Demise of The Co-operative Group / Part 7 - Where do we go from here?
The Future - if we have not yet lost The Group
Assuming we have not already lost The Group, what should we be doing?
Do we wish simply to outperform Tesco? In fact we have, to a large extent, become the victims of our own success. Our unique selling point (USP) used to be fairness. But things have moved on and, over time, Tesco and the like have been forced into fairness by progressive legislation and trading standards based largely on the examples we and the wider co-operative movement set. So we are no longer the only traders who don't add chalk to the flour. And on exemplars like Fair Trade and organic produce, many of our competitors are catching up and even surpassing us. So does it now come down to a price (and bonus) war, or do we need to look farther afield for new challenges on the moral high ground?
There can be no doubt that we have to face the music and consider some of the implications of the various reviews (whilst bearing in mind that they have been sourced largely through lords, millionaires, and other stuffed shirts).
In terms of the core food retailing business, there is already a focus on “convenience” which seems to have given us a jump on our competitors. This focus looks to being usefully extended into the foreseeable future and the prospects seem promising. We need to build on this and to expand our Membership offer through these up-beat outlets.
Executive decisions have been and continue to be made about disposals and contractions of other aspects of the business and it seems these will have to be weathered in the short to medium term. Our debts have to be serviced and our credit rating (however crookedly cooked up) protected.
In the longer term, we need to monitor our executive much more closely and, as touched upon above, we need to re-visit how we source our executives, IPNEDS, accountants, and reviewers. It is difficult to imagine how we might do this more successfully than in the past given the innate clumsiness of democracies combined with the even greater strictures recently applied. But it is also clear that any dilution or diminution of our democracy flies in the face of everything we stand for, to whit:
the intentions of the founding Pioneers
The Group Values & Principles
the seven internationally recognised Co-operative Principles, most specifically Principle 2
our marketing of “the co-operative difference”
and, not least, The Group's own Member Engagement Strategy and the entirety of our Elected Members' induction training
There is still much talk of the need for “reform”, but most of the rationale and drive for this seems to be coming from the curiously merged Board and executive team and its hand picked “professional” “independent” advisers and is couched in terms of keeping the democratic apparatus at arm's length so that they, the Board/executive, can “get on with the job”, unfettered by interfering amateurs.
I say curiously merged because there seems to be some confusion over the term “agent”. Experts like the ludicrous Cliff Mills (also known for his limited understanding of “mutuals”), have publicly opined that the Board is our (the Members') “agent”. In fact, of course, the Executive is our Agent. The Board is supposed to be our representative body in keeping our “agent” in order and working to remit. Interpreting the Board as our agent simply increases the distance between the Executive and our elected representation and allows the Board further to cosy up with its ilk in the Executive.
What is actually needed is a clearer demarcation (not distancing) between the roles of the Executive and of the elected Membership. And what appears to have been lost in all the furore is that, throughout the débâcle, that distinction became blurred to the complete disadvantage of the elected representatives. They, the elected reps, were there to assure that the direction of the organisation was consistent with its Values & Principles. They were not there to assess, in isolation, complex business decisions and manoeuvres. They had highly paid executives, IPNEDs, and City accountants to advise them on these. They were stupendously failed by these advisers, but nowhere, in all the reviewing, has anybody accused the elected reps, anywhere in the process, of not trying to protect the V&P.
The threats to V&P have all come about since, as we cast about for solutions to the deplorable executive business decisions whilst successions of “independent” lords, millionaires, and City accountants advise us that our V&Ps need to be compromised in order to preserve the business.
The answer is, of course, not to diminish the roles of elected reps, but to clarify those roles and to give them the status not of supplicants but of informed corporate owners with the teeth to properly hold the Executive fully to account.
To assist them in this, some of the now dissolved Area Committees had mooted the idea of ad hoc scrutiny or Select Committees.
Rather than existing permanently (I believe there are already two permanent Standing Committees) to add to the clumsiness of the democratic apparatus, Select Committees would rise and fall with demand as different aspects of the business are deemed worthy of closer study. They could be called by, say, a minimum of ten individual Council Members with carefully selected Chairs and made up of short-listed, interested/concerned, Involved, Interacting, and Influencing Members and resourced sufficiently to call for expert researchers, investigators, and witnesses as required. They wouldn't be encumbered with volumes of routine business. They would focus exclusively within the parameters of their Council specified remit. A suitably resourced Select Committee looking into the scope for legal redress vis a vis the Britannia débâcle would be a good start!
“questions from the floor”
Questions from the floor in large plenary sessions are a complete and utter waste of time.
The current Board/executive's pandering to open General Meetings where “any Member can raise any question” is a cynical attempt to create an appearance of democracy where a serious reduction of democratic recourse has actually taken place. Asking a single question of a gloriously staged panel is nerve wracking and intimidating enough, but it is also futile and frustrating because any half competent stuffed shirt worth his salt can handle any single question any Member could ever come up with.
The strength in questioning comes from supplementary questions. Weaselling and shirking and missing the point and general smart-arsing cannot be sustained where informed questioners are able to pursue their points.
Questions should be posed of specific Board members/executives by panels of three or four selected Members (perhaps serving Select Committee members) with specialised interests and expertise. These panels should be up on the glorious stage alongside the Board/executive respondent(s) and be seen by the assembled Membership to be pursuing the detailed and unequivocal answers to which they, the Members, have a constitutional right.
In addition, we should focus our educative initiatives more widely.
Rather than waiting for Members to be elected to office before offering training, such training should be made available much more widely to ordinary Members who may wish simply to know more about the organisation and about co-operative history. This could even be funded through shopping incentives such as vouchers and/or accumulated points and/or treated perfectly legitimately as “marketing”.
Clearly, many of these newly trained Members might still prefer not to be involved in the democratic process, but they would begin at least to form a significant proportion of a more informed and aware wider Membership. Over time we would inevitably see a more pronounced drive from Aware upwards through Enrolled, Involved, Interacting, and Influencing.
Return to the Moral High Ground
As mentioned above, we have become the victims of our own success insofar as society generally has caught up with us in terms of fair trading. Is it time to look elsewhere for trend leading moral high ground?
Why not look at wage disparity?
Copious research shows that the wider the gap between the higher and lower paid, the more stagnant an economy becomes. Higher earnings tend to be saved or invested “off shore” which doesn't benefit the host economy at all. Lower earnings are what actually fuel the economy because lower earners tend to spend locally and cannot save significantly, let alone invest off shore.
Wage disparity also creates distortions in the economy. It affects things as fundamental as house prices, driving the lower paid completely out of the market.
In any event, can we buy expertise from high ranking corporate executives? Clearly not. Former CEO Peter Marks was costing the organisation in the order of £4.5k per day but seemed capable of little more than jumping on more and more band wagons to enhance his “executive” status. His replacement, the ridiculous Euan Sutherland, was costing us in excess of £7k per day and was actually on hand, as a fully paid “professional” IPNED, throughout the period immediately following the ill-fated merger with Britannia.
Can we buy loyalty from high ranking executives? Clearly not. Despite the huge payments, Euan Sutherland stomped off in an infantile huff (because details of what he was actually costing us were prematurely revealed) with the parting insult that the organisation was “ungovernable”. What kind of commitment and loyalty, let alone understanding, does that suggest? And who knows when the next high ranking executive will stomp off (or threaten to) in a similar fashion? Our recruitment and remuneration policies need substantial reviewing in the light of this.
In 2011, at the behest of the Involved, Interacting, and Influencing Membership, the Annual Accounts included a multiplier to show the CEO's salary as a multiple of the The Group's lowest paid workers. At it's lowest, this multiple was x70 (ie, the CEO was paid 70 times what the lowest paid staff were paid). It is currently at x109 (although the current Accounts seem to be paving the way for x140 to x145 (page 73) because that's what other Tesco's are paying!). It is worth noting that Warren Buffet, the legendary speculator, is on record as saying he never invests in a corporation where the CEO/lowest paid multiple is greater than 50. Perhaps we can lead the way here and take this (rather than bloated FTSE corporate “norms”) as some form of guidance.
The High Pay Centre (http://highpaycentre.org/) reports increasingly run away inflation in top executive pay and bonuses. The average for UK CEOs in 2014 was £4.2 million, whereas the average worker was receiving £27,200. The top CEO received £43 million.
Are these the norms with which we are supposed to be competing? They are, plain and simple, obscene. (To see just how obscene, have a play with: http://highpaycentre.org/counter )
The co-operative movement should be setting new standards in all this. We should be rigorously training our own people to move up through the ranks. At senior level, they and elected representatives - already highly imbued with co-operative values and principles - should be receiving insider training, coaching, and mentoring of the very highest order from “independent” corporate sharks and wide boys who do know the shenanigans and realities of the corporate world. If we train them so well that they get sucked into the mainstream private sector, so be it. We'll just keep producing CEOs and Board members of the highest calibre until the market is saturated and the pay scales begin to drop back to within the bounds of reason.
In his initial progress report (Progress Update of Independent Governance Review - 14th March, 2014), the noble lord Paul Myners listed “Key Recommendations” which included reference to a “sunset clause”. This, the last of his Key Recommendations, stated:
“All rule changes would contain a so-called “sunset clause”, under which the constitution of The Co-operative Group would return to the current status quo after a period of four to five years without a member vote to retain the new structure.”
Mysteriously, I could find no reference to this in his final edition (I would be very pleased to stand corrected). The closest thing I could find was a supine reference to “Demutualisation Protection” (Recommendation 21, P 89) clothed in his standard twaddle for anything to do with the mechanics of preserving Values and Principles.
I would urge current Council members to dig this out and appoint a Select Committee to study the detail and implications. If there is any grist to this particular mill, it may represent the last chance to restore balance to our sadly listing ship.
tbc / Part 8 - Finale
....to be concluded.
The Future - if we have already lost The Group.
© 2015 Deacon Martin