Commercial confidentiality versus Co-op democracy: Ursula Lidbetter

That’s the crucial issue for all our societies, but there are no easy answers, says Lincolnshire Co-op Chief Executive Ursula Lidbetter:  Co-operative news – August 24 2009

I was contacted recently by a ‘concerned co-operator’ from another area who posed an interesting question.

She asked how co-operative members can ensure that democratic member control, one of our fundamental co-operative principles, is not undermined when major decisions are taken by their society?

Bearing in mind some of the significant disposals which society boards have faced over the years, the question really got me thinking and I agreed to share my thoughts through the columns of Co-operative News and hope to stimulate contributions from other co-operators.

There is no simple answer to the question of how members can provide effective scrutiny over commercial decisions, as they are likely to be confidential. Without this, most negotiations would not get off the ground let alone conclude.

There is, however, a great distinction between these commercial transactions and the non-commercial decisions boards have to consider. I can give two examples from Lincolnshire Society.

In the 1990s the society was involved in an idea to form a new university for the county of Lincolnshire and our board concluded that a very large contribution from the society would be instrumental in achieving this new academic facility for the area.

It was proposed to give £1 million over a ten year period. Although there was nothing in our rules to prevent this decision being made by the board, the members were consulted because of the scale of the proposed contribution.

We arranged a roadshow that went round the county to all six of our members’ meetings. The university project team and the society presented the proposals — including the funding schedule — and asked members to vote.

Many questions were asked and, after due consideration, the membership was overwhelmingly in favour of the proposal and so we went ahead. We now have a well established University of Lincoln and the society is rightly proud of the part we played in its foundation.

The second example is a request we recently received from the Fenland Green Power Windfarm Co-operative, which was setting up in the south of Lincolnshire. They asked whether we would subscribe to some of their share capital to give a lead for others in the community to follow.

Our board considered that this was potentially a worthwhile cause, though not necessarily a commercial investment in the normal sense. The society was also conscious there were strong views on both sides of the windfarm debate. We determined that our members would be our guide.

In our members’ magazine, which is mailed out to 70,000 homes, we put a balanced article about windfarms and asked members to let us know their views. We received many responses and almost all were in favour. We followed this with a presentation from a representative of Baywind Co-operative at our members’ meeting.

This attracted a large audience with many contributions from the floor and again a very positive response from members. On the basis of this consultation we went ahead and invested £100,000 in the Fenland Green Power Co-operative and are now pleased to see the blades turning and producing green energy for our community.

So consultation on important, but non-commercial decisions, is not only possible but positive for democracy as it reminds members that they are the ultimate owners of our co-operative and that their views count.

This leaves us with the problem of significant commercial decisions which can have a major impact on the society, but which cannot be decided by the membership as a whole. How do we protect our members and ensure that our democracy remains robust and meaningful?

Firstly, members should make judgements about their board. Members have elected directors to represent them and should take an interest in their character, capabilities and track record. If members are confident on these matters then to a large extent the directors have to be relied on to look after members’ interests. If members don’t believe this is happening, they should replace them.

Secondly, after a major decision has been taken and members have been informed it is perfectly proper and beneficial to ensure that there is an opportunity at members’ meetings to discuss the decision, which was made and the reasons for it and members should take an active part in this in order to judge whether their directors made the decision in the members’ interests.

A society’s formal or informal member groups and committees can be used very effectively to communicate in both directions between members, directors and managers. These networks are an important mechanism for directors and managers to get to know what their members want, so decisions will be more likely to reflect members’ priorities. They are also a regular forum for discussion and debate over key decisions, after the event if necessary.

The bottom line is that members must be engaged and educated about their society. If we let this wither, then decisions will be without the necessary scrutiny from the ultimate owners. (A similar debate is raging in the plc sector about shareholders and their lack of interest in holding to account the companies they own.)

If members take an interest in their society and are helped to understand the philosophy, business direction and trends, decisions made should fit into a coherent framework and therefore be better understood and accepted.

I would be interested to hear, through the pages of the News, how other co-operators, particularly from different sectors, have dealt with this issue which is fundamental not only to our values and principles, but also to the effective scrutiny of our co-operative businesses and I would like to thank my ‘concerned co-operator’ for raising it.

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