(Adds chairwoman, Myners comments, background)
By Paul Sandle
LONDON Aug 8 Co-op Group, Britain's
largest mutually-owned organisation, has put forward detailed
proposals for governance reforms that it has said are necessary
to secure its future.
The supermarkets-to-funerals group agreed in principle to
change the way it was managed in May after a series of
near-catastrophic mistakes culminated in a 2.5 billion pound
($4.2 billion) loss last year.
In a further response to proposals initially set out by Paul
Myners, a former government minister and veteran of Britain's
financial industry, the Co-op on Friday set out a new board
structure intended to inject a more professional management at
Co-op Group Chairwoman Ursula Lidbetter said the pillars of
Myners' reforms had been retained, but the new board would still
include three directors nominated by members.
"We will be creating a smaller, more effective board with a
majority of independent directors," she told reporters. "There
will be testing eligibility criteria for all directors including
business acumen and a commitment to cooperative values and
Myners had been appointed to overhaul the group's structure
after a series of bad decisions bought the 150-year old group to
its knees. He proposed replacing a board drawn from local
cooperatives and containing no executive members, with a smaller
group with commercial experience equal to its rivals.
The group's present board, which includes a retired telecoms
engineer, a publisher and a plasterer, had overseen what
Lidbetter described in May as "years of bad business decisions
that crystallised into one very ugly number at the bottom of our
accounts: a 2.5 billion pound loss".
Mistakes included the ill-fated 2009 takeover of Britannia
building society, a deal which eventually resulted in it losing
control of its banking arm after plunging to heavy losses. Co-op
bank had also faced embarrassment when its former chairman Paul
Flowers was arrested for possessing illegal drugs, for which he
later pleaded guilty.
Myners, who had been appointed last year as the Co-op's
senior independent director and asked to review the way it was
run, quit in April after meeting resistance to his proposals.
He subsequently launched a blistering attack in which he
said the board as it stood was not competent to perform the
duties expected of it.
Myners said on Friday the latest proposals did not go as far
as he recommended but represented significant progress.
"The acid test will be whether they are able to attract
outstanding candidates to join the board without compromising on
necessary standards," he said in a statement.
"There needs to be rigorous application of a high test for
membership of the board given the demanding business challenges
facing the group."
He added the commitment to setting the bar at the right
level would be greater if those "lay" directors who were on the
board over the last five disastrous years made clear they would
not stand again.
Lidbetter, who will stand down after her replacement is
appointed, said the group would take professional advice to set
the new standards.
The proposals also include creating a council of up to 100
people drawn from the group's 8 million members to uphold its
co-operative principles, and changing to a "one member one vote"
The reforms will be put to a vote at a meeting on Aug. 30.
(1 US dollar = 0.5951 British pound)
(Editing by Jane Merriman and David Holmes)