Abstract

The title, ‘Keeping Bad Company’ alludes to two assertions made throughout this paper. When building societies converted from mutual building societies to public companies, the erstwhile building societies became bad companies. They were bad because, necessarily, they followed the corporate model dictated by the neo-liberal ideology of the time. So, to put it another way, by incorporating, they fell into bad company. And when you keep bad company, you pick up bad habits. To substantiate these assertions, I compare two organisational forms - or at any rate, two ideological perspectives on organisational form. These are the management controlled organisation (MCO); and the shareholder value organisation (SVO). I will attempt to assess their relative strengths and to find in that contrast an explanation for the fact that converted building societies, as SVOs, have been part of - indeed central to - the current financial crisis, whereas their MCO counterparts in what one can still call the mutual movement have survived largely unscathed. I will draw upon diverse disciplines in order to make this argument, including institutional economics, organisational sociology, labour process theory, political economics and the law. I begin by examining how the original small terminating societies were usurped by larger permanent societies and the economic developments which led societies to become MCOs. I go on to assess MCO theory and the normative implications of this approach which is both supportive of and critical of the MCO. Critics cite MCOs’ hierarchical and oligarchic nature while proponents of MCOs characterise them as a rational mechanism for enhancing production and ensuring economic stability. I then show how theory critical of MCOs dovetailed with the neo-liberal economic and political project, resulting in the reform of building society law. This legislative reform and ideological shift resulted in many societies becoming market organisations; companies governed by shareholder value concerns. I then assess the problems with shareholder value and SVOs and argue that they enslave governance to the capital markets with destructive consequences. I then compare the approach of MCO building societies to the current crisis with that of SVO converted societies.