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Economics References Committee
30/10/2015
Cooperative, mutual and member owned firms

GREEN, Dame Pauline, President, International Co-operative Alliance

WALL, Mr Gregory Joseph, Director, International Co-operative Alliance

Evidence from Dame Pauline Green was taken via teleconference—

[09:40]

ACTING CHAIR: Welcome. I just want to remind you—you would not have heard our opening statement—that in giving evidence to the committee you are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to the committee and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. Do either of you have anything to add about the capacity in which you appear before the committee?

Mr Wall : I am also the CEO of the Capricorn Society, a cooperative operating nationally in Australia.

ACTING CHAIR: Thank you. Dame Pauline Green, would you like to make a brief opening statement?

Dame Pauline Green : Yes, if I could. First of all, I would like to say it is a real privilege to be able to present evidence to your inquiry on behalf of the International Co-operative Alliance. We are, of course, the global body that has responsibility to unite, represent and serve cooperatives worldwide, so thank you very much for the opportunity. I also want to put on record straight away the strong support of the alliance for the submission made by the Business Council of Co-operatives and Mutuals, for their analysis of the issues that confront member owned businesses in Australia and for their proposed solutions. I think you have already received a submission from the alliance, ourselves, which highlight some of the issues.

I really want to take a few minutes, if I can, to share with you some of what I have learnt over six years as president of the global movement about the global impact of cooperatives and their role on the socioeconomic evolution of the world, and why the alliance believes it is important that national decision makers, in particular, continue to promote, support and build their domestic cooperative economy. But before doing so, perhaps you should know that over the last six years I have had the chance to work closely with cooperative colleagues in Australia, particularly as they were building the national voice, or representative voice. In my experience, this is an absolute prerequisite not only for the development of the effective representation of this very unique legal and financial structure which cooperatives have but also for the growth of the cooperative collective impacts on the national economy. I am delighted that you are actually looking closely at what needs to happen in Australia to support that.

As I have gone around the world over the last six years, I have had the distinction of being able to speak as the voice of the one billion individual citizens of the world who have chosen to invest part or all of their life in a cooperative. I was once told by a reporter at the BBC that all of this stuff about community engagement, participation, principles and values was all idealistic fluff. I have to tell you that one billion people do not invest their time, money, resources and energy in a cooperative for fluffy, idealistic reasons. They do so because it supports their livelihoods in a very direct and immediate way; it gives them some sense of driving forward their own hopes and aspirations for themselves, their families and their communities; and it also supports their participation. That is a crucial feature that is, particularly, increasingly important for the young. As we see around the world, their distrust of large-scale business is tending to drive their engagement with, and the growth of, the new collaborative or sharing economy. Cooperatives are an essential part of that spectrum of the collaborative economy, and it is really important that we allow the cooperative movement to flourish.

The other thing I have learned very strongly is that cooperatives are the backbone of the real economy across very many countries of the world. They have a proven track record of moving millions out of the informal and into the formal economy. They are arguably the single most effective poverty reduction initiative the world has ever seen, while at the same time we have some world-leading, global multibillion-dollar businesses, the largest 300 of which last year had a combined turnover of more than US$2.2 trillion. I can tell you the alliance will publish this year's figures in a fortnight's time, and—without revealing any trade secrets, so to speak—I can tell you that this year will chalk up seven successive years of growth in that combined turnover. Given the turbulence of the last seven years in the global economy, I think you will understand the significance of that trend.

But the 300 only represent the tip of this huge iceberg. We have continued to grow our movement very strongly over this same period—the last seven years—moving strongly into new sectors of the economy like energy, for instance, and internet based businesses, creating more jobs. Together this multitude, from our tiny microcooperatives at the very local level through to huge cooperatives, sustains the livelihoods of over 250 million people around the world. As you know, job creation, particularly for the young and women, is a key driver for international action at the G20 level, for the success of the sustainable development goals that were just agreed in the UN and to halt the growing inequality around the world.

In the last three years, cooperative and mutual insurance, for instance, has grown from 23 per cent of global market share to 28 per cent, at the same time employing another 120,000 people worldwide. On a different scale, in Spain, I am sure you will know that they have had unemployment levels among young people of over 50 per cent in recent years. In that time, worker cooperatives have created thousands of jobs for the young in particular. So we have a role to play in dealing with some of the key issues that are confronting the world. Not all of these problems are problems for Australia, but it gives you a view of what is happening around the world and the sort of contribution that we are making.

In 2012, the United Nations held the International Year of Cooperatives, and we were asked to take part in the launch of that year. The movement asked for three things in particular: firstly, that the specific and unique legal and financial framework of a cooperative is fully acknowledged and recognised in public policy and regulation, and that there should be a level playing field with other forms of business; secondly, that our model of business should be given equal promotion with the stockholder model; and, thirdly, that there should be a greater diversification of the global economy. I think you will see the resonance in those requests, if you like, with the ones that you have before you on behalf of the Australian movement.

So you are part of the drive that is going on across the world now to modernise cooperative law, to make it empowering rather than restrictive, and also to ensure that professional bodies are much more cognisant of the difference between a cooperative and a company. I am often told, 'There is no difference, especially for big cooperatives.' It is simply not true. As you know, companies are obliged normally by their constitution and by law to maximise profit and return to shareholders. We are constitutionally bound to meet the needs of members. Immediately, the difference is clear. It is about people. We are people-centred businesses.

I know you have been discussing in one of your hearings the International Accounting Standards Board. I just wanted to say to you that even there, just in the last weeks, the IASB has supported the appointment of a key cooperative specialist from a French cooperative bank onto its IFRS Advisory Council to try and ensure that there are no unintended consequences, if you like, on our model of business and to grow the strength and knowledge within the council about collaborative business.

We have also, with the support of your government last year, broken through the glass ceiling and entered the business advisory group of the G20. We have been campaigning for three years for that, and thanks to your government last year we saw a lone Australian, Dr Andrew Crane of CBH—

ACTING CHAIR: Sorry to interrupt. Senators are keen to ask you questions.

Dame Pauline Green : I was just about to stop, actually.

ACTING CHAIR: Excellent. Far be it from me to interrupt a dame. I think you are the economics committee's first dame and I am looking forward to getting that into the annual report. Please continue.

Dame Pauline Green : I am just finishing, because I recognise that time is tight. What started last year with Dr Andrew Crane has this year seen 16 large cooperative businesses taking part in the B20 task forces to try and ensure that recommendations take account of the opportunity offered by co-ops. I think what we are seeing is a global recognition developing about the cooperative difference and the need to ensure that countries have more pluralistic and diversified national economies. There is clear evidence that those who did rode through the financial crisis and the recession much better than anyone else. So we welcome your deliberations. You have a strong, creative and innovative cooperative sector, but it has much more to give, to your national economy as well as to communities and members.

ACTING CHAIR: Thank you very much. I will go to questions.

Senator McALLISTER: Thanks very much for being here. It is really good to have someone here with an international perspective. I suspect that what that means is that you have visibility of a whole range of examples of the way the cooperative and mutual structure is being adapted to contemporary economic opportunities and conditions. I wonder if you might provide us with a couple of examples of some of the more interesting businesses that you have seen internationally. I suppose I am particularly interested in your earlier remarks about the significance of this business form in tackling poverty in developing countries and the significance of this business form in engaging young people in collaborative activity or value building in their own communities.

Dame Pauline Green : Across the developing world we have seen massive growth in cooperative businesses. They are some of the largest businesses. For instance, we have a large dairy cooperative in India that has literally millions of small dairy farmers, mainly women, who own what has become the largest and most trusted brand in India, which is Amul. This is a striking cooperative that has developed and is supporting women whose husbands have to go and work in the city. These women are running the farms themselves. So there is a huge amount of work going on in supporting women out of poverty. Of course, these businesses then become very large. Amul itself is now exporting to all different parts of the world. This is added value to these members and their communities.

So that is the sort of thing that is happening. On another level you see in places like the Philippines that the poorest women have developed through a cooperative a bank that produces microloans for them. The whole board is made up of some of the poorest women. They are trained and have worked very hard to bring their skills up to help them run the bank. They have professional managers, of course. The default rate on the loans is very low and they are creating real value—educating their children, getting better homes and so on. So this is a model that is working. We have a lot of work still to do in Africa. We are working with the Food and Agriculture Organization on finance for local communities growing and creating sustainable agriculture. There is a lot of work going on in that area. So that answers the first part of your question, about poverty reduction.

You do not have to go very far for some of the most innovative businesses actually. Speak to Greg Wall. Capricorn is a most unusual corporative. It is very, very successful, much admired and the only one of its kind that I know of in the world. So cooperatives can grow in any sector of the economy. Many are now developing in the public sector with work that is being outsourced or privatised or externalised—call it what you will—to cope with social care or hospitals or whatever. In the UK, we now have cooperative schools. The day the government liberalised education—in fact, allowed trust schools to develop—we set up one flagship cooperative school. There are now nearly 1,000 because the ethos of cooperatives is very empathetic to the teaching profession. They find it very attractive to them in terms of working together and creating a different culture in the school. We took on the ones that were in some of the most deprived areas of Britain. Their educational results and their cohesion have grown substantially; they have been a great success. So you can see even in mature economies they can do this work very successfully, as well as in emerging countries.

Senator XENOPHON: I have a couple of questions, and I am happy for you to take them on notice because of time constraints. In your submission you make reference to discouraging demutualisation through the provision of relevant legislation or regulatory guidance. Firstly, could you, on notice, put to the committee what you consider to be the best practice in respect of that? In other words, what frameworks, what countries have got it right so that there are barriers to demutualisation. Secondly, the B20 Infrastructure and Investment Taskforce: do you have any thoughts, again on notice, as to how we can harness cooperatives in the context of infrastructure development, getting the best result for the best value for money with that community involvement?

Dame Pauline Green : On the demutualisation, this is really something that has to be tackled on a national basis because the nature of cooperatives in each country is different—there is no question. While we all subscribe to the same values and principles and we are all looking at member ownership participation et cetera, the nature of the way cooperative business develops in each country is quite different.

I know in the UK, for instance, we had a major demutualisation program, which is where it all began, and there was significant loss to our mutual sector rather than our cooperative sector. We defended the cooperative movement there by agreeing with our supervisor that we would have model rules, which made the members very clearly in control of the demutualisation decision and so that it was not driven by external factors. That can be done either through internal agreements or through regulation. There are different practices around the world. Those can be provided to you if you want them. We certainly have collective evidence of that, and we can supply that.

Senator XENOPHON: And a framework as to how legislatively those countries—I would be interested to see, from a drafting point of view and from a technical point of view, how they have put up sandbags against demutualisation.

Dame Pauline Green : Yes, I get that. We can certainly try to find that evidence for you and send it on. We would be happy to do that.

Senator XENOPHON: We would be very grateful; thank you.

Dame Pauline Green : On your second question, I think last year we had the first recommendation, through Andrew Crane's work, on the value of infrastructure and the mutualisation of infrastructure funding investment. I have not seen the development of that work as yet. I have not seen it going forward. I have been on the employment taskforce, and been pretty fully engaged on that this year, but there is a growth of acceptance across the piece at the B20, and the G20 now, that there are different ways of doing things, that coming from a purely stockholder positioning had never been presented to the B20 before. That opens up a whole new avenue of work. Once again, I cannot answer you directly on how that is developing, but there are some real opportunities. When you look at some of the opportunities that were offered in large-scale cooperative business in the electricity industry and the water industry—in all the utilities, in fact—and in telecommunications, I think there are huge opportunities.

ACTING CHAIR: Thank you very much, Dame Pauline and Mr Wall, for your evidence today.

Senator XENOPHON: He did not say much.

ACTING CHAIR: Well, you were very supportive. Did you have anything to add, Mr Wall?

Mr Wall : Just quickly, if I may, I will answer two of the questions that Senator McAllister raised. One was around the uniqueness of the business model. Also, with the previous witnesses, you asked about corporate entities. I run a cooperative that has 16,000 small businesses as members, rather than individuals. So we support small business and their requirements right across Australia and indeed New Zealand, and that is quite unique around the world, as Dame Pauline has said. So I can answer any of those questions that you may have.

Senator XENOPHON: In the motor trade?

Mr Wall : In the motor trade, yes. The second one was around the international accounting standards. I sit on the ICA subcommittee around accounting standards and the regulatory advisory committee, and I know that the committee yesterday had some questions around the accounting standards and the treatment of debt versus equity. I have a memo that we sent to the IFRS more recently, and I can answer some questions if you so wish.

ACTING CHAIR: Thank you.

Senator XENOPHON: Just with time constraints, if you have any material about international accounting standards, could you send that through to us.

Mr Wall : I have it.

Senator XENOPHON: That would be great.

ACTING CHAIR: Wonderful. Thank you so much, and thank you very much, Dame Pauline.

Dame Pauline Green : You are very welcome.