Co-Operative Bank today 'terminated' Capita's outsourcing contract years before it was due to expire Co-Operative Bank is terminating its outsourcing contract with Capita years ahead of schedule and is planning to TUPE across staff to provision services in-house again, ending what at times was a fractious relationship. A six-year agreement for Capita to run the Bank's mortgage services operation was signed in 2015 worth £325m …
All the mutuals have gone to the dogs. The Co-op is a waste of space now, their food is junk and overpriced, LV is almost gone, Nationwide is a joke that keeps trying to make a profit - why if its a mutual?
Even John Lewis, which was supposed to be run by its employees is a total disaster and rips off its own staff.
Almost all mutuals and not-for-profit concerns need to make profits. ie Take in more money than they spend. Any surplus goes into reserves - 1 year's turnover is the usual metric for charities and the like - and to pay for strategic investments. John Lewis for example doesn't borrow to pay for new shops and warehouses. It buys them with cash. Well-run mutuals avoid borrowing because the members have to pay those debts if the business goes bust.
The key difference between mutuals and regular companies is their profits don't get paid out to shareholders as dividends. Though mutual insurers and pension companies do distribute their profits to with-profit policy holders. They also use their reserves to smooth out these pay-outs over the peaks and troughs of the usual business cycle. Limited companies can't do that because they have a statutory duty to maximise shareholder return - in dividends and the share price.
Mutuals should provide better prices and services, all things being equal, because they're not under pressure to make money for shareholders. On the other hand, membership apathy means clueless idiots like Paul Flowers (the Crystal Methodist) can find a cosy sinecure on the board.
> because they have a statutory duty to maximise shareholder return - in dividends and the share price
I don't think so. Businesses all have reserves to deal with cashflow problems. Share price is just "the price the last person bought a share at", it's not something that businesses pump money into at the expense of knowing where next month's salary run is coming from.
Clearly, a company that can't meet its payroll won't have the money to spare for boosting the share price.
Sometimes share valuations are beyond silly: how much is Tesla worth compared to GM or Toyota? Aside from these outliers, share prices are generally based on a company's balance sheet and how its business is impacted by long-/short-term external factors. It's a normal part of business for a company to improve its balance sheet by buying and selling assets, paying off debt, cutting spending, etc. Many companies also have share buy-back schemes which increase/distort the value of their shares because there are fewer shares which now have a slighly bigger fraction of the company's unchanged value.
Of course companies have reserves to handle cashflow issues or whatever. But when those reserves get too big, shareholders can and do exert pressure to get that dosh returned to them.
<quote> Limited companies can't do that because they have a statutory duty to maximise shareholder return - in dividends and the share price.<quote>
The law does not say that.
This is the law, from the Companies Act 2006:
172: Duty to promote the success of the company
(1)A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to–
(a)the likely consequences of any decision in the long term,
(b)the interests of the company's employees,
(c)the need to foster the company's business relationships with suppliers, customers and others,
(d)the impact of the company's operations on the community and the environment,
(e)the desirability of the company maintaining a reputation for high standards of business conduct, and
(f)the need to act fairly as between members of the company.
(2)Where or to the extent that the purposes of the company consist of or include purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes.
(3)The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.
So, where does it say that profit maximisation has to be the object of the company? Quite clearly it doesn't.
Sure, 'success of the company for the benefit of its members' clearly implies a duty to generate profit, or at least a positive cash flow, but maximise it? No way! This is at best a constrained requirement, as is clear from sub-paragraphs a to f.
So what is abundantly clear is that in UK law there is:
a) No duty to maximise profit
b) No duty to minimise tax bills
c) A duty to exercise judgement.
The point is the long list of exception: impact on the wider community, employes, relationships with customers, long term impact and any purposes other than profit (I assume specified in articles or similar).
In the case of mutuals members interests will be good service and prices, rather than profit.
I had to write a whole assignment on the different forms of this for my degree - shareholder returns is often the one that's focused on because it's easy and tangible and you can say "look, I did the best by the business because I made eleventy bajillion quid profit for the shareholders" whereas it's much more difficult to quantify things like reputation, minimizing environmental impact etc.
But just because everyone does something a specific way doesn't mean that's the only (or even correct) way to do it.
Maintaining a functioning business is a success, providing good value high quality services and products to customers is a success, keeping staff in employment is a success, being a responsible contributor to the local economy and culture is a success, managing positive cashflow is a success.
Where does share price come into that? Where do dividends come into that?
Indeed, I am part owner of a company that's never made a profit, never issued a dividend, is approximately worthless and yet is successful, continually doing the things I want it to do. Money isn't everything, and the law understands this.
…and yet so many businesses still frame everything in terms of “maximising shareholder value”[1] and reference “fiduciary duty’s to shareholders” as justification for driving down costs to the detriment of employees, smaller suppliers, and the wider communities they exist within.
Funny that…
[1] In fact “We work to increase shareholder value” replaced a whole lot of more altruistic, socially responsible stuff as the official statement of values at one company I worked at some te ago…
I had a friend (RIP) who was a professor of accountancy. His opinion of accountants was that every single one of them has forgotten what accountancy is for, and that the lot of them should be fired... from a large howitzer. He was very big on business ethics, something that and I agreed was an oxymoron, but something to strive for. Business is about much more than making money.
I have a Coop CC. I can never get into the site. I recently rang them first off without bothering to frustrate myself. They reset my account, I got in set it up, recorded what I needed to. Then four days later I needed to get in again. I get to input the texted number. I do that, I am not cross eyed. It then says something went wrong.
I can get into both my bank here and in NZ and my new zero % card (being paid off) with someone else just fine. The Coop is the ONLY site I have this problem with. I answered my query by putting my card in an ATM and getting a balance, amount subtracted from my credit limit told me what I needed to pay to zero it.
When I have paid the Zero card off I shall ring Coop and tell them I no longer want their card since their IT stinks.
I've been with them over 10 years, and it's just got progressively worse.
They "upgraded" their website from the old one, and it's been a bag of shite. The old one looked like something from 1995 but it worked. Now though it's hard to get in to, if you can get in at all.
I do most of the banking I need to do via the app, which helpfully tells me it'll be down for maintenance nearly every weekend.
Like you I've got ties to them for the time being. But I more or less do most of my banking with another bank now. It's sad, because the bank has turned to shite since the vulture funds took over.
I started a Co-op account before they had to de-mutualise (I'd get dividends for taking cashback at the local co-op store!). They then closed down the local branch and I never managed to get the online banking working so I ended up travelling 60 miles to the nearest branch and spent an hour in their setting up on-line banking. I returned home to find the online banking I'd set up just wouldnt work and despite numerous phone calls it never worked. They'd ask security questions that I'd never given answers to! I'd several other bank accounts so I used those and then one day I just though sod it I'll see if I can close the account so rang up and gave them a few details and they transferred a very large wedge of money to an account with the same name in a different bank but without any security questions. I dont think I've come across anything quite so shit in a long time.
Coop must share some of the responsibility for the issues. Too many organisations fail to invest and then expect “transformation” by making it someone else’s problem (outsourcing). Guess what? The outsourcing company sales people told you it would all be wonderful but the reality is they need to do it even cheaper than you in order for them to profit. This is often by sticking rigidity to the contract you signed, charging stupid fees for anything extra and not replacing staff as they leave (usually the good ones go quickly).
Outsourcing of boring business functions like HR and Payroll can make sense but a bank outsourcing a core banking function was never going to end well!
The CO-OP (former slogan "Good With Money" - till their CEO was caught short) and CRAPITA the chief bullshitters of all time.
They get together, pat each other on the back (with a sharp bladed instrument), I can smell the shit from where I live, Manchester CO-OP HQ is a mere mile downwind today.
Shameful behaviour of the CO-OP. Stick to what you do best and operate corner shops.
Though even then you would probably get Crapita to design your POS system.
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