It was in 1844 that a group of like-minded individuals in Lancashire founded the Rochdale Society of Equitable Pioneers, the prototype for the modern co-operative movement in Britain. The members believed in the same principles – fairness, ethical business and the importance of working together for mutual benefit. They also distributed profits among members, not by share ownership, but by how much each person had traded with the society.
It may be understating the case to say that during the 20th century and the first 12 years of this century those principles were not always entirely respected. Most businesses, understandably, are run with a focus on turning a profit. This cash, of course, is just as likely to be reinvested in the business as into lining the pockets of bosses. However, what we have seen since the recession hit in 2008 is disillusionment among many, both here and in other major economies, at how the economy works. In the UK, we have witnessed strikes and banker bashing. In the US, Occupy Wall Street has struck a chord with millions of ordinary people.
In this climate – with employees feeling a greater disconnect between them and their overlords, and the public footing the bill for corporate excess – it is perhaps not hugely surprising that the idea of co-operatives and mutuals is back in vogue, 160 years after those Rochdale workers set up their society. Today, the co-operatives and mutuals sector is worth more than £30bn to the UK and crucially, unlike most sectors, it is growing.
And it is not just the private sector that spotted the benefit of businesses owned collectively by staff. The coalition government has spent its two years in office extolling the virtues of organisations like John Lewis and the Co-operative Group. Nick Clegg, the deputy prime minister, has openly called for a "John Lewis" economy. Meanwhile, last month MyCSP (My Civil Service Pension) became the first mutualised spin-out from Whitehall. It will be 25% owned by staff.
Yet despite us Britons believing we invented the co-operative, the sector is not yet fully mature and its support network is sorely lacking. All businesses, ethically run or otherwise, need professional support, whether that be legal advice or auditing. However, most of this is currently aimed at the purely corporate market and there is a lack of understanding about what co-operatives and mutuals need.
We set up our specialist co-operatives and mutuals team last year because this had become very clear to us. We were working with more and more of these organisations and they felt they were lacking professional support that really understood them and their aims. Although co-ops have many of the same commercial pressures as conventional businesses, the way they approach key areas differs. So advice on governance needs to take account of the specifics of a staff-owned setup and dividend distribution and the (occasionally arcane) law that governs how co-operatives operate. Equally, supply chain management and energy generation are handled differently by these organisations to businesses for whom delivering profits for shareholders comes above all else.
With that in mind, though, we should not stigmatise corporates. The co-operative and mutual approach is not right for all organisations in all fields. However, there are clear benefits for those who do choose to become a co-op. One is employee morale. Staff turnover tends to be much lower than in other organisations as people feel they have bought in to the setup. Co-ops also have clear priorities: being sustainable and delivering profits back to members. Finally, in a world where trust in business has been rocked, co-ops and mutuals offer transparency and a framework for mutual accountability.
All this provides an opportunity for services firms to offer improved support to the sector. As partnerships, law and accountancy practices already share some of the ethos that co-ops and mutuals drive. In our firm, too, we believe that our experience working with public sector and co-op organisations helps us appreciate the challenges they face. The sector is likely to continue to grow over the next decade and will become more important to how the UK economy functions as a result. It is vital that we get the support network it needs in place.
Richard Brooks is a partner and head of the co-operatives and mutuals team at Anthony Collins Solicitors in Birmingham
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