We examine the present in light of the past
so as to better understand the future.
John Maynard Keynes

* With apologies to Karl von Clausewitz

Co-operatives: distinct and different, or just another organisation?

The resignation of Lord Myners from the board of the Co-operative Group has once again thrown the issue of governance of co-operatives into the spotlight. Myners, of course, has been arguing for reform of the governance of the Co-operative, while membership representatives have pushed back, arguing in their turn that the proposed reforms would destroy the culture of the Co-operative.

The argument is a fascinating one, largely because it masks a number of other, underlying issues. Chief among these is, are ‘co-operative businesses’ primarily co-operatives, or primarily businesses? Do we apply conventional business theory to them? Or is some other model needed to explain them?

Looking for answers to this, I recently read an article by Chris Cornforth of the Open University Business School, ‘The Governance of Co-operatives and Mutual Organisations: A Paradox Perspective’ (http://oro.open.ac.uk/1270/1/Annals_paper_2003.pdf). The article is ten years old, but that hardly matters; the issues Cornforth raises are as important as ever.

Cornforth argues that the governance of co-operatives are beset by three paradoxes:

  • The tension between board members acting as representatives of the members and experts charged with taking the business forward;

 

  • The tension between ensuring organisational performance, i.e. achieving strategic goals, and conformance, i.e. staying true to the organisation’s values and ensuring that it is run in an accountable and prudent manner, and;

 

  • The tension between the need for the board to control management and support management.

It is these points that make people think that there is something different about co-operatives. But in fact, as Cornforth says, there is nothing new in this. All three of these tensions are to be found in existing theories of corporate governance; and, as I know from my own experience as a trustee and from interviewing non-executive directors, in practice too.

Take any organisation, a business, a charity, whatever. The board supports management and helps it to get things done, but it also checks and monitors management to make sure the right things are being done in the right way. Of course boards ensure performance targets are met, while at the same time ensuring that the organisation is run in an acceptable manner and stays true to its values. In fact, if the organisation is not run in an acceptable manner, it is highly likely that it will not meet its performance targets.

The one area where co-operatives might seem to differ is the first paradox, where the board has to represent the members while at the same time running a business. But, it is this really any different from what corporate boards do? They represent the owners of the business: the shareholders. A co-operative business represents the owners of the business: the members. So long as the members own the business, the board has a duty to run it in their interests.

So, rather than debating the merits of the co-operative model, I would suggest that the solution to the Co-operative problem lies in implementing good, sensible corporate governance such as is practiced elsewhere. I think Cornforth is right. We don’t need a new model of governance that specifically covers co-operatives, but neither do we need to radically restructure or reform a model that up until now has worked pretty well.

Good governance and good management; that is what the Co-operative needs.

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