In his article, Griffiths uses the recent attempts by
Warrnambool Cheese and Butter Factory
to list on the Australian Stock Exchange to argue that legislative action
is needed to stop the further 'demutualisation' of co-operatives in Australia.
the case that:
WCBF and PIVOT
are not typical of most Australian co-operatives and are not good examples to
current laws make it possible but difficult for a co-operative
Recent reforms to Australian
co-operatives law makes it unnecessary for the state to prohibit the
'demutualisation' of co-operatives, and
inappropriate for the state to intervene on this matter, as it would be
inconsistent with the co-operative principles.
Both WCBF and PIVOT are unlisted public companies registered
under the federal Corporations Act, and are not subject to Australian
They were formed as 'co-operative companies' before
Unlike co-operatives, companies do not have an in-built exit
for non-user (inactive) shareholders. While originally co-operative in
inability of WCBF and PIVOT to remove inactive shareholders has led, over the
years, to an increasing number of investor shareholders compared to user
(active) shareholders. This
has contributed to the pressure to list on the stock
The situation above also occurred in agricultural co-operatives until 1987 in
NSW, and 1997/98 for most other states. New co-operatives legislation in those
years introduced a compulsory exit mechanism called active membership, which
removes non-users from membership.
Active membership, together with other
reforms, has been
effective in virtually
stopping Australian co-operatives from becoming listed public companies.
Had WCBF and PIVOT been registered under co-operatives legislation instead of
the Corporations Act, the proposals to list on the stock exchange may never
WCBF and PIVOT are not mutuals
argument that WCBF and PIVOT were about to 'demutualise' is a nonsense.
Neither can be classified as
mutuals, as both companies
have user and investor shareholders.
A mutual is an organisation where there is a complete identity between the
participants in the entity and its members, and where the entity's income is
derived from members.
In Australia, mutuals come in many forms (trade unions, clubs, credit unions),
and are incorporated under a variety of legislation, both state and federal.
A co-operative is just one of a number of legal entities available for
people and businesses to form mutual organisations. Other entities include
incorporated associations and companies limited by guarantee.
Housing co-operatives, for example, are mutuals - only tenants may be members,
all tenants must be members, and income is derived from members. Similarly,
credit unions are mutuals - only
savers can be members, all savers must be members, and income is derived from
services to members. Some buying co-operatives are also mutuals.
Not all Australian
co-operatives are mutuals because they provide
services to both members and non-members. For example, buying co-operatives
retail outlets are not fully mutual as some customers may not be members.
Similarly, some health services co-operatives are not fully mutual because they
services to both member and non member patients, and derive their income from
government sources as well as members.
In contrast, agricultural
marketing co-operatives and worker co-operatives are not mutuals at all, as
not derive their income from members but from customers who
are not members.
UK Co-operatives and Community Benefit Societies Bill
Griffiths refers to the UK
Co-operatives and Community Benefit Societies
Bill as an example of using government legislation to stop further
The Bill contains provisions enabling the UK Government to make
regulations under which
community benefit societies
could be permanently prevented from any use of or dealing with their assets
for the benefit of the community, and also prohibit the conversion of
the society to a company or the transfer of its assets to another body.
Although they are covered by the same legislation, co-operatives differ from
community benefit societies. A
co-operative conducts its business in the interests of its members, whereas,
community benefit societies (bencoms) trade for the benefit of a
wider community, rather than just their own members. Bencoms include housing
associations and some social and sporting clubs.
Crucially, the UK parliament did not extend the provisions to apply to
co-operatives, in recognition that they are self-help and democratic
to access the second reading speech of the Bill in the UK House of Commons.
Co-operative values and principles
Griffiths claims that the process of demutualising a
the demutualised outcome are inconsistent with co-operative values and
principles. He fails, however, to substantiate his claim with examples of
which values and/or principles prohibits the 'demutualisation' of a
co-operative. This is because there is no such prohibition.
describe co-operatives as autonomous organisations, which gives
members the right to choose for themselves the best
structure to meet their
needs, including changing to a company or some other corporate body, merging
with another co-operative or even winding up.