Tuesday, 22 July 2008

The Co-operative Dividend Finally Pays Off

A global financial crisis has woken us up to the benefits of mutual and co-operative business ownership. Converted building societies have found their plc status no protection against poor management and the drying up of international credit. Those remaining mutual, partly shielded by their structure, maybe dull and safe but with global banking in meltdown a dull and safe place is the best place to keep your money.

For some the Co-op was as an anachronism. Politicians paid tribute to its past, to Robert Owen, the Rochdale Pioneers or in Scotland the Fenwick Weavers, implying it had no future. Patronising the sector with warm words when asking for support (or an extension to the overdraft) but privately thinking there was no place in the modern world of shareholder capitalism for a business owned by its customers.

For them the news of the Co-operative Group take over of Somerfield, putting it back amongst the big boys in the retail sector, must seem like seeing Lazarus. Observers of the co-op scene know better, they may not be widely known but the Co-op has in the recent past benefited from some excellent leadership and their efforts are now paying off.

The renaissance began when the Co-op Bank was re-branded as the ethical bank. Its success surprised everyone, including many in the co-op movement, giving confidence, that after years of decline, there was nothing intrinsically uncompetitive about the co-op model.

Society mergers, mostly from weakness, looked to outsiders like the co-op was closing down and in some places it was. Quietly however from dozens of small societies the co-op was forming a new leaner and more effective organisation.

Then last year came the merger that turned the tide. The marriage of the Co-op Group and United Co-operatives, a union from strength rather than weakness meant that at last the Co-op had the critical mass to grow.

Despite the huge challenges of this merger the process of improving the customer experience went on, creating better products, with an emphasis on ethical and fair-trade products, and better stores. Behind the scenes too new IT and logistics systems helped increase sales.

Those new IT systems have enabled the Co-op to bring back the “Divi” in a meaningful way – paying out over £38 million to members this year.

Mergers are no panacea – like some trade union mergers - on paper the new organisation should be as big as the two organisations added together but somehow they end up smaller. This merger was different; the new Group has in the words of CEO Peter Marks the “best opportunity for 50 years to move forward”.

The increased buying power the Somerfield merger will bring will make the whole co-op retail sector more competitive and put an end to some of those Co-op deserts. It will not be easy to create a democratic structure for the new organisation as the new merged Group is only just coming together. But managing growth is far better than managing decline.

At this years Co-op Congress, Kitty Usher Economic Secretary to the Treasury, promised, at long last, a new legal framework to help this modernisation continue. The FSA who have responsibility for regulating the Co-op and mutual sector (you may think that currently they have more pressing responsibilities) have said “it will enable the movement to enjoy the legislative framework it deserves; one fit for this century, rather than the nineteenth.”

With immense patience former Labour MEP Pauline Green and her colleagues at Co-operatives UK have done a good job in cajoling and educating the FSA to take, a sector of some 5000 businesses employing a quarter of a million people, seriously. But a healthy co-op sector is important not just to the one in five of us that have a share in a Co-op.

The new General Secretary of the Co-op Party, Michael Stevenson, has a good story to tell - how by rediscovering its ethical values and democratic principles the co-operative sector has been able to rebuild its business. Could this be a lesson for the Labour Party and the Government?