The Co-op's future relies on rebuilding trust: the group needs to buy into that

http://www.theguardian.com/commentisfree/2014/may/13/co-op-future-lord-myners-proposals-agm

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Just after the Phone Co-op started supplying telecommunications services in 1998, one of our first elected directors was contacted by her former telecoms provider, asking why she had left them. Her response was: "It's OK, we're doing it ourselves now." This undoubtedly reflected her dry sense of humour. It also gave voice to one of the most powerful concepts that motivates people to start and be involved in co-operatives. Co-ops are businesses where, instead of people having things done to (or for) them by others, members take their destiny in their own hands and shape the businesses that serve them.

The question of how this works when co-operatives achieve scale is not new. Until the mid-20th century elected board members had quasi-executive roles in many retail co-ops. This became increasingly impractical, so boards appointed executive management. Some of those they appointed did an excellent job. Others didn't serve them well.

When I first became involved in my local co-op in the 1980s, it was clear there was an endemic culture across much of the movement of self-serving management who had engineered tame boards. A number of corruption scandals followed. The chief executive and president of one large society served prison terms.

This led to a governance reform in the mid-1990s led by Bob Burlton, then chair of the forerunner of the movement's umbrella body, Co-operatives UK.

Thirty years ago the local co-op where I lived recruited only a few hundred members a year, and boards were elected by in-store ballots where few voted. It had almost become a secret society rather than a co-operative society embedded in its local community.

With the reforms, postal ballots became the norm, along with a focus on recruiting and engaging members. The successor to that same co-op now recruits tens of thousands of members a year, and 50,000 take part annually in voting in a strongly contested board election. There is a much clearer framework for the relationship between boards and management. Improvements followed, corruption scandals came to an end and there was a real sense of a better partnership between boards and executives in many societies.

But there were parts of the movement where this reform didn't take root. Under Peter Marks, the Co-operative Group pursued an aggressive acquisition policy, justified in his characteristically macho language by the need to "play in the premier league of retailers". Rather than delivering organic growth through an engaged membership, he went for a top-down, deal-driven strategy. The rest is history.

Lord Myners is right to observe that the board was collectively not up to the job of challenging Peter Marks. Few people with the experience and skills needed to do so were willing to spend years on committees building the support needed to reach that level. On a board of 20, it must have been easy for dissenters to be marginalised.

Not many in the co-op movement disagree that the group's governance needs reform. Lord Myners' plan draws on the continental model of two-tier governance in which a supervisory board oversees a management board. It is understandable that active members, seared by the experience of domineering management, question why the solution should lie in a structure that appears to hand even more power to technocrats. It is a shame that Myners, rather than recognising this and addressing it directly, has tried to portray the active members as self-serving: this doesn't do them justice. Their concerns are real and justified. Despite this, I believe his proposals can form the basis of a way forward.

All business owners (not just co-op members) face the challenge of stepping back, as their businesses grow, and handing more aspects of the running of it to people they believe they can trust. It is this trust that is the key. Co-ops have more complex objectives than a typical plc, which makes this harder. We need to have executives who fully buy into the business's distinct values and culture and the same will apply to professional non-executive directors. Lip service is not enough.

To give an approach based on Myners' proposals a chance, members (who, after all, own the business) need to hold the ultimate keys to their co-operative, and the upper tier needs to be supervisory rather than advisory. The structures need to be fashioned in a way that builds trust between the board, executives, and the proposed National Members' Council, rather than fostering conflict.

So Saturday's AGM should support the board's enabling motion, but as the start of the process rather than the end. That means trusting the members with ultimate control. Myners is right when he says that, without reform, the group risks serious decline. Co-operatives have enormous potential to enhance people's lives. We have to get the design of the UK's largest co-operative right so it can achieve its full potential.