I’m a big fan of the Financial Times (FT). It is well respected globally and is an excellent source of business information, However, I recently read with mounting concern an article headlined as Delay for Co-op move on Lloyds’ branches.
It stated that the UK regulator, the Financial Services Authority (FSA) was delaying approval of the Co-operative Group’s acquisition of 630 bank branches of the Lloyds Banking Group because, in its opinion, the governance of the Cooperative Group was too weak to run such a large bank. The FT stated that “the mutual comes under pressure to overhaul its board, which includes a Methodist minister, a plasterer and a nurse”.
Judging on the 20-plus comments posted on FT.com I was not alone in my concern. Much of what was reported on this occasion appeared rather ill-conceived.
To be fair to the FT it is difficult to present complex issues in brief news articles. But in terms of key messages, I would have liked to have seen some acknowledgement in the piece about just how successful the Co-operative Bank has been in avoiding the pitfalls which resulted in the massive financial bail out of the major UK banking players.
However, one of the hugely empowering benefits of online media is the reader’s ability to reply and add some balance to a story. In the case of this article, the readers didn’t hold back.
This is one of the more barbed comments the story has attracted and sums up FT reader’s sentiment quite well.
“The financial crisis has proven that the so-called experts appointed to the boards of financial firms acted recklessly and endangered the entire world economy, to revert back to reliance on their ‘expertise’ (in reality, lack thereof) is the City regulator proving that they are fools and doomed to repeat the mistakes of the past. The Co-op’s financial arm has grown and remains stable despite the financial crises; they have been better managed than the traditional financial firms with their ‘expert’ boards. This alone should expose the sham that is the selection process for directors, the old boy system that lacks any meritocratic aspect.”
ICMIF members are truly democratic organisations that draw their boards from their customer membership. Many of you have very active democracies with regional voting and proper election processes with thousands of participants. Contrast this to the shareholder model where board candidates are automatically appointed with very little shareholder interest or activism.
Having been part of the group that wrote the UK Annotated Combined Code for Mutual Insurers back in 2005, I am aware of what makes for good governance. One of the key challenges for every board is to have good balance of skills that represent many walks of business life. If I have interpreted the FSA guidelines correctly they appear to be interested solely in financial people, actuaries, accountants and lawyers on financial services organisations’ boards. This could result in the whole UK financial sector being driven by boards made up of similar people, thinking in similar ways. Where’s the challenge? Where’s the good practice? Where is the diversity?
Diversity is what cooperative and mutual boards excel at. It is widely accepted that member-owned boards are better engaged and often have more passion for their organisation and therefore create a more challenging layer of governance. And where is the proof of this? The answer lies in the fact that there were no mutual or cooperative insurance organisation bailouts during the recent crisis.
So we know our governance is stronger, better and it works. Maybe we can take control of this situation by working even harder at informing the media, the regulators and the policymakers of this fact?
It is so important that we maintain a constant dialogue with the media in particular to ensure that journalists can balance stories. Good journalists welcome different perspectives on an issue, but they are busy and we need to offer them a good source of joined-up messages from our sector. I see ICMIF playing a key role here as we move forward.
A similar example of good governance has arisen from the Solvency II regulatory regime. Diversity of products and geography are undeniably a positive when it comes to deciding solvency levels. The media and regulators can accept this point, so let’s help them engage with the same point relating to the governance of our businesses!
And finally, on a very positive note, Thursday, March 8 was International Women’s Day and the ICA in collaboration with ICMIF produced a video featuring Dame Pauline Green, President of the International Co-operative Alliance and other influential female co-operators around the world. There are currently 28 female Chief Executives of cooperative and mutual insurance organisations – which is 13% of ICMIF’s 221 members.
Once again our sector is leading the world in diversity and good governance.