If Lord Myners is to be believed then the Coop Group was and is in a profound mess due to serious faults in its corporate governance.
Let me start with an important caveat: I am sure Lord Myners is telling what he believes to be the truth. Equally there is always room for more than one view on such issues and it is wise to remember that. It's also true that there can be advantage to to the new broom to, if not overstating the problem, at least being blunt about it to create the shock effect necessary to create acceptance of change.
That being said, Paul Myners' description of what failed resonates with me. As he has put it:
"I have observed the bad governance of the banks, but this is on an altogether worse level.
"The rate of deterioration has increased over the last half dozen years because of the recklessness of the strategy being pursued and supported by the board."
And according to the Guardian:
He added that the entire retail, funeral home, pharmacy and farming conglomerate would deteriorate further unless it was radically reformed.
Having been called into, albeit smaller, companies in my time where this was undoubtedly true I have little doubt that he is right.
From my own experience I am also quite sure he is right to say that this problem started at the top. I have rarely seen major corporate mess without concluding the bosses were to blame. In this case the Guardian says:
He said the company's most senior managers were left to waste billions of pounds on disastrous corporate transactions because the directors drawn from the Co-op movement were not qualified to keep them in check. "Few of them have any serious business experience and many are drawing material financial benefits from their positions."
This appear to be a blow to the Co-op movement but as Myners has said:
"What I think I have exposed is that the Co-op is not a democratic organisation and has a deeply flawed governance structure, and if it doesn't address these issues the pace of decline will simply increase. The reality is that the Co-op has been in decline for 60 years."
And:
He said that the group, led by £1.2m-a-year chief executive Peter Marks until last year, had been obsessed with making large acquisitions instead of competing in the cut-throat world of grocery retailing, which is its main business.
It is at this juncture that what Myners is saying really resonated with me. I have always had a fairly straightforward philosophy on business. The first is that a business needs to know what it is doing and why, and to then do it very well. The second is that if you're buying a business you never know what you're going to get, but the surprises will always be on the down side. The third is that growth is of value, but most certainly not if it compromises existing success.
The Co-op clearly breached all these, I think, common sense principles.
But, again, if Myners is right, there is something more profoundly worrying at play here and it is, pretty importantly, at the philosophical level that things have gone wrong.
Myners has pointed out two things. First, management was out of control. I think there is little doubt that the management team of the Co-op had fully embraced the neoliberal logic that competing is the sole goal of all organisations. They evidenced this through a desire to compete on the basis of the group's size and breadth even though that both clearly compromised viability and, at least as importantly, defied the supposed ethos of the group, which was and should be to supply value to its members. Yt has very clearly failed to do that. This was the fundamental malaise at the heart of this issue. The management, possibly motivated by self interest (which appears to have been well rewarded), had very clearly forgotten all that this group was supposed to be about and what they were good at.
As worryingly, the board that were supposed to remind them of this appear not to have done so. They take some significant blame for what happened if that is true: it looks like they succumbed to the same neoliberal logic, not that this is surprising: the whole neoliberal game of the last thirty years has been to make its logic of competition in all things all pervasive. It would appear to have succeeded here, at great cost.
What was needed were board members who had the courage to ask awkward questions and stick to asking them time, after time, after time, even if that created an uncomfortable atmosphere at board meetings and strained relations on occasions between executive and non-executive members of the board. I will tell you that many boards thoroughly resent those who make such scenes ( you need not ask how I know: I think you can guess) and yet they are essential on occasion.
What Myners seems to be saying is that the non-execs at the Co-op were drawn from a relatively small cohort of activists who themselves probably shared a broadly similar mindset amongst whom inclusive behaviour was probably quite highly valued and that this group were in turn not especially qualified to then stand up against the executives of the group. That is a recipe for disaster in this situation, albeit it is, of course, a long way from being unusual. Much of the boardroom elite of the UK behaves in much the same way, even f the group from which board members is drawn is different.
In that case what Myners is proposing is appropriate. The Co-ops' currently ignored wider membership does need to be involved in the process of accountability and people with business experience need to be in charge of commercial decisions, albeit they also need to very firmly understand just what the Co-op is about and what it is for.
In that case I have little doubt that the boardroom does very largely need to be swept clean with a new National Membership Council to hold the board to account to the group's values and principles also being elected. That Council be wise to recall the three basic business principles I laid about above: they would have served the Co-op well.
Achieving this will take courage. Myners has made a start. I hope he succeeds. The Co-op movement requires that he does so.
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“I think there is little doubt that the management team of the Co-op had fully embraced the neoliberal logic that competing is the sole goal of all organisations”. —
Can you please point to any serious commentator who has ever expressed this opinion?
The neoliberal logic is this (and I am oversimplifying):
Economic activity must have, as its primary (but not sole) goal, the satisfying of the wants of customers. If it doesn’t do it, there is no point of having that activity. The resources are better used on something else.
Where competition comes in is this: if an organisation is without competition (i.e. a monopoly) it is easy for it to forget that the purpose of its activity is to meet the wants of customers. It starts to think its purpose is to meet the wants of the producers. The producers then tie up resources for themselves.
(Note: I am not saying a competitive environment is necessarily appropriate in every situation – for example, I’m happy with the Council being the sole provider of street lighting in my street, but I would like a competitive environment for suppliers of the light bulbs).
‘Competing’ is not an end in itself for an organisation. If an organisation is in a competitive environment (as consumers desire in most but not all situations), then the end for the organisation is survival and (hopefully) prosperity. Competing is just the necessity to meet these ends. If they don’t compete, they close (and good riddance to uncompetitive organisations).
You start with misrepresentation and end agreeing with the point I make
Do you call that an argument I should engage with?
Well maybe you could just explain how
‘competing is the sole goal of all organisations’?
It isn’t if course
But neoliberalism says that is the case: rational individual maximisation, it says, requires it
It is to corrupting dogma that I was referring
Adrian -that is an utter misrepresentation of the neo-liberal ‘illogic’ . Read PHilip Mirowski on this (http://www.timeshighereducation.co.uk/books/never-let-a-serious-crisis-go-to-waste-by-philip-mirowski/2005266.article). neo-liberalism is about corporate capture, the monetizing and financialisation of everything with a relatively small group of people syphoning off wealth -it is rooted in a psychology that reduces human beings to ‘branded entities’ and is utterly corrosive. It is fundamentally anti-competitive as it uses rigged markets, highly skewed financial instruments that are actually anti-business and is often supported by the State which creates what has been described as ‘reverse-socialism.’ The ‘Help to Buy’ scheme, bail outs and bail ins are all part of this -anything that is not monetized (like looking after your kids/caring for a neighbour) has to be financialised or it ‘does not exist.’
I suggest you look into the implications of this.
Neoliberalism is clearly about the creation of a corporate culture for all behaviour – but the corporation is the perfect way of concentrating wealth, of course: it is a funnel to feed wealth upwards
It is also a narrative of competing perpetually for resources – which is, of course, the way of justifying the wealth concentration and making the rest they do not have them as a result fo their failure in the race: this is its control mechanism
The narrative that combines these two is fundamental to neoliberalism
Agreed, Richard. if you don’t feed it through the ‘rigged casino’ you are a non-entity – of course the riggers always win and as you say, if you don’t rig it -you are a ‘failure’. This existed in America in the 30’s where politicians (Thomas Nixon Carver)put forward eugenics that defined the poor as lesser beings who should be sterilised. cameron’s banal ‘doing the right thing’ phrase means: play the rigged casino or go to the wall-if you ‘do the right thing’ you get a condescending pat on the head whilst everything you have is syphoned away via housing scams/eroded public services and financialized health ‘care.’
I don’t hold my breath on this one -nor do I think these reforms will happen -the neo-lib mindset with its go for broke mentality has infected every corner of these organisations. As far as the bank is concerned after getting the insulting ’round robin’ from Niall Booker I’m looking at moving what little I have to the salvation Army bank where, one hopes the neo-lib agenda might not be in such a state of heat.
I quoted you directly, cut and pasted your own words. Could you please point out the misrepresentation. None was intended.
I’ve never heard anyone say that competing is the sole goal of all organisations. Nobody.
But clearly someone must have done so (and in sufficient numbers for it have pervaded the Coop). You would not have attributed the Co-ops failings (at least in part) to a non-existent idea.
For the sake of my own education, could you please point me to an article, author etc where this idea is expressed?
Start here http://www.amazon.co.uk/The-New-Way-World-Neoliberal/dp/1781681767/ref=sr_1_9?ie=UTF8&qid=1394881099&sr=8-9&keywords=neoliberalism
Yes I know that’s Amazon
It’s easy
Thanks
Can I be cheeky and ask you for a quote from the book where they say this? I’m genuinely interested.
It would be an odd thing for them to say. They’re entitled to their opinion, but it is hardly mainstream.
Apart from anything it would fly in the face of some of the really influential management thinkers (e.g. Peter Drucker).
And not even Adam Smith thought the sole purpose of business was to compete. Didn’t he say something to the effect that business owners prefer not to compete (and by implication, they only compete if they have to)?
It’s the whole approach Foucault takes to neoliberalism ably explained by these authors and easily the best explanation of the phenomena that I know of
The blurb on the laval and Dardot book does some it up well:
“Exploring the genesis of neoliberalism, and the political and economic circumstances of its deployment, Pierre Dardot and Christian Laval dispel numerous common misconceptions. Neoliberalism is neither a return to classical liberalism nor the restoration of “pure” capitalism. To misinterpret neoliberalism is to fail to understand what is new about it: far from viewing the market as a natural given that limits state action, neoliberalism seeks to construct the market and make the firm a model for governments. Only once this is grasped will its opponents be able to meet the unprecedented political and intellectual challenge it poses.”
They encapsulate well something I have long felt
And which explains the Co-op fiasco rather neatly
Personally, when an organisation fails radically, I tend to look at the vultures circling and the links between them and the current personnel operating the organisation.
Rarely will I find no links.
As one of 8 million Coop members I would like to be able to vote to replace senior board members with an effective board, but it seems almost impossible for ordinary members to have any effect. To start with, the voting system is almost completely concealed from members (try finding it on the web). If members succeed in finding how to vote, as far as I can see they can only vote for a candidate for the lowest tier of committee. After several years at the lowest level, their candidate may be chosen by the low committee to move to a middle level committee. After a few more years a member of the middle committees may be chosen to move to the top committee. Hardly a recipe for decisive action or independent thought. Democracy Jim, but not as we know it?
The two opposing dangers are that the board will be replaced with “professionals”, i.e. the shysters that it failed to control, or that we get democracy and a board stuffed with single issue fanatics (e.g. the most important thing for the Coop to do is to stop selling the Sun because of page 3). There was a fascinating and relevant article on Yves Smith’s blog a few months ago
http://www.nakedcapitalism.com/2013/12/guns-and-votes-the-victory-of-an-intense-minority-against-an-apathetic-majority.html
Your point is entirely fair
I had not until, recently realised just how bad this was
It’s a perfect recipe for capture – and not to advantage
Intense minority versus an apathetic majority just about sums up contemporary Britain.. We need change at the school level to create engaged and socially motivated people -I’m afraid apathy and burn out as well as information overload (the negative side of the internet) has switched a lot of people off and led them to the opiate of dumbed down TV. Neo-liberalism is now the ‘wallpaper’ or default setting of our culture and it takes consciousness and heightened awareness to notice it at work-this is why, as Mirowski points out, dumbing down, simplistic explanations of reality and anti-intellectualism (‘do the right thing!’) are the fundamental tools of power and corporate control.
To be fair, the article article actually compares the reasonable majority to the single issue minority. A rational voter will vote for the candidate whose views most nearly reflect their own on a range of issues. The pro-gun voter will always vote on that issue regardless of anything else. Since I come from Northern Ireland, this really resonated with me. Someone once remarked that a unionist would vote for a polar bear, if it was waving a union jack.
I am considering the Reliance Bank as an option (not many!) to the Co-Op:
http://www.reliancebankltd.com/