Co-op plans to keep three member-directors in change to Myners plan
(Guardian (UK) Via Acquire Media NewsEdge) The troubled Co-operative Group has rowed back on a proposal by City veteran Lord Myners to remove democratically elected members from its board, under plans for sweeping internal changes announced yesterday.
Seeking to draw a line under a disastrous year in which the 150-year-old mutual came close to collapse, the Co-op is proposing a board that is composed mainly of independent directors, alongside two executives.
The proposals are broadly in line with what Lord Myners recommended apart from one key point: he had proposed removing all the democratically elected members from the board. The mutual is offering members three seats on the board in the hope that this concession will persuade its members to support the reforms.
Lord Myners said: "The proposals do not go as far as I recommended in my review of governance but they represent significant progress in the right direction. The acid test will be whether they are able to attract outstanding candidates to join the board without compromising on necessary standards."
Pointedly calling for a new set of Co-op members to join the board, he added: "The commitment to setting the bar at the right level would be greater if those lay directors who have sat on the board over the last five disastrous years made clear that they accepted that they fell well short of the new standard and said that they would not be standing for election to the board."
The Institute of Directors voiced similar concerns. Referring to the retention of three elected members on the board, the IoD's corporate governance adviser, Oliver Parry, said: "Without an entirely independently appointed board, there remain concerns about how much independent oversight the board will be able to exercise." However, Parry also welcomed the Co-op's proposals as a "welcome break from the failings of the past".
The Co-op's interim chief executive, Richard Pennycook, hailed the proposals as a "significant step towards meaningful reform" which, if approved by members, will "mark the end of the rescue phase for the group". Under the proposals the board will be slashed from 18 members to 11.
The Co-op chair, Ursula Lidbetter, insisted that only people with "business acumen and commitment to cooperative values and principles" would be chosen to serve on the board.
After weeks of discussions following the annual meeting in May where members agreed in principle to an overhaul, the proposals will be put to a vote at a special meeting on 30 August.
Myners had recommended a complete overhaul of the board, which is currently populated entirely by Co-op members. The former City minister was brought in after the organisation slumped to a pounds 2.5bn loss, the worst in its history, and was forced to give up control of its banking arm. Myners quit in May after encountering fierce resistance to his plans.
Lidbetter said the mutual was "very grateful" to the City veteran for the work he had done.
The new board will comprise an independent chair as recommended by Myners, five independent non-executive directors, two executive directors including the chief executive, and three member-nominated directors. Lidbetter will step down after a transitional period while Pennycook wants to return to his previous role of chief operating officer.
Another important change is a switch to "one member, one vote".
Lord Myners said the latest proposals were progress in the right direction
(c) 2014 Guardian Newspapers Limited.
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