May 9th 2013 was the worst day for the co-operative sector for 15 years. And it is down to us. It has taken time to unfold, but today’s change in ownership of the Co-operative Bank, as night follows day, is far more the result of what we got wrong in the Bank before May 9th than what others, including hedge funds, have done to us since.
I say ‘we’, because it is a characteristic of co-operatives that people feel as if they have a personal sense of ownership of what happens. Failure in a co-operative is always a traumatic experience, for the very reasons that failure is rare – that people care what happens. It is right to feel a huge sense of loss.
So how far is what has emerged a failure? Here, the test is not how we feel and respond by instinct today, but how the Bank moves forward and what it looks like in five and ten years time.
The assumption is that the Co-operative Bank will now be an investor-owned business, subject to stock market equity pricing – in short that it will not be a co-operative, or owned in line with core co-operative principles.
Whether this is the case must depend on a reading of the full prospectus and formal constitution of the new Bank – and whether these are accepted by all the relevant parties. Co-operatives UK is the recognised and unquestioned independent authority on co-operative identity and, as we do for any business seeking to trade as a co-op, we will examine the formal documentation carefully and rigorously before expressing a view on this. We have already indicated that if we believe that it is not a co-operative, then we would argue vigorously for a review of the name.
There are some indications that co-operative values may be locked into the core purpose of the Bank. If so, then the Co-operative Group deserves credit for a creative model that will be new to the UK. This is what in other countries is called a Public Benefit Corporation – profit-seeking, but with a wider public purpose enshrined in its goals.
If so, then this is demutualisation, but a soft demutualisation. We would still have an ethical bank, with plenty of room to shine. You just have to look at the high street competitors to see that the Co-operative Bank did not fail because it was a co-operative. If it hadn’t been a co-operative, arguably things would have been worse. But this is not the banking system we want and the rewards will go to the banks, building societies or credit unions, that get there first.
In time, could Bank customers one day become members and remutualise the bank – saving it in the way that the Japanese co-operative, the Norinchukin Bank was rescued by its members? This was not an option we had today and there is a lesson both about what membership means in co-operatives and where our capital comes from.
To move forward, there is a need for humility and deep learning. But in a co-operative way — cynicism, or automatic mistrust, would see us fail in other ways. We published in July 2013 an open and considered set of questions that need to be answered in relation to what went wrong — some of which are taken up in the terms of reference for the welcome inquiry by Sir Christopher Kelly, a public figure of integrity and insight, who will report by next May.
The key test is what now happens. As an individual customer of the Bank, I am still proud of its difference, proud of its values and hopeful that these can continue.