THE BLOG

Keep Calm, and Co-operate

17/03/2014 12:18 GMT | Updated 16/05/2014 10:59 BST

This has not been an easy time for The Co-operative Group. The departure of its CEO, Euan Sutherland, and report by Lord Myners on boardroom failures, has prompted a good deal of public and private debate, not least around the model of governance that the business has.

It is with perfect timing therefore that Co-operatives UK, the association for co-operative and mutual enterprises, has now just released the results of new research on co-operative governance worldwide.

Governance is the overall system of decision-making and accountability that a business has. For co-operatives, the accountability is to the members, all of whom are involved in one way or another with the life of the business.

Although co-operatives have been growing, relative to the wider economy, this is the first systematic review of the governance of sixty of the world's largest co-operatives. There are two key findings:

• First, the most effective models of co-operative governance over time, such as the Desjardins Group (leading financial services provider in Canada) and Fonterra in New Zealand (the world's largest dairy exporter), are designed to put the right mix of people and skills onto the board, with a very clear line of accountability to the ultimate owners

• Second, having a large assembly of representatives enables some consumer co-operatives, such as the S-Group (the co-operative that has 80% of Finnish households membership) and the Nonghyup federation (that has 80% of Korean farmers in membership), to have a smaller, mixed board of directors and managers, and that seems to work well

The Good Governance of Large Co-operative Businesses is written by Professor Johnston Birchall of the University of Stirling. He emerges with a positive overall conclusion from the research that "...the participative model of co-operative governance does work at scale, and, governance in co-operatives worldwide is as good, if not better, as anything we find in the plc realms."

However, governance is not something you get right and then forget about. Governance that does not adjust and adapt proves more costly over time. For The Co-operative Group, the report last week by Lord Myners on his interim findings is a starkly worded critique of what he sees as a business that has fallen short.

All this has been played out in the media in a way that might surprise many business commentators. The characters and reports involved, including a forensic analysis still to come of the weaknesses that led to the change in ownership of The Co-operative Bank, are all paid for The Co-operative Group. To brand analysts, this might look like corporate self-harming.

True, there have been unapproved leaks and briefings, which is a not a sign of a happy organisation. But one reason that this has been so public, is that the Group is ultimately owned by millions of customers and any debate that is effective in reaching them is almost by definition going to be open and public. For better or worse, The Co-operative Group is a public interest organisation, and one that has historically enjoyed high levels of public trust.

The issue now is what is the change in governance that will work over time? Here, Lord Myners helps considerably by making a practical set of proposals. But, for all the undoubted need for haste, these also have to be considered with care and a practical, experienced eye in order to avoid the risk of unintended consequences. The moral? Keep calm, and co-operate.