Co-op Group and Two Tier Boards

I posted this on the Co-operative Members Group FB page on 09.05.14:

On two tier boards, this is a complex issue and there are no simple or easy answers.

Subject to detailed legislative requirements that certain particular matters have to be dealt with by the committee/board or by the members’ meeting, societies, like companies, have a lot of freedom about structure. In that sense, I agree with Dave Boyle’s scepticism about there being a strictly legal rule against a two tier board.

However, what is crucial is that there is absolute clarity about the roles of all the organs in the business and that there is one organ (usually the board) which has extensive decision-making powers and carries the legal can for cock ups. I think that is what City people mean when they say there must be one unitary board.

See also the Co-ops UK Corporate Governance Code at  page 9:
“Every co-operative should be headed by an effective board which is accountable to its membership and is collectively responsible for the long-term success of the business in accordance with the International Co-operative Alliance Values and Principles.”

That provision is similar to the equivalent for PLC’s. Responsibility for success also gives responsibility for failure so the focus is clear.

However in both co-ops and companies there is another group that plays a role: the executive team. They will in fact meet weekly. That looks rather like a management board but legally it is a group of people with powers given in the constitution or delegated by the board. In the Group the rules deal with that.

The Co-ops UK document about Reserved Powers for the Board limits Executives’ power by listing decisions that need prior approval by the full board. In a PLC those executives (or some of them) would also be on the Board – usually in a minority. The rest of the board would consist of IPNED’s.

Rules 2.10 to 2.15 of the Co-op Group Rules confer certain roles and powers on the board and the executive. Rule 2.12 gives the list of things reserved for the Board.

Kelly and Myners are effectively both pointing to the catastrophic failure of the Group Board to deal effectively with its non-delegable roles of:

“2.10.1 deciding the vision and strategy of the Society and its businesses in
consultation with the Subsidiary Boards, and having regard to the nature
and extent of its interest in all of its businesses……
2.10.3 monitoring the Society’s businesses; and
2.10.4 overseeing the Group Chief Executive and the other members of the
Executive as they carry out their roles.”

That is where lack of business experience is a problem and that problem needs to be dealt with while members retain control.

Hope this helps.

© Ian Snaith 2014 Creative Commons LicenseThis work is licensed under a Creative Commons Attribution-ShareAlike 2.0 UK: England & Wales License.

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