From baked beans to social housing

When there is a major problem within a public company, or a difficulty with the decisions made by its executive or non-executive directors, what happens? Shareholders make their views known.

If remedial action is not taken, sanctions are applied.

Usually, the threat of shareholder action has the desired effect – recent events during Granada's merger with Carlton are an example. In that case, the board tried to organise the post-merger jobs just how it wanted, but shareholders forced it to think again.

Contrast this with what happens in the housing world. Association boards often deal with the non-performance of the chief executive or other senior officers, but what happens when the board itself fails?

Do the members – the "shareholders" in this case – act?

It seems that the ultimate sanction in the world of public companies does not really function in social housing, although according to the sector's constitutional documents, it should.

The reason is simple. The role of members has been sidelined, frequently by the common practice of ensuring that there is little difference between their identity and the make-up of association boards.

As such, there is no effective overview of the decisions and actions made by individual boards within housing. It is left to the Housing Corporation to take regulatory action to correct problems.

As part of its current governance review, now is the perfect time for the social housing sector to think about whether it wants this state of affairs to continue.

The problem with having to rely on the corporation to solve problems is that an air of panic and recrimination, not to mention financial worry, always follows on from regulatory action. This is not unreasonable, you might argue.

Surely, though, it would be better if the sector had its own mechanism that operated efficiently for the most part? This would leave the corporation to act as the body of last resort, as an agency to guide members in performing their overseeing role.

If this idea is to develop, some work must be done to recruit and provide training and development for knowledgeable and committed people prepared to carry out this significant task.

Some might argue it is impossible to achieve this: I beg to differ. Let me give you an example of how it can work.

Co-ops lead the way
Some years ago the retail cooperative sector was in fairly dire straits. A dwindling business, it had lost its way. However, it found that a significant element in this decline was its failure to adopt an effective role for its (voluntary) membership.

Current governance actually deters any real employee participation. Is this defensible in the modern world?

It was said that the public would not be interested in the price of baked beans tins. However, the retail co-op movement as a whole decided to ignore the doom-mongers, resolving instead to do something about the problem.

Now it has a thriving membership, one that has a real influence over the paid executives who actually manage business on a day-to-day basis.

If retail co-ops can make the change, why not housing associations? It ought to be easier to interest people in housing than in baked beans.

There is also a case for re-examining the role that association employees are able to play in governance. Apart from chief executives on the board, the current framework actually deters any real employee participation.

Such an old-fashioned approach may have been appropriate 30 years ago, but is it right – even defensible – in the modern world?

The argument has always been conducted around the need to preserve the not-for- profit ethos. Does this stand up to intelligent scrutiny when there are lots of examples around of these kinds of social businesses offering a greater role to their employees?

Many of those most committed to the housing movement's goals are the very people who are employed by associations. They are not always highly paid executives.

Urgent consideration should be given to defining a new, positive and creative role for employees in association governance.

We should look critically at and justify the reasons why employee membership is discouraged in this context.

There is a virtuous circle possible in housing, which can deliver lasting excellence. It involves the establishment of social goals supported both by tenants and employees.

The attainment of these goals, through the involvement of tenants and employees (as well as the current and wider public membership), will create stronger organisations better able to deliver to the communities they serve.

The key driver in creating this virtuous circle should not be the board: it should be the membership, and this membership must include tenants and employees. Its revamped role must be wide-ranging.