Save Our Co-op – Vote for Reform

As many of you will know I have been working with the Co-operative Group as an independent advisor for the last three months as part of a team developing Governance Reform Proposals. On 30th August those proposals need a 66% majority at the Co-op Group Special General Meeting. It seems to me vital that they are passed.

Co-op News reports that a petition has been launched by Co-operative Business Consultants urging a rethink of the proposed reform. The petition has proved a rallying point for many people with legitimate worries about the way the current proposals deal with the issue of member control of the society. There is also anxiety about the trend towards corporate domination in our neo-liberal world.

I think that passing these reform proposals is the best way forward on both of those points. The Group will still be a co-op with its status entrenched. Its assets will remain under the control of that co-op and its employees will still work for that consumer co-op.

I understand why people feel as they do after the bruising experiences of the last year or two. However, this is a time for clear thinking and a calm rational approach. The vote a week on Saturday will decide the future of the assets built up in CWS and then the Group over 150 years. It will also affect the jobs of 87,000 people.

So let me explain why I believe that for this co-op in this situation, these reforms offer positive benefits.

The petition advocates a board composed of a majority of directors elected from the membership. But is that required by the ICA Principle?

Let’s look at what the Principle 2 actually says:

“Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organised in a democratic manner.”

For many co-ops that means a majority of elected directors from the membership but that is not the only way of complying with it.

Survival in the market demands a high level of skill and experience – especially when a business is as big and diverse as the Co-op Group. That has been acknowledged most recently by Prof Johnston Birchall in a research project on governance in large co-ops around the world. He acknowledges the importance of member voice, member representation, outsider expertise and effective management. A balance is needed between these elements. At this time the Co-op Group is in need of a boost in member voice and outsider expertise. In my view the reforms provide that.

The Group’s recent failings resulted at least in part from the nature and composition of its board and the process of decision-making where the executive is separate from the directors. It would be irresponsible to ignore those problems and refuse to agree proposals to impose greater control on the executive than was achieved under the previous system. Under the reforms directors will be equipped to fully participate in business decisions and will be held to account both by all members through direct OMOV meetings and other decisions and by the member elected Council of activists.

It is unclear how the system proposed in the petition would remedy the problems of governance that have brought the Group to this pass. The petition’s proposal, while based on OMOV, seems to remove a key part of the Nomination Committee’s role. To be effective in making sound business decisions as part of a team with the Executives and in challenging them on their plans and proposals, the spread of skills on the board needs to match those required at a particular time. The Board is best placed to assess that and appointing the independent people seems the obvious way to achieve it. To get the right people as Independent Non-exec Directors, a sophisticated recruitment process needs to be carried out.

The reforms allow for that. They also ensure contested elections for three board places and empower the membership using OMOV to reject any Independent Non-execs at the first AGM after their appointment and to remove any director during their term. That gives the members control while giving the best possible chance of effective business decisions.

The ICA President Pauline Green and Ed Mayo of Co-operatives UK both urge support for the reforms on the basis that members have sufficient control.

Rule 118 protects the powers of each organ: the Council, the members using OMOV, and the board. It is a balanced institutional structure. However, the members elect the Council and can remove directors so they ultimately control both of those bodies and so could radically change the governance structure if they chose. That gives a possible route to a new governance structure and certainly ensures that both Board and Council will have to respond to demands for change. There is also a commitment by the current Board and Executive to a full review of governance in three years’ time.

The vote on 30th August is for or against the current proposals. Those proposals are agreed by the current board and have been the subject of extensive consultation with the active members – through Regional Committees and the existing structure. They have been substantially changed during that process.

If they are rejected, the rules will remain unchanged and that would leave the Society and its business in a challenging position. Time is of the essence at this pivotal moment in the history of British Consumer Co-operation. See Richard Pennycook’s video on both the reasons for the speed of the process and the risks and consequences of voting these proposals down.

I understand the comment about autonomy in the petition but when you operate in the market place, as all co-ops do, bank loans and other credit comes with strings to protect the lenders’ interests. That leads to some loss of control and does not imperil autonomy in the sense of causing a change of ownership, which is what the ICA Principle deals with. Once you take on debts, you have to deal with the consequences. Under the old governance system the Group took on the debt. Now we have to deal with the consequences of that.

The reform proposals address the governance problems that caused the Group to lose so much control to the Banks and to make such unwise business decisions. Without the full Nomination Committee process and the appointment of INED’s, who will be required to become members, those problems will not be remedied and we are at risk of losing, sooner or later, yet more of the accumulated asset value of the Co-op Movement as well as imperilling many of our 87,000 employees’ jobs.

In my view, this is not a time to reject reforms on the basis of a simplistic view of member control with fingers crossed in the hope of avoiding more problems.

For everyone who cares about our Movement this is a time for responsible solidarity in support of reform.

Then the Group can seize the opportunities of a new culture of member involvement, the expansion and rejuvenation of the active membership base through the Council, local structures and initiatives, and the use of digital communication.

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