“That’s thousands of your clients coming to you,” says Bert Heemskerk, chairman of Rabobank’s executive board, with evident enthusiasm. “These members discuss whether they think the bank did well or not, and they have an interest in voting on the issues raised at each local board.”
The members of the bank took part recently, for example, in voting on whether to merge some of its branches. That is the kind of crucial decision usually made by top management. But at Rabobank, it was the focus of long debate among all the members. It took Rabobank’s central organization nine months, many personal discussions, and two general assemblies to build consensus throughout its vast constituency on the consolidation issue. By the end of 2006, the number of Rabobank member banks will drop from 400 to 200, a move seen as crucial to retaining a competitive edge.
At first glance, Rabobank’s lengthy and diffuse decision-making process may seem complicated, unwieldy, perhaps even preposterous. But this all-inclusive operating style is typical of businesses with a cooperative structure — of which Rabobank is a forward-thinking, massively successful example. Today, Rabobank is among the largest financial-services providers, with d475 billion (about $575 billion) in assets, 9 million customers, and operations in 37 countries. Rabobank has a consistent triple-A rating from the top rating agencies (Moody’s, Standard & Poor’s, and DBRS), rare among financial-services institutions. Mr. Heemskerk is clearly proud of the member-by-member engagement policies that enable such economic feats. It leads him to boast that “We are Rabo, and Rabo is for us.”
That phrase is echoed about 1,000 kilometers south in Florence, Italy, where a major retail advertising campaign announces “La coop sei tu” (“Co-op is you”). The slogan, put forth throughout Italy by a consortium of regional retail cooperatives under the brand name COOP, has become a national catchphrase — one that is backed up by the fact that in Tuscany alone, cooperatives in general count 1 million members out of a population of 2.5 million.
The membership-based governance structure of a cooperative is the feature that distinguishes it from an ordinary corporation — and the feature that lies at the core of its success. The organization is run by its members: one person, one vote. Members elect representatives, who are directly accountable to the members. Depending on the internal structure and operations of a particular cooperative, members may also participate actively in making decisions and setting policy. Some cooperatives admit individuals, typically either employees or customers, as members. Other cooperatives are composed of smaller businesses and organizations. Rabobank and COOP are examples of both; they are consortia of local cooperatives that in turn have individual members.
Although the companies that make up a co-op may see profits, in most countries, the co-op’s charter requires that profits be put toward the co-op’s promotion or invested in its growth and functioning, not taken as dividends. In general, co-ops are more financially successful than observers may realize, but their real value comes from their ability to keep alive the “social contract” of communities. They are set up to ensure the continued viability of jobs, promote entrepreneurship, and improve quality of life — without sacrificing competitiveness. Co-ops could be an even more powerful economic force for communities and for economic regions during the coming years.