Within one year, Lord Paul Myners is hoping for the Co-operative Group’s governance structure to be radically reformed.
In his six-month review looking into the society’s failings and how it can better itself, he calls for the Group board to be made up of non-executive directors with skills and experience comparable to its competitors; a national membership council of 50 members; and to give one-member-one-vote to the entire membership of the Group.
“To help ensure that the next stage will not be delayed by protracted discussions and debate and result once again in the ‘fudging’ of desperately needed reform,” said Lord Myners, “the Review sets out a proposed implementation plan.”
He added: “As many of the recommendations in the Report – including simplifying the electoral system, reducing the size of the board and appointing executive directors – have been proposed in the past and, given the engagement with elected members to discuss the proposed reforms over the past several months, any resistance to swift implementation will not be the result of a lack of understanding but a lack of conviction to pursue meaningful reforms.”
Starting next month, Lord Myners recommends a consultation process, alongside a series of special meetings to approve rule changes that will lead to a ‘Day 1’ board being installed in November and elections being held in February. A full board and national membership council will be installed at the May 2015 AGM.
Lord Myners said: “The Review believes that on 1 November 2014 (“Day 1”), the Group board and NMC should have enough members to be functional but not necessarily be filled to capacity. All members of the Day 1 Group board and NMC will face elections within six to nine months of their appointment.”
On Day 1, the Group’s transitional board would have one to two independent professional non-executive directors from subsidiary boards, two executives (most likely Group chief executive and finance director), and one to two new independent non-executive directors.
Members of the Day 1 Group board should be selected by an implementation committee with the assistance of a recognised executive search firm, whose role would include devising the collective and individual director skills and experience specifications for a board of the Group’s scale and complexity.
The implementation committee should be led by the Group chair and include a combination of the Group chief executive, another member of the executive, one or two other Group board directors and possibly an IPNED from a subsidiary board. To provide an impartial perspective, a highly respected individual of unquestioned integrity from outside the co-operative movement would be appointed.
On Day 1, the NMC would comprise of all Group board members (20); all chairs of regional boards (7); chairs of regional values and principles committees (7); and five employees (drawn from the pool of employees serving on regional boards). NMC members would elect their own president.
All regional boards will be disbanded on Day 1. However, because all regional board members occupy seats on area committees, they will still retain a formal role in the society until the future of the area committees is decided.
While area committees will remain in place, their remit is still to be decided as part of the Group’s larger purpose to be unveiled at the May annual meeting. However, committees will no longer play a constitutional role.
In his report, Lord Myners warned that if elected members refuse to take action or deliberately implement change at a slower pace then it will affect the future prospects of the Group. He commented: “I strongly believe that such an approach would provide false comfort for elected members and would gravely harm the Group’s long-term ability to survive and the true interests of its several million ordinary members, its employees and its pension scheme holders. Among the top ten grocers, for example, there is likely to be no organisation more challenged by the price war now developing in food retailing unless the Group can swiftly put a strong, well-informed board in place.”
Ursula Lidbetter, chair of the Group, said: “The board of the Group has made clear its commitment to far-reaching and fundamental reform of our governance. A resolution containing four key principles on reform is being put to members at a general meeting in May and we will build from there to ensure we put the right changes in place. Paul’s report will be an invaluable contribution to that work.
“As Group chair, I see this as essential and urgent work that is critical to our future, enabling us to build a more effective organisation which can deliver for all our members, customers and colleagues.”
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