More Myners Quibbles

One of the things Paul Myners made a point of in the presentation of his plans was that governance in co-operatives suffers from the lack of threat from hostile takeover as shareholders pissed off with the direction the business is going get out.

In essence, PLCs have a rudimentary democracy, which suffices because the most vital means of extricating yourself is to sell up; democracy needs collective activity to achieve transformation, but shareholder democracy means you can just cash out, and what remains is a matter for who’s left. Eventually, you’ll be vulnerable to a takeover by people who have the starting point that you (the senior executives and board) have to be removed.

PLCs are built on the notion that someone’s relationship to the business is a simple matter of profit (a dividend or capital gain) and the job of the board is to service that need.

Co-operatives are cut from a different cloth. They forge political communities of self-help through membership, and whilst they should profit, they should also do benefit from the different kind of relationship and different timespans in which the relationship occurs (in essence, co-operatives relationships are more like friendships, plc-relationships are like speed-dating).

Since in a co-operative, you can’t cash out in the same way, you have the means to affect change through having a voice. It’s the exit-voice-loyalty typology developed by the wonderful Albert Hirschmann, who argued that enterprises (by which he included countries as well as business) needed feedback mechanisms in order that they could be guided as to their successes and failures.

The more difficult it is to exit, the more you need to have a voice, and vice versa. If you have no voice (where you aren’t listened to and have no influence) and have no exit (you can’t easily walk away), then the enterprise suffers — think the Soviet Union, or indeed, a modern British football club.

Myners’ proposals failed to address this at all. They sought to remove any meaningful voice, which in the context of not having an exit, leaves members powerless. You can see why executives were pushing for it, because it would be essentially accountability free. It’s the sensation Macaulay Culkin has when he realised he’s got the run of the house in Home Alone.

Ultimately, something would have gone wrong, and the only way to get accountability back would be to go back to where we are now, or plough on and bring the PLC structure into the heart of the co-operative group by getting rid of one-member, one-vote provisions, and allowing shares to be transferred.

Given any cock-up would likely require some form of recapitalisation, the Co-operative group would have been on a collusion course with a management-driven catastrophe to which the only possible outcome was de-mutalisation.

That’s why Myners proposals inspired such a reaction: not because we’re a bunch of stick in the muds who hate change but because we’re a bunch of ordinary people who think that the notion of accountability to be one worth fighting for, starting with The Co-operative Group but by no means restricted to that. It’s the battle of our age, and its taking place at a convenience retailer with a green fascia store near you right now.