A corporate takeover from within means the Co-op is losing its soul

On 9 April, the Co-operative Group released its 2014 full-year results. They are moderately encouraging: the Group appears to have put its 2013 annus horribilis behind it and...

On 9 April, the Co-operative Group released its 2014 full-year results. They are moderately encouraging: the Group appears to have put its 2013 annus horribilis behind it and is slowly recovering, producing a small operating profit and improved turnover in the Food business.

But I read the Group’s press release with a growing sense of disquiet. Something about the language used bothered me.

I kept seeing words like “profit”, “disposals”, “efficiency” – the usual language of commercial corporations, in fact. Almost entirely missing were “values”, “co-operation” and “democracy”. And when these words did appear, they seemed oddly disconnected from the hard commercial focus of the rest of the piece.

In fact, the press release could have been announcing the results for any large commercial retail organisation. Although the Group said its rebuild strategy was “focused on restoring the business to its rightful place at the heart of communities up and down the UK”, there was no mention of the need to engage with local communities.

No, the Group just wants to sell to them: the proposed membership reforms looked remarkably like the sort of ideas I have seen from commercial retail conglomerates aiming to build larger and more engaged customer bases. The food business has a “comprehensive plan to improve its commercial performance” by serving its customers better. A renewed customer focus is no doubt laudable, but what has this statement got to do with co-operative values?

The renewed focus of the Co-op Group’s general insurance arm was described as “providing motor and car insurance services targeted at Co-operative Group members”.Apparently, the Group will “leverage GI’s competitive advantages through this member-centric focus”. “Targeted at”? “Competitive advantages”? What sort of language is this for a co-operative enterprise?

The Group has saved a set of core businesses, including Funeralcare – but will its co-operative nature be dead and buried?
The Group has saved a set of core businesses, including Funeralcare – but will its co-operative nature be dead and buried?

Co-op board members do make reassuring statements – like this one, from Allan Leighton. “This is not just another commercial turnaround,” he said. “The Co-operative Group is different because we are owned by our members. They have a direct say in running the business, through electing member representatives to the board and the council, and through having a say on key issues through the one member, one vote democratic process.

“The communities we have traded in for generations have made us what we are today, so at the heart of our Rebuild plan is our purpose: ‘Championing a better way of doing business for you and your communities’.”

But it is actions, not statements that matter – and the language used in corporate announcements says much more about the real values of the organisation than motivational speeches from top executives.

The tone of the press release, and indeed of the report and accounts, was that of a commercial retail organisation to all intents and purposes indistinguishable from Tesco or Asda. The plans and actions described were those required to turn around a struggling commercial enterprise, not revive a declining co-operative venture.

The principles of co-operation are becoming simply a surface veneer – and the Co-operative Group is slowly losing its soul.

There are growing indications that, far from embedding democratic governance at the heart of the Group, the board is systematically sidelining the membership and bypassing democratic decision-making processes.

Co-op democracy?

Which brings us to the latest attempt to prevent members from making real democratic decisions – the election of members to the board.

The membership committee put forward six candidates to stand for election to three seats. But the executive reduced these to three candidates, one for each seat. And the people eliminated were those with the strongest connections to the co-operative movement.

Graham Melmoth described this as “theft of co-operative democracy”. He is right. There is no democracy when the electorate is given no choice.

But this is not the worst example of anti-democratic behaviour by the board. For me, the silent restructure of the business without democratic approval is even more serious.

Farms, pharmacies and Sunwin Services have all been sold, reducing the Co-op Group’s core business lines to four – food and electrical, funeralcare, general insurance and legal services. And the Co-op Bank was quietly dropped from the Co-op Group’s core business early in 2014 –
did anyone notice how, in the 2013 report and accounts, it was shown under ‘discontinued operations’? There is a brief section in the 2014 report and accounts on the Co-op Bank which concludes thus:

“The Group and the Bank continue to work together closely. We aim to deliver a smooth separation of the Bank from the Group, focusing particularly on the IT systems and the Pace pension scheme.”

Reports in the Guardian say that the Co-operative Group has not taken up its seat on the Co-op Bank board. I can’t say I’m surprised: why would the board waste time and effort attending the board meetings of a non-strategic minority interest? No doubt, in due course, the board will seek a buyer for its remaining 20% stake. The hedge funds have won.

Such significant strategic changes should surely have been put to the membership for discussion and democratic approval. But they weren’t, and they won’t be in May either. The membership will be asked to rubber stamp a fait accompli, not participate in strategic decision-making about how their Co-op Group should be organised and what it should do.

This is exactly what happens in a commercial corporation. Strategic decisions are made and implemented by the board, not the shareholders.

And this is what the Co-op Group is slowly becoming: a corporation, not a co-operative. The organisation that successfully fought off external attempts to turn it into a corporation in the 1990s is seemingly unable to resist insidious transformation from within.

The Co-op Group is slowly being absorbed into the prevailing corporate commercial paradigm. Soon it will be indistinguishable from any other retail conglomerate –co-operative in name, but no longer in nature.

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