Ownership and leadership: Scrutiny of co-operative governance matters

‘Once-essential democratic processes have become ossified, have lost their point and are unfit for purpose … Democracy must be rooted in business competence.’
– Alun Burge, ‘The crisis of co-operative governance’, 28 January

‘Governance is a geeky word’
— Lord Myners, ‘Governance shake-up at the Group’, 28 January

There is a remarkable degree of scrutiny on governance matters in the co-operative movement at the moment. 

The way the Co-operative Group is organised is under fundamental review. The basic tenets of the co-operative movement – collective ownership, democratic member control, active participation – have been called into question, not least by a sceptical media. The whole process gives, in fact, an opportunity for careful reflection, despite the overtones of ‘geekiness’ which Lord Myners detects.

Ownership by the wider community is not peculiar to the co-operative movement, and there are other sectors where there have been similar debates. The development trust movement, championed by national charity Locality, has been supporting the growth of neighbourhood-based community enterprises since the foundation of the Development Trust Association (Locality’s predecessor) in 1993. Development trusts are defined as organisations that are:

• engaged in the economic, environmental and social regeneration of a defined area

• independent, aiming for self-sufficiency and not for private profit

• community based, owned and managed

• actively involved in partnerships and alliances between the community, voluntary, private and public sectors.

In the 1990s and the early noughties, partly supported by an enthusiastic wave of New Labour regeneration funding through the New Deal for Communities programme, open elections to the boards of community regeneration bodies were all the rage. Often that meant anybody from the neighbourhood – whether they were technically a member of the organisation or not – got to vote in the elections to the board, and even to stand if they wanted to.

But successful partnerships, such as Royds Community Association in Bradford (which started life under the Major government’s Single Regeneration Budget scheme) recognised that as well as local community involvement, they needed additional skills to be able to make informed decisions. It was a key principle that those brought in as experts needed to be “on tap, but not on top” – so independent directors should not outnumber the community, but rather sit alongside to help the board make wise policy.

The challenge was always managing the tension between ownership and leadership; between accountability and competence.  This tension is made more acute by the legal demands that being on the board puts on individuals, who become subject to a range of legal duties and responsibilities to the organisation (and its members and creditors). This means that no one can truly sit on a board in a “representative” capacity, because they owe legal duties to the whole organisation, not just to the stakeholders that put them there.

The same tension can be seen in the world of housing associations, where the role of tenant board members has again been the subject of debate. As housing associations have grown larger and larger, and (in some cases) more and more remote from the neighbourhoods they serve, the model has increasingly moved away from tenant-led to tenant-focused. The same tensions appear to emerge in relation to capacity, skills and leadership, with an active regulator looking to boards to exercise effective strategy and business acumen in their decision making. Sound familiar?

Some themes emerge consistently, across these divergent types of organisation. Ownership in name is not enough, unless it is matched by a consistent, locally focused and determined effort to engage. The larger an organisation becomes, the more removed it will get from those it seeks to serve, unless there is a deliberate and prioritised strategy (and sometimes even then). When things work well, it is because of a strange alchemy between the right kind of people and the right kind of strategy.

Democracy in and of itself is not the same as empowerment; just because an organisation has some kind of democratic process built into its structure, that does not make its governance either accountable or effective. As Ken Livingstone once said: “If voting changed anything, they’d abolish it.”