Co-op Group Crunch on Saturday – A No Brainer?

On Saturday 17th May 2014, Delegates at the Co-op Group General meeting consider a resolution on the reform of the Group’s governance. That is part of the process of considering Paul Myners’ recommendations on governance and the Kelly Report on the great Co-op Bank disaster and demutualisation of 2013.

Saturday’s decision will determine whether the Co-operative Group has a chance of survival. Getting it wrong may well bring insolvency proceedings closer. The implications of that for the UK and world wide co-operative movements would be grave indeed.

This is not a time for small minded political bickering or dogmatism. Those voting must rise to the challenge of giving UK Co-operation a future by allowing space for the revival of the Co-op Group as an effective co-operative business.

The resolution accepts four key principles about the direction of reform.

  • A Board elected by members that is individually and collectively qualified to lead an organisation of the size and complexity of the Group

  • A structure that gives the Co-operative Group’s members appropriate powers to hold the Board properly to account for business performance and adherence to co-operative values and principles

  • ‘One member one vote’ with appropriate representation for independent Co-operative societies

  • Necessary provisions in the Rules to protect against de-mutualisation.

Ursula Lidbetter as Chair of the Group has said that Myners’ recommendations are not “stapled to the back” of the resolution. She is working to achieve reforms acceptable to the Group’s members and their elected representatives which also address the serious governance problems that the Myners and Kelly Reports identified.

Ursula has made clear her willingness to talk to people with concerns. She has set up a board committee to work on reforms. She has said:

“I would be concerned if we don’t pass the motion. I think it would send a message to the world that we don’t actually understand the problems that we have. I can’t envisage that would happen.”

Co-op Group employees, through their trade union support reform. Many wise and experienced co-operators support the process: Sir Graham Melmoth expects sanity to prevail, Vivian Woodell has presented the case for a yes vote with his usual clear and principled approach, Cliff Mills, despite his reservations about Myners’ recommendations, has accepted (at http://www.mutuo.co.uk/news/the-myners-report-a-response/) that as long as it is clear that a process of debate and reform follows Saturday’s meeting people should accept the Principles.

How much clearer could the next stage of the process could be? A vote in favour of the resolution leaves the detail to be filled in by the members’ meeting. Only rule changes needing a two thirds majority at one or more further general meetings can actually change the system. That leaves scope for debate about the detail of the structure once the principles are agreed – although changes need to be in place by the end of 2014.

The background to Saturday’s meeting is last year’s disastrous £2,500,000,000 loss. The bank consortium, whose covenants have already been renegotiated once and without whose support the game is up, have already sent in a “troubleshooter” to look at selling off businesses.

If the resolution is lost it is not hard to imagine the banks’ reaction. If it is passed, the next stage allows co-operators to work alongside the executives, the employees, the creditors and the board to put reforms in place. The prize is more power for ordinary members than they have at present and a board with the skills necessary to run a business of the size of even the smaller Group that will survive, held to account by a body elected by members. Sales of parts of the Group are, sadly, necessary to reduce the debt burden left by the grandiose failures documented by Kelly and Myners.

The lessons from this debacle have been expensive. It is important that the whole co-operative movement takes them on board. There is no room for complacency about governance by other big societies.

To me, the choice about how delegates should vote on Saturday is a no brainer. The resolution should pass with an overwhelming majority. Then the real work can begin.

© 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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4 Responses to Co-op Group Crunch on Saturday – A No Brainer?

  1. Elizabeth Stewart says:

    Isn’t it interesting that the banks bailed out to the tune of $27 billion post-GFC, didn’t include the Co-op Bank?! I’m interested to hear an explanation for that.

    • isn says:

      Hi

      I think it’s because a taxpayer “bail out” is seen as a last resort and the Co-op Bank could be rescued by a “bail in” i.e. the Bond holders (long term creditors) and the owner (Co-op Group) took the loss. The bond holders mainly by getting shares which are riskier than their bonds were and the Group by reducing its ownership from 100% to 30% – soon to get lower as they can’t afford to buy their proportion of the next share issue.

      Hope this helps.

      Ian

  2. Ed Brown says:

    Important meeting which as a member I haven’t been informed about.

    Where is it and how do members attend to exercise their democratic rights?

    • isn says:

      Under the present system it’s a delegate meeting and the only way ordinary members can get involved is by attending area meetings and trying to get elected to their area committee and then to their regional board. Myners reforms would give a bigger role to the ordinary members.

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