Myners report: Bleak future for the Co-operative Group

The Myners report should set the Co-operative Group on the road to recovery. But prickly issues abound. "It's longer term survival if it fails to grasp these nettles is much bleaker," says Dave Boyle adviser for the co-operative enterprise hub.

This Saturday will see delegates to the Co-operative Group's AGM (annual general meeting) vote on endorsing the principles for reform outlined by Paul Myners, former City minister and independent director to the Co-operative Group board. The resolution itself is motherhood and apple pie stuff with which only a fool could disagree. So why is there tension ahead of the meeting?

The problem comes in not knowing what is really being voted on. The resolution commits the Group to fundamental reform of its governance, enshrining greater member participation, a professional board and a more streamlined representative system, and crucially, to bring forward detailed proposals for approval by members in short order.

It's the length of this last aspect that worries many. There's widespread support for the thrust of the reforms (losses of £2.5bn and losing your long-standing bank make the case eloquently) but deep reservation about the devil in this detail. 

Others have digested the proposals in greater detail and made wise comment, but Myners response to all attempts to engage in debate has been to insist that it's all or nothing and he’s made it very clear through his manner and tone that his personal test of whether someone is worthy of respectful debate is whether they agree with him. 

Everyone who has tried to engage has received the same haughty brush off. The man himself hasn’t been able to take part in a forum which hasn't seen him over egg the custard of criticism. Before the Treasury Select Committee, he agreed that the group had no formal training or qualification required. Simply not true; we might quibble as to its effectiveness given the Group's parlous condition, but to deny it exists is just willful misrepresentation.

Sitting in the background is the issue of the banks who own the debt the group took on to fund the disastrous Peter Marks era of expansion, where there is a feeling that approving these reforms is being seen as proof that the Group recognises the depth of the hole it is in. Rumours suggest the detailed proposals will be put to a Special General Meeting in just over a month; under the standing orders, resolutions to SGMs (special general meetings) are unamendable, so it’s a stark and choice – you must agree to everything I say - and nothing more or less - and you must do it quickly. Or else.

Of course criticisms of the Board are valid; indeed, they're shooting fish in a barrel. The Group's governance is a exercise in limiting participation, put in place to make it almost impossible for members to undertake a concerted approach to demutualise as happened with building societies. The down side is a sclerotic system in which 97% of members don't participate in any meaningful way, and which privileges political skills of greasy-pole climbing, combined with an excessive veneration of tradition that ceases to be an anchor and instead becomes a set of concrete boots.

Directors protest – rightly - that all the advice they received from investment banks turned out to be have been very, very flawed and there is a serious case to answer for those advisors. But that all said, the buck must stop with the Board. Sins of omission and commission are of equal rank when it comes to corporate governance.

So, something must be done, but it is very much open to debate as to whether this particular something is what we must do. 

For starters, if the Board were hoodwinked by executives, what confidence can we have that these changes will make any difference to that? There's an enormous irony that a set of reforms to address the fact that the bank took on a complete basket case like Britannia Building Society seek to put in place a structure that looks almost exactly like that used by the Britannia Building Society.

But as annoying as Myners style has been, of even greater disappointment is the enormous missed opportunity to address far more existential problems. Myners encapsulated that well when he said the issue at hand was "how 8 million members can control an organisation of this scale and complexity."

It's tempting to think that the Co-operative Group can choose perm two from three of being good at what it does, being democratic and being a national conglomerate. Myners chooses being good and being national, when the same members who had no role in choosing to become big still are denied a debate on whether they should reverse course, following the example of the successful regional co-operatives like Midcounties which posted record results this year.

Even further off the agenda are the still more important questions about what the need is for a co-operative difference in the businesses the Group operates in. The landscape of food retailing is vastly different from when the business built up its retail presence. The economies of scale that drove 20th century business are now being challenged by the rise of more agile structures based on networks, combined with an increasing sensibility for the provenance of food and a preference for the local. 

Still more pertinent is a question for every co-operative about how the possibilities of member involvement work with the new tools available to engage that make the idea of casting a vote or attending a meeting seem as limited and limiting as they seem old-fashioned.

None of this is on the agenda on Saturday, and nor is any of it likely to be on agenda anytime soon. Myners might give the Group another 5 years, maybe 10. It's longer term survival if it fails to grasp these nettles is much bleaker. 

Photo by Taylor Leopold