Cooperative answers to the current economic crisis – The MemberValue concept Eric Meyer University of Münster Germany

Roots of the economic crisis 1 Decoupling of the financial system from real economic needs 2 Exploitation of information asymmetries 3 „Short-termism“ 4 Misguided executive incentives (executive compensation) 5 Misguided and undifferentiated regulation, lacking or poor supervision Member-based economic relations needed

MemberValue contribution How can the MemberValue concept contribute to the answers to the economic crisis? 1 Cooperative managers 2 Polititians Regulators

Maximizes Value WITH the customers Short term ShareholderValue Customers COMPANY Maximizes Value WITH the customers FOR the owners Owners/Shareholders

Maximizes Value WITH the owner/customer FOR the owner/customers Long-term MemberValue Indirect Member Value Direct MemberValue Sustainable Member Value Property Services/products Investment Maximizes Value WITH the owner/customer FOR the owner/customers Members

MemberValue components Indirect Direct Sustainable Interest payments Cooperative Governance (owner involment) Benefits of owner control … Supporting member in their value creating activities Conditions Reimbursements Education Marketing Risk mitigation … Long-term ability to support members (option value) Ability to innovate Stocks Reserves …

Implementation Example of a cooperative bank Services /Products UMV_1 (+) Adisory services UMV_2 (+) Direct MemberValue Framework H_1 (+) UMV_3 (+) Communication UMV_4 (+) Membership UMV_5 (+) MemberValue Indirect MemberValue Dividends H_2 (+) MMV_1 (+) Control NMV_1 (+) Real option Sustainable MemberValue NMV_2 (+) H_3 (+) Investment NMV_3 (+) Interaction NMV_4 (+) Source: Tschöpel (2011)

MemberValue implications Direct MV Anchored in the real economy Indirect MV Responsibility as an entrepreneur / providing equity Sustainable MV Option value of the cooperative, long-term vision

MemberValue implications 1 Decoupling of the financial system from real economic needs MemberValue integrates customer and owner interests MemberValue provides real world anchoring 2 Exploitation of information asymmetries MemberValue strategies mitigate information asymmetries by the cooperative governance (trust, owner control …) 3 „Short-termism“ Sustainable MemberValue component provides a long-term perspective 4 Misguided executive incentives (executive compensation) Close control of the board by the members provide customer/member based incentives 5 Misguided and undifferentiated regulation, lacking or poor supervision MemberValue strategies reduce regulation needs

What do people want? Representative IfG poll of people‘s knowledge about cooperatives and their attitudes towards (selected) characteristics of cooperatives  People‘s attitudes are close to cooperative characteristics and values Question: Your attitude towards this characteristic? Answers „very good“ or „good“ in per cent Rest: „indifferent“, „bad“, „very bad“

Polititians / Regulators Lessons Cooperative managers Polititians / Regulators Structuring the MemberValue is fundamental for managing cooperatives MemberValue strategies re-integrate the financial and the real world Every cooperative has ist own MemberValue structure MemberValue focus provides sustainable long-term solution MemberValue strategies improve the resilience of the cooperative Cooperatives should NOT be submitted to the same regulation as shareholder value companies