Review: Johnston Birchall on co-operative governance

Prof Birchall’s updated review takes a sector-by-sector look at issues facing the movement

The second edition of Professor Johnston Birchall’s The Governance of Large Co-operative Businesses, published by Co-operatives UK, takes a look how the world’s 60 largest co-ops “ensure that their customers, employees and suppliers have meaningful influence”.

It follows a renewed focus on governance in the movement, prompted by high-profile crises such as the demutualisation of the UK Co-op Bank, and challenges such as volatile global markets and the rise of big data – although, the report says, co-ops have “a relatively good track record in governance”.

And Prof Birchall says this is an important moment for governance for another reason: “More people are beginning to appreciate the co-operative difference, and to see member-owned businesses as an alternative to investor-ownership.

“This makes the occasional co-operative failure even harder to bear, because with it go the silent hopes of people who had a suspicion that there might be a better way but who now feel let down. For these reasons, it is imperative that we make sure co-operatives are as well governed as possible, and that we learn by our mistakes.”

With that in mind, the report offers “a more systematic and analytical account of comparative governance … to present some practical considerations for the design and redesign of good governance in co-operatives”.

And it poses the question of “why the conventional critique of co-operatives by economists is so negative, and why we need a more realistic theory of co-operative governance”.

Prof Burchill considers the merits of member-centred and multi-stakeholder approaches to governance and stresses the importance of giving equal weight to member voice, representation and expertise. He then goes on take a sector-by-sector look at the world’s biggest co-ops to assess the issues facing the movement.

It’s also vital to adapt governance to keep up with changes in a co-op, he says, pointing to regular review of regional representation in US agri co-op Land o’ Lakes to match changes in the number of members, or the way Arla Foods adjusts its governance to represent new members as it expands into new countries.

He advocates member councils to ensure effective representation in large co-ops, with “authority distributed so the member council and the board of directors can each get on with doing what they do best”.

“There should be some tension between the two bodies,” he adds. “The council should have some powers, such as having places on the nominations committee, being able to approve annual accounts, and endorsing strategic plans.”

And he suggests holding meetings between expert boards and members to ensure effective communication of members’ wishes.

 

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