If I said to you ‘mutuals – great! We need more of them’, the average person might not know what I was talking about. But if I asked ‘have you ever had a financial product with a building society or shopped in your local Co-op or John Lewis?’ then we might be on more familiar territory.
So what do building societies and the local Co-op store have in common? They are mutual organisations: owned by their members or customers. In an earlier piece, I discussed the growing discontent across the political, economic and social spheres and posed the question whether mutuals help address questions of corporate governance and fairness. With Frank Field MP, Chair of the Work and Pensions Select Committee, recently advocating the mutual model as a solution for running the NHS and social care, I turn the spotlight on mutuals.
The principles according to which mutual organisations should be governed include voluntary and open membership, democratic member control and economic participation by members, that is equitably and democratically controlled. Also important are commitments to autonomy, independence, education, training and concern for community, means that co-operatives have a fundamentally different approach to the way they do business, which translates into a different attitude towards their customers or members.
Research by Co-operatives UK found that 62% of people regard co-operatives as being fair, compared with a paltry 11% for PLCs; highlighting just how much of a knock the reputation of ‘big business’ has taken. Against that backdrop, it may come as little surprise that membership of a co-operative organisation has grown steadily over recent years. Between 2010 and 2015 the number of people who are members of a co-operative increased by 15%, reaching 17.5 million members. There are now around 7,000 independent co-operatives in the UK, worth approximately £34 billion to the British economy. According to Ed Mayo, General Secretary of Co-operatives UK, “there has never been a better time to start or grow a cooperative. The UK has a flourishing and entrepreneurial mutuals sector, right across the economy and society”.
The benefits to consumers or members might be more immediately obvious, but what are the benefits to an organisation? Calum Bennie, Scottish Friendly’s Savings Expert, sheds some light “As a mutual organisation, Scottish Friendly is able to focus purely on the interests of our members in both day to day management and in our growth and development plans”. He says “PLCs require an inordinate amount of board and senior management energy and resource devoted to the interest of shareholders. Focusing on members’ interests means greater efficiency and streamlined decision-making.”
The interest of mutuals has been promoted in the public policy space by the Co-operative Party, set-up in 1917, it stands candidates in elections on a joint ticket with the Labour Party. MRM spoke with the Chair of the Co-operative Party Gareth Thomas MP. “As a Labour Co-op MP there are a number of ways I can help shape the policy agenda to promote co-operatives and mutuals. In this last week I have called for the mutualisation of RBS and spoken on the Savings Bill, arguing that the government should consider allowing credit unions to offer the Help to Save scheme alongside NS&I. I have also led a successful two year campaign to establish a credit union for the armed forces, who have often been exploited by payday loan sharks.”
Back in September, when I posed the question of whether a mutual model might help solve issues of corporate governance, I wasn’t expecting a conference speech from a Conservative Prime Minister that would be attacked by the business community for its interventionist approach. I’m not sure Theresa May is an avid reader of my posts, but her speech demonstrated an understanding of the concerns around corporate governance, offering solutions such as employee representatives on boards. While the PM seems to have softened on this, the government’s green paper on corporate governance raises questions across a range of policy areas including shareholder voting rights, executive pay and the customer voice. Potentially significant and ground-breaking, we will watch with interest what 2017 holds in store for corporate governance policy.