“A massive failure of governance” of the Co-operative Group board has now made radical reform of the organisation’s democratic structure “inescapable”, according to Lord Myners.
The Labour peer was drafted into the Co-operative Group as an independent director last December to review its governance following the failure of the Co-operative Bank.
Lord Myners told a live online discussion with members that “50 or 60 people control sufficient votes at a member meeting to obstruct” any of proposals and that he has been warned by directors of such a move.
He said: “Within the first three days of my involvement with the Co-op, one of the directors came up to me and said ‘you will get no change without my support. I control 25% of the votes.’ At last Wednesday’s board meeting in Manchester I repeated this story to the whole board. The director in question re-corrected me; he said it wasn’t 25%, it was 28%. Is that what we mean by democracy in the Co-op? Is that defensible?”
The current structure of the Group consists of a main board, seven regional boards and 48 area committees, including a members’ council for Northern Ireland. This three-tier governance structure of the Group has “consistently produced governors without the necessary qualifications and experience to provide effective board leadership and to monitor, challenge and provide guidance to management,” according to Lord Myners.
Problems with the democratic structure:
Lord Myners is proposing that the Group board be reduced from 21 down to around 10 members, consisting of six to seven independent non-executive directors, two executive directors and an independent chair.
Responding to criticism about a potential management takeover, Lord Myners said: “There will be nothing in my proposals that in any way increases the risk of the Co-op being forcibly demutualised.”
He added: “I will stand ready to defend to anyone that my proposals are entirely consistent with us being a customer-owned mutual – that to me is a line across which I cannot go, and I do not think I have gone, but we do need to have a competent board of directors who can hold the executive to account.”
Wider membership will be represented through a National Membership Council (NMC) of around 100 individuals, including provision for representation of around 20 employees, which will be established to ensure the Group adheres to co-operative values and principles, and that these are reflected in its corporate vision, strategy and operating practices.
Lord Myners says the National Members Council will not be a “talking shop”
Lord Myners said of the NMC: “They will have much more information than they’ve previously had, a great inconsistency, spotted here. The board is unclear as to whether they are delegates or representatives. There’s a [current] tendency, that when a decision is difficult, to say ‘I’d have to go back to my regional board’ or even possibly occasionally saying one thing in the Group board and then campaigning against a board decision.”
He added that reform is needed: “Members deserve to be told the truth. I don’t pad out my thoughts with lots of cosy words because I think it’s important the members understand how serious I regard the situation to be, but at the same time I see there is a way forward in which we maintain our co-operative values. We remain member-controlled, democratic and efficient. In fact, my proposal will make us more democratic that we have previously been. One member, one vote.”
Despite questions during the webinar around “management control” of the main board, Lord Myners did not rule out a co-operator being able to stand for this board. He said it’s in nobody’s interest that there are “token directors”, but said boards of major plc competitors or other mutual organisations have independent directors “who do not come from a business background but bring other skills and experience”.
Lord Myners also added that main board directors will stand for annual elections, which is the “norm in plc land” – but the national members council will see people elected for either a three or four year term. Full details will be released in his report, which is due out in mid-April.
For further updates, information and analysis, view the full Myners Review collection