of The Co-ops problems stem from its “close links” with Labour. In fact Labour have effectively controlled The Co-op for decades, using it as a cash-cow. The parallels with The Trade Union movement are obvious .
Something that gets me with mutuals is their phony elections every year. You are invited to vote for the directors as if there was a point to your vote but as the number of candidates equals the number of vacancies, there is no point in voting at all. These aren’t elections, they are coronations. The average member has no more say in the governance of mutuals than they do in any other type of company.
The mutual movement will never succeed unless they are only mutual by name.
By the way, I think there is definitely a market for mutuals, one that is arguably not being met at the moment, I just don’t agree when people want lots of government money spent on these things, because then they just because another form of public sector employment.
I am also concerned about what I call the “not for profit scandal” – where it appears companies are just rebanding profit as “pay” and using it to attack their competitors. I think reform is required in this area.
An example of not for profits rebranding pay as something else and using it to attack their competitors is in this article:
“they avoid public companies’ shareholder short-termism”
I don’t think there is any evidence that employees are less short-termist than shareholders. The mutual sector needs to say what it is and not try to make out it is anything different – it is simply a more selfless business structure, but it is not a solution to human short-termism or some great movement that will sweep away capitalism.
So back to my first statement: “The mutual movement will never succeed unless they are only mutual by name.” – what I mean is the mass movement the radicals want it to be will never happen (in my opinion) and they will just alienate society and make mistakes if they try to make it this. I think it needs to focus on being a minority but significant sector.
I used to be a director of a co-operative (albeit a small student led one) and it does give you a greater sense of social responsibility, but at its worse it can just function as a business with directors taking dubious expenses (not me, but a few of the other directors did this).
why should the CO-OP be considered the preserve of the Labour Party , when so many Liberals were involved in the creation of the CO-OP
Perhaps the contributors might just spare a moment to measure the magnitude of the Flowers catastrophe brought about by a clearly incompetent Bank chairman and compare it with the 2008 crash presumably involving many highly qualified Directors.
Dare I mention the John Lewis Partnership? Do we really think that the energy needs of the nation are being well served by the current suppliers. One doesn’t need to be a socialist to observe that current market solutions are not necessarily in the interests of consumers.
‘The Cooperative scandal, it’s got the lot.
Sex + drugs + religion + money = media feeding frenzy. ‘
Sex, drugs and religion are not, in any way the primary source of the Co-op’s problems, which was the management of the fourth – money. Although one can envisage that the first three may distract a manager and there may be occasions when they have secondary bad effects, little evidence has been given that first three had any effect here on the real problem – they are just in the stories for titilation.
I regard the enterprise culture as an ecosystem, and as such it is in our long-term interest to maintain biodiversity in it.
So we need to have working examples of a various sorts of enterprises to exist so that we can compare them with alternatives.That means, in addition to plcs, we need partnerships, individual traders, mutuals, staff co-operatives, customer co-operatives and publically-owned enterprises (both national and local). I’ve probably left some more innovative ones out!
The mood since the 1980s has been to favour one kind of enterprise – plcs – at the expense of all the others. I see this as anti-competitive in terms of corporate structure. It is like a foolish farmer who produces a monoculture of one type of crop. It seems a good idea right up to moment when a pest or disease that devastates that variety makes its appearance.
We know many of the disadvantages of the plc structure – disengagement of owners and management from each other and from both employees and customers. Even worse is disengagement from the environment in which the company operates as manifested by the worse sorts of tax avoidance.
We need to preserve other sorts of organisms (enterprises) to take over when an epidemic strikes plcs, as it did in 2007-8.
So lets not use the recent failures at the Co-op bank management as stick to beat mutuals as a whole. The Daily Mail represents a view that hates mutuals and other alterative enterprise structures, and would hurtle us towards monoculture.
Thank you Paul Connolly. The Liberal Party was promoting co-ownership, genuinely mutually managed enterprises sixty years ago. Good to see the idea has not been dumped to appease the SDPs. Nationalization certainly improved working conditions but did not end the “Them and Us” attitudes in our major industries. It did not generate a more universal understanding of world markets. The Trades Union movement was in need of democratic reform, pity that task was left to Thatcher.
The problem started with the bank’s chairman selected by a process that appeared to be influenced by the Falkirk element in the Labour Party
Let us beware of allowing our LibDem anti-NewLab attitudes to permit us to shoot ourselves in our coalition feet. We should remember that the not very Reverend Mr Flowers was a welcomed visitor to Treasury ministers (of free-market religion) and that George Osborne himself pleaded with the EU to bend the rules and regs so that the Co-op Bank could buy hundreds of Lloyds-TSB branches.
We would be wise to hope that the Co-op will survive its present crisis and we should also support all mutual organizations. As ‘markfairclough’ observed, Liberals were prime movers in the establishment of the Rochdale Pioneers, and many other mutuals. It might have been a good idea had our party fought harder to prevent the privatisation of so many building societies.
BrianD and Cllr. David Becket, the Co-op’s problems started before Flowers. I applied for a job with them in early 2010 before he became chairman and their business model was doomed then. All they seemed interested in was me hitting their sales targets for selling their financial products. I remember thinking at the time how it was laughable they were marketed as an ethical bank – no wonder they got embroiled in the PPI miss-selling scandal.
As I said, mutuals have a market, but a solution to individualism they are not.
Demutualisation was a prelude to greed, rashness and disaster at the Bradford and Bingley and other building societies.
Yes, Graham, mutuals could be more genuinely democratic, and maybe that;s something to campaign for. But what you describe doesn’t sound very different to, say, the Royal Society for the Protection of Birds, with a mass membership and a network of branches but elections held in London and no postal voting for members and with most board members nominated by the board. In both cases, though, the elections do provide an opportunity for a challenge at a time of crisis or deep division, a bit like the power in the U.S. constitution to impeach the president.
I totally agree that mutualism is natural Liberal territory.
You’ve got to ask yourselves as well: how many times have a group of workers genuinely pulled together, set up a co-operative and shared the proceeds of trade? It just doesn’t happen, the people at the top get paid the most, as per any other business.
I would go as far as saying co-operatives are unfair because the owner should be the person who puts down the capital (broadly), so they’ll never appeal to me personally, but plenty of people look out for them.
There’s another problem with this “employee ownership” stuff. What happens when the employees leave? If they have to give up their shares then they never owned anything at all – it’s just another form of employment.
Few organisations given the label “mutual” are really democratic. Indeed it can be argued that the directors of the large mutual financial institutions are in practice less accountable to their members than a PLC, where at least the institutional shareholders can at times exert real influence on management. Moreover, while the profits at John Lewis may be distributed to the staff, the approach to managing John Lewis is essentially patriarchal, as it was under the founder of the company. There is probably an upper limit to the size of a mutual which can claim to be genuinely democratic, and its probably much smaller than even John Lewis.