When all the dust has settled, it will be seen that the Co-operative Bank fiasco will have only added strength to co-operative governance and the co-operative ideal.
The origins of the co-operative movement go back to the industrial revolution and Robert Owen’s mill village at New Lanark. It was common practice then for mill owners to pay employees in funny money which was only exchangeable at the company shop where prices were fixed for the benefit of the owner. Owen’s employees at New Lanark were paid in real money and the company shop sold goods to employees at their cost price. That was the forerunner of the 1844 Rochdale Pioneers, the basic idea being to offer the common man an alternative to being fleeced by the mill owners.
Since then we seem to have come full circle. The Duke of York has just hosted JPMorgan and clients for dinner and entertainments at Buckingham Palace. That is only days after Morgan’s agreed settlement of their $13bn fine for the fraud and criminality, now customary in the banking world, which caused the current crisis. Morgan’s CEO Jamie Dimon and colleagues may be under criminal investigation, but the Duke of York is clearly advised that these are only formalities and won’t lead anywhere. Morgan’s settlements, now totalling around $19bn, as with the other banks’ fines, are simply the fees that have to be paid for participation in fleecing the common man.
By comparison, the Co-operative Bank’s transgressions are small beer and have also not been at cost to the tax payer. The appointments of ill-qualified and inappropriate individuals to senior roles in the Co-op, are now revealed as quite ridiculous. Individuals working their way up through the various Co-operative enterprises, may or may not be bona fide ‘co-operators’, but that narrow experience is limited qualification for appointment to senior roles. For a co-operative business to prosper in competitive markets, it will need, just as any other does, to be led by individuals with both relevant qualifications and broad practical experience. However, the high profile failure of Co-operative governance is not just a threat; it provides a one-off opportunity to sort it out.
Co-operative organisations seem well suited to the European Company format with its two-tier board structure. The management board should be comprised of qualified and experienced professionals, who don’t all have to be life-long co-operators. The supervisory board would, following the German model, be 50% member representatives, with the other 50% representing other stakeholders, plus some external independent professionals, preferably including the chairperson. That two-tier structure has shown itself to engender a more open culture and to be less susceptible to domination by a single individual, appropriate or otherwise. The Co-operative Bank so constituted could survive and prosper, even under its proposed ambiguous ownership which would, hopefully, not be permanent.
The head of one London hedge fund that was invested in the Co-op Bank summed up the current situation as follows. “I think it’s a storm in a teacup. I am told there are no deposit outflows. Frankly, the socioeconomic group that banks with [the Co-op] will hardly react to the scandal. They didn’t when the bank was close to collapse” [Financial Times, 23.11.2013]. That cynical and patronising analysis couldn’t be more wrong. When the Co-operative Wholesale Society was threatened with takeover and asset stripping back in 1997, a process from which members would have made a substantial personal gain, they decisively rejected the bid. At the first signs that the hedge fund owners of the new equity are changing the ethical stance of the Co-operative Bank, that ‘socio-economic group’ are likely to desert in their millions.
That is the real worth of co-operation. It responds to higher instincts than just greed. The Co-operative Group may have made some daft appointments, but it would be a big mistake to think co-operators are so naïve as to believe George Osborne’s “we’re all in this together.” We know full well we’re not.