Committed to the co-operative model

  • Lianne Dalziel
Commerce

Thank you for the invitation to participate in your 21st Annual General Meeting.

I don’t need to traverse the history of the co-operative movement to you here, given that as members of co-operatives you are the modern embodiment of a tradition that since the early part of the nineteenth century has been based on notions of self-help, self-responsibility, democracy, equality, equity and solidarity.

The modern encapsulation I guess can be found in the principles articulated by the International Cooperatives Association in 1995, namely:
(1)Voluntary and open membership
(2)Democratic member control
(3)Member economic participation (i.e. members contribute equitably to and democratically control the capital of their co-operative)
(4)Autonomy and independence
(5)Education, training and information
(6)Co-operation among co-operatives, and
(7)Concern for community

Today, there are millions of co-operatives worldwide producing a vast array of goods and services. In New Zealand the Association’s co-operative members are engaged in a wide range of areas including the:

·primary production sector (meat, wool and dairy) e.g. Fonterra,
·arable and horticulture sectors (eg Market Gardeners Ltd)
·Fertiliser and top dressing (eg Balance Agri-Nutrients and Ravensdown)
·Financial services sector (eg Farmer’s Mutual Group)
·Grocery wholesale sector (eg Foodstuffs)
·Energy (Electricity Ashburton)
A number of co-operatives are also developing new markets in olive oil, honey and dairy goat production. Other new co-operatives, such as Hato Paora Co-operative are seeking to advance the interests of their local communities.

I understand that the Association estimates that in 2002, its 46 member co-operatives generated annual turnover of $25 billion using $17 billion of assets which you estimate to be equivalent to 22% of New Zealand’s Gross Domestic Product. These figures clearly demonstrate the important contribution that co-operatives make at the local and national level.

The reason I am here today is to re-state the Government’s commitment to the co-operative model and to outline the steps that we are planning to take in order to address the Association’s concerns about the future of this model.

I know that one of the Association’s key frustrations has been the absence of any publicly available information on the co-operative model. I agree that this situation must be corrected. I have here with me today, an advance draft of the information that will be posted to the MED website before the end of the year.

Anyone searching the MED website will be able to obtain basic information regarding the:
(1)Origins of co-operative companies;
(2)Key features of co-operative companies;
(3)Advantages of the co-operative model, and
(4)Registration requirements.

The Association has played an important role in helping the Ministry develop this information material and this project provides an excellent example of what can be achieved when government departments work in partnership with their key stakeholder groups.

I also understand that the Association is frustrated by what it perceives to be a lack of awareness within government agencies of the benefits of the co-operative model.

I would like to reassure you that co-operative company expertise is embedded in key government departments such as MED, which administers the Co-operative Companies Act, and the Ministry of Agriculture and Fisheries which has overseen the corporatisation of a number of primary producer boards. I think the main problem isn’t necessarily the lack of expertise but how to ensure co-operative Associations can access it.

Many of you may not be aware that the State Services Commission has been undertaking a Review of the Centre. The aims of this review are to deliver a public sector that:

·adopts a “whole of government” approach when analysing public policy problems and developing policy interventions and;
·delivers public value by ensuring that “citizens” including businesses, communities and individuals are engaged in and contribute to the public policy debate.

As a consequence of this review process, the Ministry of Economic Development is committed to developing stronger relationships with key stakeholder groups such as the Association and to share information, ideas and resources to improve the quality and delivery of its policy work.

As part of this process one of my officials (Kay Brown) from the Ministry of Economic Development is here today in order to gain a deeper understanding of the key challenges the co-operative movement faces and to outline what the Ministry can do to assist the Association in strengthening its linkages with departments such as the:
·Ministry of Social Development so the Association can discuss its ideas about using co-operatives or other mutual associations as the business models to deliver some community services;
·Ministry of Education so that the Association can discuss its suggestions for the inclusion of modules on co-operative/mutual business models to included as part of the secondary and tertiary level curriculum; and
·New Zealand Trade and Enterprise, which is the government’s newly formed trade and economic development agency which aims to provide the New Zealand business community a single organisation that can provide a range of high quality, responsible and expert services to businesses throughout their life cycle.

While it is important to acknowledge that the Ministry of Economic Development can’t resolve every problem that co-operatives may face, it can ensure that co-operatives have early access to the other government departments who can help.

With respect to the legal framework that co-operatives operate under this comes under my role as Minister of Commerce.

I am advised that the Association is keen to receive assurances that any plans to change the co-operative Companies Act will be foreshadowed well in advance so that it has time to consult its members on any proposed changes and make detailed submissions.

First, I would like to assure you that the Ministry of Economic Development believes the Act is functioning efficiently and, unless the Association has evidence to the contrary, there are no plans to review the co-operative Companies Act in the near future. My motto is ‘if it ain’t broke – don’t fix it’.

But, having said that, if the Association has any thoughts or ideas as to areas where the Act could be improved then, both the Ministry and I would be keen to hear from you. I think it is always helpful to bear in mind that discrete, technical changes that are aimed at improving the overall efficiency of co-operatives can be included in future Business Law Reform Bills.
The Business Law Reform Bill is an omnibus bill that provides the government with a flexible legislative vehicle for making incremental improvements to statutes. This process is extremely efficient and means that the government and key stakeholders don’t have to wait for the large build-up of “issues” that is often required for a fundamental review of any Act.

The Ministry of Economic Development will commence work on the third Business Law Reform Bill early next year and I would urge you to write to me at Parliament, or speak to Kay Brown, if you have issues that you think may be appropriate for inclusion in a Business Law Reform Bill.

I understand that most of you here today will be staying on in Christchurch this weekend to attend the sixth annual agribusiness co-operative leadership and governance forum.

This forum provides an important opportunity for you to share international experience of working with co-operative business models.

The recent financial reporting scandals that have rocked the United States and Australia have served as a timely reminder about the need for all entities including co-operatives to implement effective corporate governance strategies.

I hope the Forum is a success and that you return to your co-operatives with new ideas and strategies for improving performance.

I should like to spend my final moments highlighting two projects that I am sure will be of interest to the Association.

As some of you may know, the Securities Commission has recently completed a public consultation process, which is designed to develop an agreed set of principles to guide corporate governance practices in New Zealand businesses.

As part of this process the Securities Commission released a detailed background paper that focussed on nine key interest areas namely:
·Ethical conduct
·Board composition and performance
·Board committees;
·Reporting and disclosure
·Remuneration;
·Risk management;
·Auditors;
·Shareholder relationships; and
·Stakeholder interests.

It was accompanied by a detailed questionnaire that was designed to obtain feedback on corporate governance practices in New Zealand and develop an understanding as to the areas where New Zealand businesses perform well and, identify areas for future improvement.

The Securities Commission is due to report back to me on the outcome of this process before the end of this year. I know that there are those who believe that I have a predisposition to a rules-based approach, however, I want to assure you that I do not. The ‘tick box’ approach can still produce a result that is inaccurate or misleading and can give a false sense of security top stakeholders, in terms of their responsibility that good practices are in place. Anyway, I am looking forward to receiving the report for some not-so-light holiday reading.

The second matter relates to the decision in October 2002 of the Accounting Standards Review Board to recommend the mandatory adoption of International Financial Reporting Standards (IFRS) by listed issuers by 1 January 2007. In December 2002 the Board extended the scope of its earlier decision to include public and private sector entities.

The decision to adopt IFRS is of huge significance and has necessitated a fundamental review of New Zealand’s financial reporting structure. The Ministry of Economic Development is currently developing a pubic discussion paper that tackles the critical convergence issues such as:

·Which entities should comply with international financial reporting standards?
·Should there by full or partial exemptions from IFRS?
·What, if any, statutory financial reporting obligations should “exempt” entities be subject to?

This decision to adopt IFRS is, no doubt, of interest to the Association and its members. I would therefore like to encourage the Association to prepare a submission in response to the issues raised in the public discussion paper to ensure that not-for-profit entities are successfully accommodated within the new financial reporting regime. The Ministry hopes to release the public discussion paper in February 2004.

In conclusion, in my role as Minister of Commerce, I am your Minister, and I would like to take this opportunity to emphasise my personal commitment to advance the values of the co-operative model. I also wish to assure you of my desire to ensure that the New Zealand business environment fosters the continued growth and development of the co-operative movement and my personal commitment to work collaboratively with the Association in identifying and removing any regulatory barriers that may be acting as a fetter on the movement’s sustainable growth.

I am quite serious when I say that my door is always open to the Association and I would urge you to keep in regular contact with me personally or through my officials at the Ministry of Economic Development.

Thank you.