According to leaked reports, the Co-operative Group directors are considering a dual board structure because the current structure is “ungovernable”.
Following a series of leaks over the past few weeks, Group chief executive Euan Sutherland made the comment and has blamed members of his own board for undermining him.
As part of a governance review into the Group by Lord Myners, it appears that directors are escalating proposals for a more conventional board to manage the business.
How does the current Group board work?
Currently, the Group board consists of 21 directors and has total management over the business. The journey for 15 of these directors begins when they are initially elected as area committee members. From here, they are elected to the next tier of governance, a regional committee. Regional boards of the Group then elect members to become Group board directors.
Five directors are also elected from independent co-operative societies. At the moment, these include, the chair, Ursula Lidbetter, who is chief executive of Lincolnshire Co-operative; Martyn Cheatle, chief executive of Central England Co-operative; and Ben Reid, chief executive of Midcounties. Lord Myners was also this year appointed (by the Group board) as the first independent non-executive director.
What does a dual board structure look like?
- A dual board system, Vorstand, is popular in Germany among private companies
- In this system, a management board is responsible for the day-to-day business, while a supervisory board oversees the management
- The chief executive presides over a management board, while a chair oversees the supervisory board
- Elected members make up the supervisory board, which has the power to appoint and remove members of the management board
- The management board is made up of executives, but the Group may be considering non-executive directors
How can this apply to a co-operative model?
This two-tier level works in the following ways:
- Responsible for managing the co-operative
- Member or members of the management board are appointed and removed by the supervisory board (although local law may require or permit that a member are appointed and removed by the general meeting)
- No person may at the same time be a member of the management board and of the supervisory board
- A supervisory board may nominate one of its members to exercise the function of member of the management board in the event of a vacancy
- The management board elects a chair from among its members
- The supervisory board supervises the duties performed by the management board, but may not itself exercise the power to manage the co-operative
- The members of the supervisory board are appointed and removed through the general meeting
- Of the members of the supervisory board, not more than one quarter of the posts available may be filled by non-user members
Are there any other models for the Group to consider?
The John Lewis Partnership model has been widely referenced by co-operators and commentators as a viable alternative. This model has: five directors appointed by the chair from the executive; five members from the Partnership (employee) Council (the equivalent in co-op circles would be individual members); and three non-executive directors.
At the recent National Retail Consumer Conference, Professor Johnston Birchall of the University of Stirling drew on his studies into governance in co-operatives and mutuals to highlight a three-tier model of governance that he thinks could work. “It’s just a hunch,” he said, “but a hunch based on experience.” The model would involve:
- A members’ assembly – a group of 100 or more members whose role would be to aggregate and voice the preferences of the wider membership
- A supervisory board, elected by the members’ assembly, which has the mandate from the membership to hold the executive to account and provide stewardship
- A management board, appointed by the supervisory board, to include a chair from the members’ assembly, four members of the supervisory board, four non-executive directors appointed for their expertise, plus the chief executive and select members of the management team.
For further updates, information and analysis, view the full Myners Review collection