The Phone Co-op Limited Perspectives on Governance E3M Seminar - PowerPoint PPT Presentation

The Phone Co-op Limited The Phone Co-op Limited Perspectives on Governance E3M Seminar London, 18 Setpember 2014 Vivian Woodell Chief Executive, The Phone Co-op 1

The Phone Co-op Limited A personal perspective • Some reflections on what makes for effective governance and what can go wrong, after 30 years of experiencing both good and bad 2

The Phone Co-op Limited What does governance in a co- operative need to achieve? • Co-operativesUK recently said governance needs to provide the right balance between: – Voice – Representation – Expertise 3

The Phone Co-op Limited How can that be made to work effectively – Several iterations of a corporate governance code for consumer co-ops – They mainly focus on having the right Structure and Process – The problems we have seen recently underline the equal importance of having the right People and Culture 4

The Phone Co-op Limited A personal perspective • First experience of governance was local consumer co-op in 1983 • I put a motion on South African goods • Someone talked to me and got me interested in standing for the board 5

The Phone Co-op Limited Early experiences • A number of us formed a pressure group aiming to take the Co-op back to its original values, reinterpreted for the 1980s • We raised awareness of the Co-op and its potential • Two years later, we started to win board seats. 6

The Phone Co-op Limited Early experiences • At this time, the local Co-op was losing money and had no membership strategy or overall vision • Corruption was common across the Movement • Management was openly cynical about membership • The Co-op was a microcosm of the left 7

The Phone Co-op Limited Members taking real power • Progressive members became the majority over a number of years • However long before that we were able to change the management • We appointed a new CEO who had vision for the Co-op 8

The Phone Co-op Limited Members taking real control • After turning the business around he started to build a real co-op • Putting the values into practical action, making stores reflect them • Worked with Canadian, Tom Webb, to introduce concept of “MOCA”, Marketing our Co-operative Advantage. • The new CEO (Bob Burlton) became a Movement leader, and as Chair of Co-operativesUK introduced the first governance code 9

The Phone Co-op Limited Member pressure leads to business transformation • The “MOCA” concept stores and brand contained many seeds of the new Co-operative Brand. • Business was turned around. Membership taken seriously. We took in another failing society that had been run by a despot. • Eventually, another merger created Midcounties 10

The Phone Co-op Limited But it was still hard for elected members • Management (especially the traders) often didn’t take board members’ ideas seriously – “Yes, I’ve read all the textbooks too” • I wanted to prove them wrong and demonstrate that you could make a business more successful by being more co-operative. – A key motivation for starting The Phone Co-op 11

The Phone Co-op Limited So what was it like on the other side of the table? • Realisation that people act into roles more than I thought • Despite wanting to do things differently I sometimes found myself getting into some of the same dynamics I’d wanted to change. • There is a risk that governance structures can foster adversarial behaviour 12

The Phone Co-op Limited So what does governance at The Phone Co-op look like? • A consumer co-op – members elect the board – Size has changed a couple of times but settled at 7 – 3 year cycle. Chair can’t serve for more than 9 years – Restriction on number of employees and materially dependent suppliers – 10 meetings a year approx, 4-5 face to face, 5-6 by telephone conference. 13

The Phone Co-op Limited Other stakeholders get a look in too • Although we’re a consumer co-op we want to engage other key stakeholders – Employee Council, 5 people elected by staff – Ethical Policy Committee (staff and board) 14

The Phone Co-op Limited Engaging members • We try to make our meetings accessible to as many members as possible and involve them in a genuine dialogue – Half-Yearly meeting was used to develop engagement – Members can join by phone – Extensive reporting – Surveys, consultation on big decision 15

The Phone Co-op Limited Governance challenges • Not that many members will get deeply engaged in something that only affects one area of life (but 30% turnout in board election) • Employees haven’t always rushed to stand for Employee Council • Board-Management relationship goes through phases. Not always straightforward 16

The Phone Co-op Limited Governance challenges • Sometimes honesty with the board can feel like a mistake (I don’t think it is though) – But I do understand why other CEOs have sought to “manage” their boards. 17

The Phone Co-op Limited Governance at Midcounties • At my first members’ meeting, 39 votes needed to be elected – Now typically 15,000 (50,000 vote out of 500,000) • Board is active and engaged • Unitary board – regions abolished • AGM can have 500+ people • Half-yearly meetings more 18

The Phone Co-op Limited Governance at Midcounties • Business is regional in character but Energy and Childcare businesses present a challenge – Exploring idea of specialist elected forums 19

The Phone Co-op Limited Key relationships • CEO/Chair • Other directors/CEO • Board/Management • If these aren’t working well you have a problem 20

The Phone Co-op Limited Perspectives on the Group’s problems • The recurring theme in consumer co-ops in recent decades – Inability or unwillingness of boards to rein in dominant CEOs – There were many scandals • President and CEO in prison in one – Many more unreported ones 21

The Phone Co-op Limited Perspectives on the Group’s problems • 3-tier structure was flawed – Led to a route to election to the main board which eliminated many good candidates – Resulted in a weak board, mostly unwilling to challenge the CEO – In fact no one wanted to challenge what was happening because it was difficult and could endanger their position. 22

The Phone Co-op Limited Perspectives on the Group’s problems • In the Group, eventually all 4 components were wrong: – Ineffective structure – Process made directors weaker than they should be – Culture was cynical and complacent – Wrong people were in office, both in management and board. • How the CEO came to be there is a lesson in itself. 23

The Phone Co-op Limited Perspectives on the Group’s problems • New model draws on “supervisory board” type structure – Successful in Germany and elsewhere • Good points: clarity about what each governance level should be doing • Bad points: may be just a management putsch 24

The Phone Co-op Limited Perspectives on the Group’s problems • Under the new structure, if it goes well we could have – A workable structure – A much more transparent process that’s trusted – We turn a new leaf and the culture feels genuinely co-operative – Highly qualified co-operators take the reins 25

The Phone Co-op Limited Perspectives on the Group’s problems • But if it goes wrong, there’s a risk that we could end up with – A structure that bakes in conflict – A process that is easily manipulated behind the scenes – A continuing culture of cynicism – People who don’t understand co-operation running the business 26

The Phone Co-op Limited Perspectives on the Group’s problems • I’m not saying that will happen • Just that there’s a risk which co-operators need to guard against 27

The Phone Co-op Limited Conclusion • Governance is about how groups of people get good at organising their affairs together • Often Structure and Process are presented as way to guide the People and Culture • Arguably People and Culture eat Structure and Process for breakfast….. 28

The Phone Co-op Limited Questions/Discussion

The Phone Co-op Limited How to contact The Phone Co-op • Contact details: • www.thephone.coop • Tel 0845 458 9000 • Fax 0845 458 9001 • enquiries@thephone.coop (general) • vivian@thephone.coop (Vivian Woodell) 30