Land Reform Act Part 2 Guidance
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Ironically, this last difference may lead national statistics to under-report the importance of the cooperative and mutual sector. Gross national product is calculated according to the "value added" by companies, broadly made up of wages and profits. If a private company boosts profits, this may be recorded as a greater contribution to national income; if a cooperative or mutual decides to forgo such opportunities, and concentrates on quality of service, the benefit to the economy may go unrecorded. Cooperatives and mutuals have a wider impact on the economy not only as a result of what they do themselves, but from the constraints they put on private companies and plcs. There is compelling evidence that the stronger the cooperative and mutual presence in a market, the less other companies are, for example, able to raise prices, for fear of losing market share. There has long been a recognition across the political spectrum of the need to tackle what Edward Heath called the "unacceptable face of capitalism": from Winston Churchill's advocacy of a minimum wage to prevent the good employer being undercut by the bad, to the Enron scandal - a company that ticked all the good corporate governance boxes while lining the pockets of managers and directors until the company was bankrupted and the employees lost their jobs, pensions and savings, all tied up in Enron stock. Great effort has gone recently into improved corporate governance as a way of improving corporate behaviour. This is important but, as Enron demonstrated, may not suffice. Another more effective form of pressure may be to encourage a strong cooperative and mutual sector, which will not only behave ethically itself, but constrain others from behaving in too ugly a fashion. After all, the battle against bad corporate practice goes back to the earliest days of capitalism. The cooperative movement was founded so that customers could buy reliable produce, as a reaction to the foodstuffs that were all too common at the time. Similarly, credit unions are being formed to cut out loan sharks, and football clubs are being rescued from improper or corrupt ownership practices by supporters' trusts that seek to ensure clubs are run in the interests of the supporters and the community rather than private financial gain. So the mutual form is not only surviving, but is being re-born. It is showing a way to organise economic and social activities in the interests of those who work for or deal with those organisations, rather than for external shareholders. And rather than pay out dividends to external shareholders, cooperatives and mutuals can use their surpluses to reward customers, employees and local communities. © The Guardian 2005 www.guardian.co.uk Professor Jonathan Michie is director of Birmingham Business School and co-author of Mutuals and their Communities, available from www.mutuo.co.uk
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