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Co-op Group members to cast crucial vote on company reforms Co-op Group members vote in favour of reforms
(about 9 hours later)
Members of the troubled Co-operative Group are due to meet for a final vote on reforming how the business is run. Members of the troubled Co-operative Group have voted in favour of reforming how the business is run.
The group has been in turmoil since a £1.5bn hole emerged in its finances last year and has been forced to sell off parts or all of its insurance, pharmacies and banking divisions. The group has been in turmoil since a £1.5bn hole emerged in its finances last year, forcing it to sell off parts or all of its insurance, pharmacies and banking divisions.
Changes to the structure of the board have been proposed and have met stiff resistance from some key figures. Changes to the structure of the board were proposed, but had met stiff resistance from some key figures.
But members are expected to adopt most of the proposals in the crucial vote. But 83% of members voted in favour of the changes.
They will meet at a special general meeting in Manchester between 11:00 and 13:00 BST to decide on the plans, which were made by former City Minister Lord Myners and accepted in principle last May. The plans were proposed by former City minister Lord Myners and were accepted in principle in May.
Lord Myners had blamed the structure of the Co-op Group's board for much of the chaos around the business. Lord Myners had blamed the structure of the Co-op Group's board for much of the chaos surrounding the business.
His proposals included the establishment of a new smaller board with more commercial experience, but also a separate council controlled by members to hold that board to account. Among the changes:
Black hole Ursula Lidbetter, chair of the Co-operative Group, called it a "momentous and defining moment".
He also proposed to retain its cooperative ethos and prevent it from ever being turned into a publicly listed company. "These reforms represent the final crucial step in delivering the change necessary to return the group to health," she said.
Earlier this month, the Co-op Bank reported a pre-tax loss of £75.8m for the first half of 2014, down from £845m a year ago. Patrick Gray, president of the Midcounties Co-op which opposed the changes, said the vote was "not necessarily the end of the matter but rather the beginning of a new phase".
It has also cut staff numbers by 13% in the first six months of the year. He described the process as "exhausting".
Following the discovery of the £1.5bn capital black hole in 2013, a deal was reached which saw the wider Co-op Group cede majority ownership of the bank to bondholders, including a number of US hedge funds. "The effort now is to make new Co-op both commercial and ethical. It's possible but difficult to achieve and depends on how the new [commercially focused] board gets along with the also new [members'] council."
In a separate scandal before the bank had to be rescued, revelations emerged about the bank's disgraced former chairman Paul Flowers who was arrested in connection with a drugs supply investigation. More business acumen
Following the discovery of the £1.5bn black hole in 2013, a deal was reached which saw the wider Co-op Group cede majority ownership of the bank to bondholders, including a number of US hedge funds.
In a separate scandal before the bank had to be rescued, revelations emerged about the bank's disgraced former chairman Paul Flowers, who pleaded guilty to drugs possession in May.
BBC business correspondent Joe Lynam said: "Today's vote is basically reinventing how the Co-op is run, putting it on a more commercial footing while retaining crucially the ethical background to the Co-Operative movement - the fact that it cannot be turned into a company at some stage in the future, that is one of the safeguards."
He added: "It will still very much be an ethically focused, members-driven organisation but with far more business acumen and experience going forward.
"That doesn't mean that there won't be a residue of a split-type movement - there are a lot of people who were very resistant to this change."