The Co-op was urged yesterday to back radical reforms to sweep away the “dysfunctional” board which presided over the mutual’s near-collapse.
Former City minister Lord Myners set out his plans for a “plc and beyond” structure by replacing the existing 20-strong board of representatives from the co-operative movement with professionally-trained directors.
His proposals will be put to the vote at the Co-op’s AGM in Manchester on May 17 but the peer fears that many traditionalists are “still stuck in denial” over the failings of the Co-op, which reported annual losses of £2.5billion last month.
Despite its membership of around 8million and a 90,000-strong workforce, Lord Myners said acceptance of his report would depend on the votes of about 100 “elected democrats” who sit on regional boards.
He added: “It is these people I need to persuade that if they do not make the changes I’m proposing, the Co-op will decline into less and less significance and come under more and more directions from banks.”
Lord Myners, who spent four months as a Co-op director but resigned in April, said the 15 lay directors on the group’s current main board were drawn from a total eligible pool of only 35 regional board members. They include an engineer, a plasterer and a retired deputy head teacher.
He added that apart from their lack of relevant skills and experience, this was not “genuine democracy at work”.
The former Marks and Spencer chairman said it was apparent to him within 30 minutes of his first board meeting that not one single member had the ability to address the complex issues faced by a group burdened with debts of £1.4billion.
He also said it was a “catastrophe” that chief executive Euan Sutherland left the group earlier this year on the grounds that it was ungovernable, having been forced out by some people “who should lower their heads in shame”.
Lord Myners said he believed the Co-op would survive but it faced the prospect of having to sell assets in order to meet the demands of its lending banks.
His report comes days after the mutual’s management was sharply criticised in a review by Sir Christopher Kelly into the near-collapse of the group’s banking arm after the discovery of a £1.5billion hole in its balance sheet.
The banking division had to be rescued by bondholders in a move that saw the Co-op’s stake reduced from 100% to 30%. Lord Myners’ proposals for reform include:
The creation of a new group board made up of an independent chair with no previous association or involvement with the Co-op.
The establishment of a national membership council of about 50 people, including 10 employees.
A nominations committee to screen and propose candidates for group board approval and for election and re-election by members at each AGM.
An extension of constitutional rights to the group’s entire membership – the “one member, one vote” has been a core principle of co-operative ownership but Lord Myners said ordinary members currently held very little power.
He called on Co-op traditionalists to acknowledge the collective failure of the current board and the deficiencies of the governance system, saying their resistance reflected a culture of entitlement within a small but highly active proportion of the membership.