The Co-operative Bank will raise the £1 billion it needs to plug its capital hole by selling shares on the stock market.
This signals a major shift in ownership of the Bank, giving outside investors a significant share for the first time.
There are some significant implications for business ownership here, both for the Co-operative Bank’s current and soon to be owners, and for businesses more widely.
1. Member control. The stock market flotation won’t result in a demutualisation. The new investors will have between them less than 50% ownership of the Bank, with The Co-operative Group (which previously wholly owned the Bank) holding controlling shares.
The Co-operative Group is, in turn, owned by its six million customer members, meaning that the customer members will continue to have control, albeit shared with outside investors.
In any mutual there are always productive tensions between the members and the executives; the introduction of a new class of investor members focused on profit will add an additional dimension and shift more control from customer members.
2. Complexity. The new class of members also adds a further level of complexity into the ownership structure.
The Co-operative Group has always had a mix of owners: a small number of corporate members, which are businesses that use The Co-operative Group, sit alongside millions of individual customers. The business has always dealt with this complexity and now it will have another set of owner investors to deal with too. The interests of shareholders, individual and corporate members may sometimes be aligned, but in areas like ethics and long term vs short term profitability perhaps less so. Time will tell on this.
3. Investors. Another interesting implication is for the stock market investors. There are mixed models out combining member owners and investor owners. Circle, the private health provider, for example, is owned 49.9% by employees and the remainder by investors through a PLC. But not many.
It will be interesting to see what impact this model will have on shareholders. Will they see the benefits of sharing ownership with business and individual customers? Will it put investors off? How will these groups relate to one another and to the executive team?
4. A new model? And, finally, will other businesses see the benefits of attracting capital from investors whilst keeping ownership in the business through a customer or employee ownership model? Might we see more of these models emerge? Maybe not in the immediate term, whilst the Bank deals with some reputation issues, but longer term perhaps. After all it’s a good approach for mixing investment and member ownership and this offers a high profile example and test bed.