Co-operative Group board member defends 'robust' business model

Ben Reid is chief executive of Midcounties Co-operative. Photograph: Daniel Lynch

The Co-operative Group should not stray from the mutual model or add layers of authority that distance the group from its members, according to an independent member of its governing board.

Ben Reid, chief executive of the Midcounties Co-operative, Britain's biggest independent customer-owned retailer, said the model had been proven to work and the Co-operative Group needed to respond to its troubles by getting back in touch with its customer owners.

The co-operative model of member ownership has faced severe criticism after the Co-op Group, the movement's biggest business, was plunged into financial crisis last year when a £1.5bn black hole was found in its banking arm. The group is expected to report a loss of at least £2bn next month.

Reid said: "Independent cooperatives have weathered the recession well and have shown how robust the co-operative model is." Reid, who is one of the five representatives of independent co-operatives who sit on the Co-op Group's 21-strong board, declined to comment specifically on proposals from Lord Myners, its independent director, for overhauling its governance.

Myners, called in to review how the group is run, has proposed an overhaul of the board of directors, which includes a nurse, a farmer and a tax official. He said governance at the group was worse than at the bailed-out banks in the run-up to the financial crisis.

But Reid said: "The co-operative model is alive and well. It might have taken a few knocks over the last few weeks but we have shown there is a way of doing this. I want to project it out there. Our movement is bigger than the problems we face.

"What we don't need is a multiplicity of layers in the structure that make it difficult for co-operative enthusiasts to have their voice heard."

He also called for caution following Myners' initial report. "I think there is still a lot of debate to be had. There has been an initial outline produced and we shouldn't get too excited until the full report comes out. It could be easy to misinterpret what he [Myners] means."

In an interim report rushed out two weeks ago after the shock departure of former group chief executive Euan Sutherland, Myners proposed a smaller board made up mainly of outsiders with business experience.

Members would elect representatives to a new membership council to oversee the board and spread power from about 100 activists who guide the group.

Reid spoke as Midcounties announced operating profit up 21% to £22m on revenues up 24% to £1.2bn – the first independent co-operative to pass the billion-pound mark for sales. Midcounties, based in Warwickshire, will pay more than £6m of dividends to its 439,000 members and staff.

"We are an independent society with direct connectivity to our membership. Maybe that is one of the things Lord Myners will look at in his report."

Myners has claimed that one member of the group's board had threatened to block his proposals by using their influence over 28% of the votes that will determine whether they take effect.

Reid said he was not the person Myners was talking about and that no one could wield that kind of power at the group.

"I just don't recognise the description. That isn't the way a co-op works. This isn't a plc where you log votes."

He said Midcounties had "taken a step back" a few years ago to draw customers and employees, who volunteered more than 44,000 hours for local causes last year, into the business. That is what the group needs to do now, he added.

"I'm a believer so I believe it is possible. The trick we have to pull off with the group is to reconnect it to its membership.

"Whatever the structure is, and there will be all sorts of suggestions, we have to find a way for the voice of the ordinary members to influence the group and its strategy. That is what is more difficult as you get bigger."

Reid said he supported the idea of bringing in independent non-executives and that he was very disappointed when Sutherland quit amid a furore over the £3.6m pay deal he negotiated last year.