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Beacons of hope

Lauded for weathering the 2008 financial crisis, but still snubbed in the business ecosystem, the co-operative sector now has reason to be back under the limelight.

The largest 300 co-operatives worldwide have a turnover of US$2.2trn (£1.4trn), according to the 2014 World Co-operative Monitor released two weeks ago at the International Summit of Co-operatives in Quebec City, Canada.

If the top 300 co-operatives formed a country, the report suggested, their combined turnover would be roughly equivalent to the national income (or gross domestic product) of Brazil, the seventh largest economy in the world.

“Our movement is a global economic player with an important stake in the world’s economy,” said Dame Pauline Green, president of the International Co-operative Alliance, which produced the report.

“Not only is it a crucial tool which we can use to raise the profile of co-operatives to policymakers and industry professionals, but it also provides an incredibly useful starting point for researchers and academics alike,” she added, noting that data on co-operatives before the Monitor was patchy at best.

Johnston Birchall, professor of social policy at Stirling University, said a previous edition of the Monitor helped him write a report on the governance of large co-operatives after the UK’s largest one, the Co-operative Group, revealed a £2.5bn loss amid a major fiasco with its top brass.

“Critics were saying that large co-operatives in general might be ungovernable,” Mr Birchall said, adding that the Monitor allowed for a more ‘scientific’ study. “It showed that there is no wider crisis, and that the Group’s problems stem from its peculiar history and unique governance structure,” he said.

The experience of the troubled Manchester-based group, however, should serve as a wake-up call for all co-operatives, according to Ed Mayo, secretary general of Co-operatives UK.

To him, it is all about staying connected to members.

“The risks of losing focus should keep any co-operative business awake, and the experience of the Co-operative Bank in the UK is a reminder that the co-operative business form is not immune,” Mr Mayo said.

He said that, while proportionately fewer co-operative banks fail or come close to bankruptcy compared to investor-owned banks, those who have experienced difficulty have turned to their members for support.

Japan

He cited how the Norinchukin Bank, a Japanese co-operative focused on agriculture and forestry, turned to the farmers it represented during the 2008 banking crisis to make up for a US$900m (£566m) loss incurred from bad US securities.

Japan and Sweden are among the few countries that prohibit consumer co-operatives from lumping banking and financial services into their portfolio, Mr Mayo said.

The UK’s Co-operative Bank, by falling under the umbrella of the Co-op Group, is not directly owned or governed by its customers and so it suffered from the lack of banking professionals in top executive positions.

Meanwhile, the trade association in the US is also concerned about good governance. The Washington, DC-based National Co-operative Business Association, which represents 29,000 co-operatives across the country, developed a governance training programme a few years ago.

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