Australia's Top Ten Demutualisation List

Why are the ten top factors that have facilitated the demutualisation of co-operatives in Australia?

A USA report reveals the obvious about demutualisation - member ownership and control prevents demutualisation, Strengthening Cooperative Business Structures: Lessons Learned from Demutualization and Cooperative Conversions (2004).

The report was co-authored by Rod Nilsestuen and E.G.Nadeau and commissioned by a coalition of organisations including the Consumer Federation of America, Credit Union National Association, CUNA Mutual Group, National Cooperative Bank, National Cooperative Business Association and the National Rural Electric Cooperative Association.

According to the study, conversions are rarely driven by members or by perceived benefits to members. Rather, conversion is more often driven "by co-op staff, leadership, or outside consultants" who stand to gain from a switch. Cooperatives that have high voting thresholds, that engage their members in their activities, and that stay connected to the community are less likely to fall prey to even the most aggressive conversion tactics, the study said.

For a USA National Co-operative Business Association news release on the report.

In Australia demutualisation has proceeded gradually. In recent years, for example, Ardmona, Pivot and the Warrnambool Cheese and Butter Factory have demutualised. Credit unions throughout Australia are at risk of demutualisation because they are under financial institutions rather than co-operative legislation.

If we can understand what has characterised the demutualisation of co-operatives in Australia, then, it is possible to begin the process of confronting future demutualisation threats. All or a majority of these characteristics have influenced the demutualisation of co-operatives in Australia:

• The boards did not protect the co-operative character of the co-operatives and, instead, promoted demutualisation.
• "Independent" experts employed by boards assumed and supported the self-evident merit of demutualisation.
• Increased capital and growth is assumed to be not possible without demutualisation.
• There has been a preceding incremental move towards demutualisation e.g. outside shareholders and establishing separate businesses.
• Co-operative , and other, legislation has aided and abetted demutualisation by not recognising and protecting the characteristics of co-operation.
• Demutualised co-operatives have a preceding history of having stopped being committed to the co-operative advantage and difference. Many large agricultural co-operatives do not include the word co-operative in their name.
• Demutualised co-operatives have a preceding history of not actively engaging their members in co-operative education and governance.
• Demutualised co-operatives have a preceding history of an increasing proportion of their users not being members and/or shareholders who are not users.
• Australian public policy ignores demutualisation as a serious public policy issue and choice.
• Australia's co-operatives have failed to unite on an an appropriate activist anti-demutualisation platform.The co-operative movement is fragmented into disparate peak bodies for building societies, credit unions, friendly societies and other co-operatives.

In contrast, in Europe large co-operatives have resisted demutualisation. Instead, the co-operatives have embraced their co-operative character as essential to their future.

David Griffiths
Last updated: 10-Apr-2005 9:53 AM