‘No deals and no compromises,’ governance is the priority says Co-operative Group chair

There will be no deals and no compromise on governance, insists Co-operative Group chair Ursula Lidbetter, in an exclusive interview with Co-operative News.

On Saturday 30 August, elected regional board members and independent societies will cast their votes on the future of the Group.

Members will vote for a set of rules that will see a majority of independent directors, selected by a nominations committee, control the board, which will also have three member-elected directors and two executives.

Representation for members will be held through a council of up to 100 members, while a steering committee of council members – the senate – will be the conduit between the representative body and the board.

A direct say by individual members will also be possible over the yet-to-be-determined criteria of “significant transactions”, which could be purchases or sell-offs.

Ms Lidbetter believes this vote – after months of consultation, starting with the Myners Review in January – is the crucial and final part of the rescue of the Group after last year’s near-collapse of the Co-operative Bank. She says the crisis, which could have brought the Group itself into default, was a result of “management and governance failings”.

The rescue of the Group now hangs on the SGM vote, she warns.

“We need the stability that our new governance structure will bring, in order to move forward and actually do the things that our members actually want us to do,” says Ms Lidbetter, who is also chief executive of Lincolnshire Co-operative.

In its January accounts, the Group reported that its debt stood at £1.4bn, which is owed to a syndicate of banks. Ms Lidbetter says the governance change “had to happen” and that the banks had not triggered this reform of “governance and management problems”, which were “a product of the current governance system”.

The governance consultation reached a key stage in May when members agreed on four principles to shape the governance review, which were to support:

• The creation of a board of directors elected by members that is individually and collectively qualified to lead an organisation of the size and complexity of the Co-operative Group
• The establishment of a structure that gives the Co-operative Group’s members appropriate powers to hold the board properly to account for the performance of the business and adherence to co-operative values and principles
• A move to the concept of ‘one member, one vote’ with appropriate representation for independent society members
• The inclusion of necessary provisions in the rules of the Co-operative Group to protect against demutualisation.

Ms Lidbetter says the first three are where the major rule changes occur. “The members want a fully qualified board that adheres to our values and principles,” she says. “They want the members to be able to hold it to account, and it wants one member, one vote for individual members, so that they get that stake.

“If we can see that we have balanced those things then that will be a good governance system. And that’s one of the most important things about this governance reform. All the way through we have absolutely been adamant that it must represent good governance.”

Looking at the past governance of the Group, Ms Lidbetter says it “very much broke down”, so “good governance must be to the fore in the new structure”.

“In the past there have been deals done and compromises, and so on,” she adds. “And sometimes governance wasn’t to the fore, it was about getting to a solution that people would agree to. And good governance was sometimes sacrificed. This time we have said ‘no’, it must represent good governance in the eyes of the world because otherwise it won’t work.”

Ultimately, the governance review has been working on the principle that this is a co-operative that is owned by its members, according to Ms Lidbetter. “This is a consumer co-operative and members must have control of their society,“ she says.

It has funnelled into the process advice from Co-operatives UK, which says the rule changes meet international co-operative standards. Ian Snaith, a co-operative lawyer who has been involved in developing co-operative structures, was also drafted in to ensure changes adhered to co-operative principles.

Ms Lidbetter says the proposition of one member, one vote and the possibilities for wide engagement with individuals is “very exciting”, but the process for how this will work is still to be decided.

If successful, the council will form out of regional board members. And this council will work with area committees to work on the membership structure and engagement for the future. Ms Lidbetter is keen that this is co-created by members.

Independent societies, such as Midcounties and Central England, will also be a part of the new structure. As well as being a part of the council, they will take up to a 20% share of senate seats and have weighted votes at general meetings as corporate members.

The council and senate will be headed by a single president. While this role will be decided by the council, Ms Lidbetter says that personally she feels this will be suitable for someone who is a great co-operator and will be a “good figurehead and leader for the society”. She adds they will also be “skilled in bringing a lot of diverse views together and creating a compelling vision about what our co-operative is going to be in the future”.

In representing members, the president will have a special relationship with the chair of the board, who will be an independent person, who is not necessarily affiliated with the co-op sector. Ms Lidbetter says the criteria for this person hasn’t been set down just yet, but in addition to having a great understanding of business they “absolutely must have a real feel, understanding, sympathy and excitement about the co-operative way of doing business. We are very different in our approach, our culture, in the way that we think about the society and they must absolutely get that and be excited by it.”

During the consultation, and on the issuance of the rules, one of the biggest concerns from Co-operative News readers and on social media is that this is a “management takeover” of a co-operative. Ms Lidbetter responds: “I don’t see that at all. I’ve been working very closely between the members and the management. Absolutely not. In fact, one of the problems we had in the previous structure was the board was not able to hold the management to account.

“The new structure will give us really skilled competent people working on behalf of us, the members, who will be much more able to hold management to account. This is a much stronger model, for controlling management, but also supporting them in a positive way compared to the previous model.”

Members have also questioned the future of independent non-executives controlling the boards of co-operatives. Is this a future model for co-operatives to be looking at? Ms Lidbetter says: “All co-ops should look, on a regular basis, at their governance to see how they could improve it. In Lincolnshire we put independent non-execs on our board many years ago and it’s been a great success for us.

“This model that we’ve put together for the Group is probably suitable for more large and complex co-operatives, but I could see people looking at it, for instance, for large public sector bodies that want to get member engagement and involvement. There is a real opportunity to show that very large organisations can be run with a consumer voice, with consumer power – if we can show this works it can be a real resurgence of co-operation for large bodies.”

In a final message to those regional boards and independent society members voting on Saturday, Ms Lidbetter says she is very hopeful that people will get behind the reforms to secure the society’s future.

Looking at the co-operative in ten years time, she hopes that members shopping in the Group and using its services feel like they are true owners. “I want members to feel that this is theirs, to feel proud of it, to feel they are engaged in it, that their view matters and that they can get involved in any way they want.”