A party seeking to restrict another's commercial activities must consider whether such terms are normal in similar, factual and contractual circumstances.
Alun Burge and Lord Myners, both quoted in Co-operative News:
“Once essential democratic processes have become ossified, have lost their point and are unfit for purpose... Democracy must be rooted in business competence.”
“Governance is a geeky word”
The whole process gives, in fact, an opportunity for careful reflection, despite the overtones of geekiness which Lord Myners detected.
Ownership by the wider community is not peculiar to the co-operative movement, and there are other sectors where there have been similar debates. The development trust movement, championed by national charity Locality, has been supporting the growth of neighbourhood based community enterprises since the foundation of the Development Trust Association (Locality’s predecessor) in 1993. Development trusts are defined as organisations that are:
- engaged in the economic, environmental and social regeneration of a defined area
- independent, aiming for self-sufficiency and not for private profit
- community based, owned and managed
- actively involved in partnerships and alliances between the community, voluntary, private and public sectors.
In the 1990s and the early noughties, partly supported by an enthusiastic wave of New Labour regeneration funding through the New Deal for Communities programme, open elections to the boards of community regeneration bodies were all the rage. Often that meant anybody from the neighbourhood – whether they were technically a “member” of the organisation or not – got to vote in the elections to the board, and even to stand if they wanted to.
But the successful partnerships, like Royds Community Association in Bradford (which started life under the Major government’s Single Regeneration Budget scheme, and is still going) recognised that as well as local community involvement, they needed additional skills to be able to make informed decisions. It was a key principle that those brought in as “experts” needed to be “on tap, but not on top” – so the independent directors should not outnumber the community, but rather sit alongside to help the board as a whole make wise policy.
The challenge was always managing the tension between ownership and leadership; between accountability and competence. This tension is made more acute by the legal demands that being “on the board” puts on individuals, who become subject to a range of legal duties and responsibilities to the organisation (and its members and creditors). This means that no one can truly sit on a board in a “representative” capacity, because they owe legal duties to the whole organisation, not just to the stakeholders that put them there.
The same tension can be seen in the world of housing associations, where the role of “tenant board members” has again been the subject of debate. As housing associations have grown larger and larger, and (in some cases) more and more remote from the neighbourhoods they serve, increasingly the model has moved away again from “tenant led” to “tenant focussed”. The same seeming tensions emerge in relation to capacity, skills and leadership, with an active regulator looking to boards to exercise effective strategy and business acumen in their decision making (sound familiar?)
Some themes emerge consistently, across these divergent types of organisation. Ownership in name is not enough, unless it is matched by a consistent, locally focused, and determined effort to engage. The larger an organisation becomes, the more remote it will get from those it seeks to serve, without a determined and prioritised strategy. When things work well, it is because of a strange alchemy between the right kind of people and the right kind of strategy. And democracy in and of itself is not the same as empowerment; just because an organisation has some kind of democratic process built into its structure, that does not make its governance either accountable or effective. As Ken Livingstone once said:
“If voting changed anything, they’d abolish it.”
David Alcock is a senior associate at Anthony Collins, where he regularly works on legal structures and governance matters for all kinds of community organisations, social enterprises, and co-operatives. He is happy to advise on governance issues in all those organisations.
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