A majority of independent directors is proposed for a new Co-operative Group board following eight months of consultation within the society.
Discussions were started by Lord Myners, who led a governance review of the society in January, and principles from his report were ratified by the representative members at a special general meeting in May.
Over the past few weeks, the current Co-operative Group board, which comprises individual elected members and three chief executives from independent societies, have been discussing the reform proposals, which will see members given three seats.
The new board will also include an independent chair, five independent non-executive directors and two executive directors, including the chief executive.
The council will represent up to 100 members and will act as guardian of the Group’s purpose, values and principles and the society’s constitution, with the power to hold the Group board to account. It will be led by a president, who will be elected for two years.
A senate, elected by the council, will act as a steering committee to help co-ordinate the activities of the council and act as a channel between the council, the board, the executive and members.
The guardian of co-operative principles in the UK, Co-operatives UK, has said the rule changes meet international co-operative standards, but acknowledged this is a significant change in the traditional model of a consumer society. It further called on the Group to monitor how the council works in practice, including its resources, the implementation and how members engage with it.
Following approval of the rules, an interim transitional board structure will be put in place, which will see the current number of directors reduced from 18 to nine. This structure will remain in place until either new board members are recruited or when the society’s annual general meeting takes place in 2015.
The structure will be underpinned by a move to one-member-one-vote. This will allow members to vote on matters concerning the Group’s future (including the election of directors and significant transactions), to participate in society meetings and to have representation at national and local levels. Independent societies will be appropriately represented, both as corporate members of the society and on the council and senate.
“These governance reforms represent the final crucial step in delivering the necessary change to restore the Group and return it to health,” said Ursula Lidbetter, chair of the Co-operative Group. “This has been a process built on co-operation, focusing above all on creating a society where every member has a voice in shaping the Group’s future. I would like to thank our members for their engagement in building a governance structure that strengthens the society and enhances member engagement and our unique democracy.”
As part of the process, the Group appointed co-operative legal specialist Ian Snaith as an independent adviser. “These reforms will increase member control of the society,” said Mr Snaith. “For the first time every member will have a direct voice in electing directors and Council members. To improve the quality of business decisions, an elected board will have the skills and experience it needs to provide effective challenge to the Executive inside the decision-making process.
“The council and senate will maintain and improve active member involvement at all levels of the society and the council will hold the board to account for its business strategy and its application of co-operative values and principles. All society members can make key decisions in society general meetings and by direct votes. The proposed rules include full protection against demutualisation. These reforms provide the international co-operative movement with an exciting new model for the governance of large co-operatives.”
Richard Pennycook, interim chief executive, said: “The executive team welcomes today’s announcement and supports the proposed reforms. This is a significant step towards meaningful reform and, if accepted by members at the forthcoming SGM, will mark the end of the Rescue Phase for the Group, following the necessary balance sheet repair that we have recently completed.
“We look forward to the support and challenges that will be provided by the highly competent and independent Board that is proposed, and to working closely with the new Council to ensure that the Group once again becomes a champion of its members.”
The Group will publish its interim results on 4 September, following the vote of proposed changes at a special meeting on 30 August. The proposed rule book and further details of the proposals have been sent to the members who have a vote, which includes area committee members and independent societies.
For the rules to be adopted requires a two-thirds majority of votes cast by 127 independent society members, which represents 21%, and seven regional boards that hold 79% of the vote.
• The full proposals can be viewed at www.co-operative.coop/proposed-rules.