This month, the Co-operative Group has started consultation on its governance reform following approval from members at May’s annual meeting.
Over the next two months, discussions about the future of governance will take place across regional boards, area committees and independent society members. Members of the Group’s executive are also leading workstreams across a number of areas to help aid the governance reform.
A number of web discussions will also be scheduled with members who can ask questions about the progress. The first session was with Group general counsel Alistair Asher, who is dealing with the legal and regulatory issues around any proposed reform.
Mr Asher, who was a lawyer for 36 years at Allen and Overy before joining the Group in 2013, answered questions on the risk of demutualisation. He said the unanimous vote from the elected members in favour of reform had “set the scene for the reform process that needs to happen”. The Group’s chief legal officer explained that members voted for four pillars of governance reform, not specifically for Lord Myners’ suggestions.
“The new rules will be created by a process of co-creation, co-operation and consultation over the coming weeks led by Ursula Lidbetter as chair and the steering committee that’s she’s formed on behalf of the board,” he said.
He revealed that the board has committed to a timetable which aims to put forward a set of draft rules in August and seek adoption in September at a special general meeting. If adopted, the rules would need to be approved by the Financial Conduct Authority.
Demutualisation needs to be a legal option, added Mr Asher, but in practical terms the Group would fail if it ceased to be a mutual. Responding to one member’s concerns that the move towards the “one member, one vote” could leave the Co-operative more open to demutualisation, he said the Group had demutualisation built into its Act.
This means that four million members would have to vote, and three million of these would need to vote in favour of demutualisation, for the process to go through.
In a submitted question, Peter Hunt from mutual think-tank Mutuo asked if Mr Asher would support government legislation to ensure that no member could benefit from voting to demutualise. He replied: “It would be nice if primary legislation would protect against demutualisation, but not essential.”
He explained how the three-tier structure currently in place at the Group protects against demutualisation, but fails to protect against other dangers. “The current structure, while it protects well against the rules to demutualise, it gives the board powers to sell and buy assets,” he said.
In his reform proposals, Lord Myners suggests that some key strategic decisions should go back to members, particularly decisions regarding selling large parts of the business. “There is more than one way that our business can be taken out of mutual ownership”, stressed Mr Asher.
He revealed that the steering committee would address how the membership body works, but added: “We don’t want to maintain that hierarchy where you have to serve time at each level to get to the national body.”
Mr Asher said the steering committee had already put together a draft set of rules and will circulate them soon. On the reform process itself, he added: “It won’t be a piece of cake, but I don’t think anything frightens us after last year.”