Has Co-operatives UK sold out? This was a question pondered privately by delegates at the recent Society for Co-operative Studies annual conference – after concerns were brought to a head by Co-operatives UK’s acceptance of the Co-operative Bank as an associate member.
The issues have been addressed by Co-operatives UK’s new statement on whether the Co-op Bank should be permitted to continue to use the name ‘co-operative’.
Of course, becoming an associate member of Co-operatives UK does not mean the Bank is accepted as a bona fide co-operative – and no one pretends the bank is a co-operative.
“We have never said they are a co-op, but there are certain circumstances in which organisations that are not co-operatives can use the word in their titles,” explains Helen Barber, head of co-operative advice at Co-operatives UK.
“It’s slightly pragmatic. But we are also recognising a unique situation. We are being proactive with the Bank. We had to handle this properly.”
Co-operatives UK has published a position statement on the Co-op Bank. “Co-operatives UK is the guardian of the co-operative identity, operating with the mandate not just of its members but of the International Co-operative Alliance (ICA), the author of the international statement on co-operative identity,” explains the statement.
“In the UK, we know that the term ‘co-operative’ operates as a ‘quality standard’, assisting market competition and helping to ensure consumers are not misled.”
The statement adds: “Co-operatives UK has an established approach when it comes to defining co-ops, which draws on years of experience and expertise. The method we use was developed in line with the values and principles set out by the ICA …”
The statement poses the crucial question: “So where does the Co-operative Bank fit in all this?” – and provides its answer. “Following the recapitalisation of the Co-operative Bank and the changes to its operating structure in 2013, Co-operatives UK reassessed the Bank against the criteria for defining a co-op.
“While co-op values and ethics have indeed been embedded in the Bank’s constitution, these alone do not make it a co-op and, as an investor-owned business, it does not meet the full principles of the ICA.
“It is important to recognise that the immediate requirement in 2013 was to secure the future of the Bank as an ethical alternative to other high street offerings.
“Now, with a new leadership team in place and real progress being made to turn things around, Co-operatives UK has been working with the Bank to agree a way forward that reflects the ethical, values-driven intent of the organisation alongside the principles of co-operative identity.”
The statement explains that Co-ops UK has tried to straddle the distance between being supportive of the Bank and the Group, while being loyal to the integrity of the co-operative identity. As such, Co-ops UK has developed – in association with the ICA – new guidelines on when non-co-operatives can use the word ‘co-operative’ in their title.
This conundrum is nothing new – the Co-operative College has never been a co-operative (nor, come to that, was the Co-operative Bank, which was, of course, a plc subsidiary of a co-operative).
But the question has a very different context when it comes to the Co-operative Bank today, which is no longer there to service or support the Co-operative Group and has no specific nor primary obligation to support the wider movement. Those same issues are identical with those Co-operative Travel stores that have for the last three years operated as part of the Thomas Cook Group and in which the Co-operative Group is merely a minority equity owner.
But the big difference between the Bank and Travel on the one hand and the Co-op College on the other is that the latter is seeking to strengthen and widen the co-operative movement, while the first group is seeking to exploit the co-operative name in their branding for commercial purposes.
Despite this, Co-operatives UK has developed criteria in which organisations that are not co-operatives may be permitted to brand themselves using the co-operative name.
They must, explains Co-operatives UK, “exist in order to promote co-operative activity and be recognised by the co-operative movement in relation to this role; operate in line with co-operative values, and not discredit the co-operative business model; [and] not use the term in ways that serve to mislead others as to whether the organisation itself is in fact a co-operative.”
Whether the Bank and Travel comply with those criteria is a matter of opinion. Personally, I cannot see how either of them can be regarded as meeting the first criteria of existing to “promote co-operative activity”, except in the sense that they were originally set up to do this, before their ownership structures changed.
Whether an organisation conforms to co-operative values is also subjective. If a fair and equitable ratio between the lowest and highest paid staff is regarded as a
co-operative principle, then the Group itself fails to conform, leaving aside the debate over governance.
Co-operatives UK has agreed with the Bank “a programme of action” to “ensure the organisation is compliant with the criteria”.
“Co-operatives UK will monitor the Bank’s compliance on an ongoing basis and, if anything varies, our view on the continued use of the name may change,” it says. “In the meantime, the wider co-op sector must acknowledge that a commitment to making good on the intentions expressed by the Bank is welcome.”
The italics are mine, emphasising a strange requirement imposed on the rest of the movement.
But it does tell us that this is not the end of the matter as far as Co-operatives UK is concerned. “Later this year, Co-operatives UK will be opening up a consultation process with our members in regards to the co-operative identity,” it adds. “This will include a look at, in contact with the ICA, the criteria developed for non-co-operative organisations.”
However, this review appears to have a limited remit. “It is intended not for retrospective action but to guide future work,” explains the statement.
Helen Barber argues that the Bank was not treated differently from other organisations wanting an association with the movement, without being genuine co-ops. In an interview, she said: “They applied and we evaluated the application as we normally do. Consideration of the actual application was simple.
“We had to deal with the Bank and that was the way to deal with them – as an associate member – to consider their identity.
“We are talking with them proactively about a number of conditions [for using the word ‘co-operative’ in the name] that we have set out. Obviously what they are doing now is providing detailed evidence [to demonstrate compliance with those conditions].
“The Bank applied to be members and we were happy to accept them as associate members in order to work with them to reflect good practice in the use of the co-operative name and the implementation of co-operative values.”
My understanding is that negotiations between Co-operatives UK and both the Bank and the Group over recent months have been tense. One person close to the talks described them as “very difficult” and “complicated”. Moreover, Co-operatives UK had no effective bargaining position.
I am told it was given legal advice and that it was unable to prevent the Bank from continuing to use the name – despite the change in ownership – because it had done so for so long. Only the business secretary, currently Vince Cable, is in a position to direct the Bank to change its name.
Ms Barber adds: “In the case of companies (such as the bank), the strongest protections exist in that ‘co-operative’ is a sensitive term and, in the case of companies, anyone using the name has to apply to an appropriate definition. The 2006 companies act introduced the concept of a company’s names tribunal to strengthen people’s ability to object to company names.
“The view of Companies House, however, is that if a company has been using a name for more than five years, it would require the secretary of state’s intervention before a change could be made.”
The Bank realised that, despite the legal situation, they needed to negotiate with Co-operatives UK because, without the name and its association with ethical values, the business was not sustainable, had little financial value and could easily lose a large proportion of its customer base.
Co-operatives UK’s hope is that by avoiding a confrontational relationship with the Bank, something positive will soon emerge. The statement suggests the Bank has not been given carte blanche to use the co-operative name permanently – which is perhaps limited good news – and that if the situation changes then Co-operatives UK will change its position.
But that will provide little solace to many in the movement.
To put this into perspective, the issue may soon become irrelevant as far as the Bank is concerned (though perhaps not for the travel business). A widespread view in the City is that as soon as the Bank returns to profitability (assuming it does), it will be sold.
We can hope that if it becomes a subsidiary of a non-mutual bank, the name will disappear into history.