Co-op backs ‘momentous’ governance reforms

THE Co-operative Group’s members have voted overwhelmingly in favour of adopting a series of reforms to its governance structure, in a bid to ensure past mistakes are not repeated.

The group has been in turmoil since a £1.5bn hole emerged in its finances last year, after what former City minister Lord Myners described as a “series of value destructive transactions.”.  The crisis has seen the Manchester-based mutual forced to sell its pharmacies and farms businesses and lose control of its bank.

Changes to the structure of the 20 strong board were proposed,  and although there was some opposition, 83.7% of members voted in favour of the changes at a meeting at the group’s Angel Square headquarters on Saturday.

The reforms include:
  The creation of a slimmed-down board of 11. The board will comprise an independent non-executive chair, five independent non-executive directors, two executive directors (including the group chief executive) and three member-nominated directors;
 A council will represent members and act as the group’s guardian. The body, to comprise a maximum of 100 members, will have power to hold the group board to account;
A senate, elected by the council, will help co-ordinate the activities of the council and act as a nexus for interactions between the council, the board, the executive and members.

Ursula Lidbetter, chair of the Co-operative Group, called the adoption of the reforms a “momentous and defining moment”.
“These reforms represent the final crucial step in delivering the change necessary to return the group to health,” she said.

 Patrick Gray, president of the Midcounties Co-op which opposed the original changes from Lord Myners, said the vote was “not necessarily the end of the matter but rather the beginning of a new phase”.

Following the discovery of the £1.5bn black hole in the bank’s balance sheet in 2013, a deal was reached which saw the wider Co-op Group cede majority ownership of the bank to bondholders, including a number of US hedge funds.

In his report on the group’s woes Lord Myners said the previous structure was too weak to stop executives pursuing deals and strategies such as the merger with Britannia Building Society and the acquisition of Somefield, which had ultimately proved to be harmful to the organisation.