Professor of social policy at the University of Stirling, Johnston Birchall, has been studying governance in co-operatives and mutuals for decades.
Last year he published a book on customer-owned banks and has recently been commissioned by Co-operatives UK to look at how the largest co-operatives in the world are governed and the lessons the UK can learn from them. Stressing that “this work began before the problems at the Co-operative Group became public,” Prof Birchall is keen to feed his findings into the Myners review.
Currently half way through the research, he is looking at the world’s 60 largest co-operatives to identify how their governance works.
He began by pointing out, with much agreement from delegates, that co-operative failures are disproportionately in the spotlight. “It is said when a conventional investor-owned company fails, people ask why it failed,” he said. “When a co-op fails, people asks whether they can ever be made to work.”
The reasons for failures of governance in large co-operatives are varied, he added.
His research has revealed that in employee-owned and farmer-owned businesses, governance failures tend to stem from badly thought-out business strategies, expensive acquisitions and boards being out of their depth. For these co-operatives, he said, “I found individual failures, but nothing systemic.”
However, Prof Birchall’s research shows that “in consumer co-operatives, there is more systemic failure going on.” Consumer co-operatives tend to have a larger number of members, many of whom have only limited interested in business operations.
As such, there is a greater distance between the membership and the executive, and this has a big impact on the oversight that members have.
Prof Birchall is still to complete his report, but drew out a lesson from his analysis so far, highlighting a three-tier model of governance that he thinks could work. “It’s just a hunch,” he said, “but a hunch based on experience.”
Similar to Coop Swiss and Migros, two large retail co-operatives in Switzerland, Prof Birchall suggests a ‘members’ assembly’ – a group of 100 or more members whose role would be to aggregate and voice the preferences of the wider membership.
This members’ assembly then elects a ‘supervisory board’ which has the mandate from the membership to hold the executive to account and provide stewardship.
The supervisory board appoints a ‘management board’, to include a chair from the members’ assembly, four members of the supervisory board, four non-executive directors appointed for their expertise, plus the chief executive and select members of the management team.
Johnston Birchall’s full report will be published by Co-operatives UK later this year.
More from the conference:
James Walton: ‘There is no room to be complacent’
Professor Tim Lang: ‘I have a very sober view of the food system’
Lukáš Nemcik: ‘Get to know the Customer’
Todor Ivanov: Euro Coop encourages European co-operatives to share best practices
Steve Murrells: ‘We have fallen out of love with food’
Neil Turton: ‘We are a business-owned co-operative’