What do the elected members think about the Bank crisis?

Co-operative News spoke to some of the Co-operative Group’s elected members to gather their reactions on the challenges facing the Co-operative Bank and the movement. All comments are written in a personal capacity:

Jennifer Lee, Kelsall
In 2012, Peter Marks told The Economist that the co-operative movement “didn’t co-operate and rarely moved". Regardless, the 2008 banking crisis seemed to give new vigour to the co-operative approach, and helped lend moral force to the Group’s plan of consolidation and growth.   

Peter Marks energetically continued to “scale up” the businesses, especially the Bank. We now know that this strategy was flawed – though not in the way that is currently being bandied about in the press.  The imprecise valuations of property loans, the difficulty in merging IT systems and the obvious naivety of management were the consequences of a complete failure to practice what we purported to preach with our “Co-operative Difference". We failed at a fundamental level to believe that we could and should be truly different from Tesco, from RBS, from HSBC. 

I have always opposed scaling up the Bank, and for two reasons: 1) that we could never guarantee that it would be run according to our values and principles and 2) that failures in its performance could potentially threaten the rest of the Group’s autonomy and independence. There was not then, nor does there exist now, sufficient democratic accountability. 

Co-operation is not an efficient, cost minimising, opportunity maximizing method of doing business. It is messy and frustrating and sometimes slow. Yet it depends upon each of us believing that, for all of its flaws, co-operation is nevertheless a better way of doing business. I still firmly believe it is. Unfortunately, our members have limited actual democratic control over the Co-operative Group as it is run today.  Should the current recapitalization plan ‘succeed’, they will have even less so tomorrow.  To me, this plan serves only to consolidate our profound failures.

Dave Boyle, Brighton
For years we have heard mostly good news, all the time sitting on the unexploded bomb of the bank's loan book. Only within the last few weeks, our members were being told all was going to be well, and elected members given reassuring messages. It appears somewhere along the line, pushing out hopeful statements full of wishful thinking became a substitute for honest communication.

Of course, the sensitivities of banking rescues prevented all but a small number of people from being in the circle of trust and knowing the full picture. It was a profoundly unco-operative way or running an enterprise, and now, as we can see, a profoundly ruinous one too. It prevented asking very important strategic questions, like whether the Bank was worth the hassle.

There are still factual questions we need urgent answers on. Was Britannia a rescue to save a stricken building society or a strong merger that went bad? Experience suggests the former, so why was everyone with the purview of the hideous loan book anxious to say the latter?

For all out talk of being accountable and democratic, we've got a failing governance model to match the failed bank. We need to address this with radical reform.

Insularity and excessive veneration of heritage have left us far too tolerant of failure and poor performance, inheriting top executives as makeweights in mergers and seeing the whole exercise as some sort of game, with shots across bows here and coded warnings there in the place of real and vibrant engagement in a culture of openness and decentralisation and determined desire to deliver something for members that was good, not just ethical.

The end of the bank as a meaningful co-operative enterprise should, like Regan, be a prompt for a thorough reassessment what we mean by membership, accountability and democracy in a mass scale enterprise. We should start by recognising that the part of the business with least openness and transparency was the worst governed and worse run and build from there.

Alison Lamond, Melrose
The Co-operative Bank fiasco is a direct result both of the wider banking crisis and poor management and governance within the Group. Recently described as a “tragedy” by Peter Marks, who refused to take responsibility in front of a panel of MPs, we now need to ensure that it does not degenerate into farce.

What are the lessons to be learned?

1. Our business leadership, including our senior employees and board, were shown to be sadly inadequate to meeting the needs of a multi-billion pound consumer-owned business. When faced with the negative consequences of their own actions, they come up with the equivalent of the primary school excuse of “a big boy did it and ran away”.
2. The membership has been left without a voice at the moment of crisis. While immediate remedial action was clearly required, the membership need a more active role in consultation over major steps, such as handing the Bank over to vulture capitalists.
3. Our businesses need to step up to the mark of meeting the ethical values that we constantly promote – mis-selling PPI is an unfortunate (and costly) example of our failure to do this.

We cannot rewrite history.  However, we can take actions to ensure that the Group can learn and move forward from past failures. This requires:

1. Remaining Group Board members to take a self-critical look at their own roles in the crisis and act accordingly, resigning where appropriate.
2. Reviewing our governance structures to ensure better accountability of the Group Board and senior management to consumer members, building a responsive and responsible leadership.
3. Making our ethics real at every level of the business — it’s not just about Fairtrade, it’s about trading fairly.

All comments are written in a personal capacity.