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Phone Co-op members demand clear limits to risk 6 February 2018

Posted by cooperatoby in cooperative, Social enterprise.
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I am now eagerly awaiting the decision of the Phone Co-op board following the decisions of the AGM last Saturday in Sheffield. The meeting, which was attended by 153 people – about 15 of whom were not members – voted overwhelmingly to support two motions critical of the co-op’s new growth strategy and asking for greater transparency and care with the members’ investment.

Overall the experience of the AGM was very pleasant: a convenient venue right opposite Sheffield station, a copious lunch served in an airy atrium, and a lecture theatre fitted with electronic voting equipment.

Even better were the two guest presentations: the first from Jean-Paul Flintoff introducing the 1 Million Conversations campaign. “A transformative conversation may only take five minutes,” he said, brandishing a mug designed to stimulate exactly such talk. I was disappointed not to pick up one of those mugs myself – I’m sure they’ll become collectors’ items. The second presentation was by Vivian Woodell (ex-CEO) and Dame Glenys Thornton on the plans of the newly-established Phone Co-op Foundation.

The meat of the meeting was however more serious, and concerned the whole culture and strategy of the co-operative.

Part of the solution to inequality?

I moved the first motion, which noted the apparent doubling of pay differentials to a ratio of 10 to 1. I alluded to my previous jobs where pay was much more equal – above all at Suma, which now has 162 workers and has practised equal pay for upwards of 40 years. I mentioned Wilkinson and Pickett’s 2009 book The Spirit Level, which correlates income inequality with a host of social ills from obesity to imprisonment. I said how much I admired the Phone Co-op’s balanced model of development, the way it cares for members, employees and the environment, and the impressive contribution it makes to the co-operative movement. “It is indeed the inspiring ‘better model for business and the economy’ that it claims to be,” I said. I called on the board to continue their commitment to honest and open communication about recruitment – and only 2 members disagreed with that, while 89 supported the motion.

The second motion was moved by Simon Blackley, who chaired the co-op for the first nine years of its life. The motion queried the ‘dash for growth’ strategy that had been briefly set out in the annual report. While welcoming growth, he felt that the upside of the plan was unrealistically ambitious, while the downside was downplayed. That downside has already absorbed a quarter of the co-op’s reserves of ₤1m, and risks eating into the member’s share capital of ₤7m. Seeing as this capital is withdrawable, retaining the members’ trust in the liquidity of the co-op is paramount.

A credible plan?

Interim CEO Peter Murley had already given much greater detail on the new growth strategy he has masterminded since his appointment in the middle of last year. His starting point is that the co-op is “A telecoms business with a co-operative USP, not a co-operative with a telecoms USP”. He believes that the co-op has underinvested in systems as well as in people, and that it must achieve critical mass or wither on the vine. This means achieving a sixfold increase in customers and targeting the business market, which is growing four times faster than sales to individuals. This turnround requires the co-op to sustain losses of ₤2.3m before reaping the reward of much higher profits.

All business plans follow this curve, so the question is whether it is a credible projection – and whether it is fair to risk the members’ investments without a more inclusive debate. In the 3 hours at our disposal, and even by overrunning for ¾ of an hour, debate had to be curtailed. But at the vote, 79 members supported the motion, with 12 against. Some members had had to leave by then, and at least one, attending by internet, reports that he could not vote.

These two reverses leave the board, and the new permanent CEO Nick Thompson, who takes up his post on 19th February, with a tough nut to crack. One solution proposed was that the coop could issue a separate class of shares to fund this investment. Then members would be clear about the risk they are sharing. I for one would buy some.

Video of the AGM: https://www.youtube.com/watch?v=tOw0qFOk3d0 (I am on at 2:44:40)

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Comments»

1. Taking stock at the Phone Co-op | Bibby on cooperatives - 12 February 2018

[…] the Phone Co-op’s AGM in Sheffield on Feb 3rd.  There’s a good report of the event on Toby Johnson’s blog the link to which has been up here on a comment but which I’m mentioning again in case […]

2. Richard - 6 February 2018

I am interested that you quote the number of 153 members as being present as at the beginning of the meeting the Chair told the people in the room that he had no way of checking or verifying which of them were or weren’t members and therefore who was allowed to vote – and in any case every seat had a voting terminal attached to it! I think the 153 figure was the number of people who registered to attend, but there was no checking on the day other than handing out or making name badges (which was all rather surprising in a co-op that has previously prided itself on its democratic governance!).

cooperatoby - 6 February 2018

Quite right Richard – 153 people present. When asked, about 15 people confessed to not being members. Will correct. T

3. Ian Symonds - 6 February 2018

Thank you for your well balanced appraisal of the issues facing the Phone Co-op. I am not an existing member but might be a potential buyer of a separate class of shares. It will be challenging to allocate the potential risks and rewards between members with a low appetite for risk and new investors, without compromising co-operative ideals. You have long experience in the co-operative movement. Is it something you have seen work successfully elsewhere?


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