The Co-op AGM Special 2018

What an AGM is really
The Annual General Meeting (AGM) is a legally required meeting where the senior management of business share details of what they’ve been doing with the business’s shareholders. For the Directors and Executives it’s a bit like an annual performance review. They go into the meeting with a list of their achievements and the shareholders ask them questions about what they have and haven’t achieved over the last year.

AGM 01

The Co-op’s shareholders are its members, and 4.6million of these shareholders are active members (people who actually buy things from the Co-op). Listening to executives and/or directors, then asking them questions, (especially the asking them questions bit) is called ‘holding them to account’ and is a large part of the meeting.

What motions are
A motion is a written statement describing an idea that an organisation can either ‘do’ or ‘not do’. The idea is written down so that all the people who are deciding whether the idea should happen or not can see exactly what it is that they are making a decision on. It is also important to have evidence of exactly what was agreed so that the people who make the decisions into a reality know what is required of them.

While many members choose to vote on whether they agree with motions online, the votes cast in the meeting are added to those cast online to decide whether a motion should happen or not. Some motions are ‘binding’ and if they are passed then that decision has to be acted on; the motion on whether we should continue to hire our current auditors was ‘binding’. Other motions are ‘non-binding’, if those motions are passed then the Board and Executive can choose whether to do what they say, disregard the motion, or to do some kind of compromise between what the motion says and disregarding the motion; the motion on advertising funding was ‘non-binding’.

Holding to account part 1 – the presentations
The first part of the meeting involved presentations by members of the Executive and the Board, as part of the ‘holding to account’ purpose for the meeting. Here are the highlights:

Introduction by Steve Murrells – Co-op Chief Executive (top executive)

AGM 02
Steve told the meeting that the Co-op had seen a 15% increase in active members over the last year, and the Co-op now has 4.6million active members. He also mentioned that the Co-op has given over £100 million to members since the 5 + 1 reward scheme was introduced.

Presentation by Ian Ellis – Chief Finance Officer (executive in charge of the money)
Ian gave us an overview of the Co-op’s finances, starting with the good news that underlying pre-tax profit is up by 25% compared to last year. He also told us that this is the Co-op’s 4th year of like-for-like growth. Like-for-like sales are the number of sales the Co-op would have made if it had the same number of stores this year that it had last year.

He told us that convenience stores’ sales are doing particularly well with like-for-like sales growth of over 4%. The Co-op’s market share has also increased; this means that a larger percentage of the the total amount of groceries bought in the UK were bought from the Co-op in 2017 than in 2016.

Ian also told us that Insurance has seen an increase in ‘gross written premiums’. The ‘gross written premiums’ are the number of insurance agreements made with customers for which payment is expected to be (and in some cases has been) made. An increase in ‘gross written premiums’ means Insurance can expect to see more money coming-in as a result of its policies sold to customers in 2017, than it saw as a result of its policies sold to customers in 2016.

He assured the meeting that the Co-op’s profit levels are as planned, this suggests that the Co-op’s plan for the business’s profitability are working. Ian also mentioned that sales of stores and other assets are set to continue for years to come. He then mentioned that the Co-op is continuing to invest as a business and needs to grow to become less dependent on debt.

Presentation by Steve Murrells

AGM 03
When Steve first spoke he was giving an introduction, this time he was giving his speech. He told the meeting about the Co-op opening 100 new stores last year, and intending to open a further 100 this year.

He made it clear that it was not acceptable that we had found ourselves in  a position where we are currently under investigation by the Groceries Code Adjudicator for how we treated our suppliers. Steve told the meeting that the Co-op has retrained our buyers, and has given back £500 million to suppliers where we found that we were in the wrong.

Steve then described how the Co-op is supporting local businesses, without demanding exclusivity as others do. He also mentioned that all of our chocolate is Fairtrade, as are our African roses. In fact the Co-op is even giving extra money to suppliers to help train health care professionals in the developing world.

The new Co-op Foodshare scheme will give a more balanced variety of donations to charity then other retailers who only give the food away after its best before date. The Co-op will be giving fresh food to charities instead of knocking it down to silly prices and selling it in stores. This change means that the fresh food will be given away in time to be used or frozen by charities.

With almost a year having passed since the Manchester bombing, Steve took a moment to send love and support to those affected, and gratitude to the Funeralcare colleagues who attended the terrible scene after it occurred.

Steve then discussed the Funeralcare business itself, telling the meeting that the end of 2018 should see the last non-branded Co-op funeral home become Co-op branded. He also mentioned that Funeralcare’s revenue is up by 8% this year.

Moving on to Insurance, the meeting was told about how Co-op Insurance has been trialling smart doorbells. Followed by how Telematics systems, which monitor how people actually drive, have been delivering lower prices for younger drivers. Moving on to travel insurance, Steve described how the Co-op has worked with members to Co-create a travel insurance product for people with pre-existing health conditions. He then told the meeting that there is a target to achieve 30,000 sales of travel insurance by the end of the year.

Some members may have heard that the Co-op is increasing the number of academies it sponsors from 12 to 40 schools. Steve confirmed that some of those Co-operative schools are going to be in Merseyside. He also mentioned that some students from academies were waiting just outside the hall, to perform for us.

After outlining the Co-op’s continuing campaign against modern slavery, Steve told the meeting that the Co-op would become the 1st business to sign Anti-Slavery International’s Anti-Slavery Charter, in the hall after the meeting finished.

Presentation by Stevie Spring – Director, and Chair of the Remuneration Committee

AGM 04
Stevie Spring made clear that Executive Pay is still a priority, but getting the balance right is not a simple matter. The Remuneration Committee, that she is Chair of, has simplified pay packages to build trust; however, we still have to compete for the best talent and doing that while building trust is a tricky balancing act.

Members voted for executive pay to be reconfigured without pay rises last year and this has been completed. The major change is that bonus arrangements have been simplified and targets are no longer duplicated. The new bonus plan will see 50% of bonus pay paid at the end of the year in which it is earned and 50% deferred for an extra 2 years.

Steve and Pippa never got a pay rise for their promotions last year, so it is fair that they get them this year. The form of those pay rises will be increases in potential bonuses, so they will only be paid more if they deliver. Steve has reduced his executive team to 6 people and new executives have substantially less generous packages than the executives who came before them.

The Senior Leadership Team are the managers within the Co-op whose levels of responsibility would see them classed as executives in a smaller business. The size of this team has been reduced by 25% in the last year. Both the Senior Leadership Team and the Executive need the Co-op to achieve 90% of its profit target in order to be awarded any bonus. The maximum bonus that the Senior Leadership Team or the majority of Executive members can receive is 200% of their basic salary. In order to thrive as a business, we do need to ensure that we recruit and retain more than our fair share of leadership talent, through reward (pay levels).

When it comes to colleague pay, we still pay for colleagues’ breaks, competitors of ours don’t pay their employees for breaks. We have also increased colleague pay by 21% over the last 3 years. Increasing pay levels is a challenge as a pay rise of 1.5p costs the Co-op £1million. Nevertheless, the plan is to improve the Co-op’s pay ratio by increasing colleague pay rather than by reducing executive pay.

Our gender pay gap figures do have room for improvement, but this is not because of differences in pay between men and women who are doing the same job. The size of the gender pay gap at the Co-op is due to the fact that only 30% of the top jobs in the Co-op are taken by women. What we are seeing is a gender role gap rather than a gender pay gap.

Presentation by Nick Crofts – President of the Members’ Council

AGM 05
Nick started by outlining some of the things that the Members’ Council has achieved. He mentioned how a Member of the Members’ Council was responsible for the Co-op applying for the Fair Tax Mark. He also told the meeting how the Members’ Council’s work on sub-national structures has led to the recruitment of Member Pioneers. He explained that the Members’ Council are working with the Executive in working groups, asking them questions and making suggestions.

On a personal note – I have heard members express concerns about whether the Members’ Council are truly asking the Executive or the Directors tough questions. The tough questions really are being asked, the good working relationship simply means that the Members’ Council are more likely to ask the tough questions in a friendly and professional tone; when questions are asked in a friendly tone the answers do tend to be a bit better. That said, the Members’ Council is there to ask questions and make suggestions, they do not have the power to tell Executives or Directors what to do as such powers are not granted to them by the rules of the business.

In his presentation, Nick mentioned how the Members’ Council have worked with people within the business on the development of Join-in activities. Join-in has seen the business engage with members on subjects ranging from creating a new wine to how we handle death and dying.

Nick also mentioned that “our Food business has recovered its mojo”, and gave thanks to Steve Murrells (our CEO) for the enthusiasm he has shown for working with the Members’ Council. Nick thanked Lesley and Frank for their dedication and thanked me for my hard work on this blog and my newsletter. He also welcomed the 11 newly elected members of the Members’ Council.

Holding to account part 2 – Members’ questions
There were a lot of questions asked, in order to keep this blog a reasonable length I have had to summarise them and focus on highlights:

AGM 06

Question: As a community pioneer, I was wondering whether communities can be better informed about what we’re doing. Have you thought about putting more advertising into local newspapers to get more volunteers?
Answer: We have been thinking about this; keep an eye out, good things are coming.

Question: 0.8% profit isn’t very much profit for a business that sells as much as we do, how are we going to increase profitability and revenue?
Answer: For a co-operative, profit is not the same as it would be for a corporation, so it is important to remember that we have put £61million of profit into members’ pockets. Also, our food margins are better than Tesco and Morrisons. Moving forward, the focus will be on getting more Co-op products into more homes. We will be getting our products into 4,000 more stores with Nisa. At the same time, the centre of the business is too fat and we will be looking to cut costs. Membership is also growing, with 21% of sales to made to members last year, rising to 35% of sales this year, and with a target of 50% of sales being made to to members in 2020.

Question: Why not remove plastic from all of your packaging?
Answer: Plastic is an effective way of making food last longer, banning plastic before we have a replacement would see food waste soar. We are looking at ways to replace plastic though and have done so where we can. When we can replace plastic, we will.

Question: You haven’t really mentioned the Electrical Store – how is the E-store doing and what are your plans for it?
Answer: We are currently reviewing the situation with the E-store as it has been a number of years since E-store has made a profit. However, given how much smaller E-store is than the other businesses, which are doing well, the fact that it is not thriving is not a great concern for the Co-op. The success of Food and Funeralcare have a far greater impact on the Co-op’s sustainability as a business.

Question: What is the likelihood of the Co-op actually having 1500 Member Pioneers in just a few years?
Answer: we are still recruiting and maybe colleagues want to take-up the slack? We still believe in the target.

AGM 07

Question: 1 Co-op store in Manchester is affected by a robbery every 6.5 days: are we doing enough to help colleagues? Should safety be a performance measure? Will you report on how often we’re hit and what you’re doing about it?
Answer: “our concern is our colleagues” we have done the basics like CCTV, but know that we have more to do. We will seek to address this issue of rising crime by looking at ways to do more in the community. Looking at causes, like a lack of support for mental health issues in the community, will enable us to tackle the issue at the root cause.

Question: Should we do more to prevent acid attacks when our water bottles are being used?
Answer: we have moved to restrict the sale of products containing chemicals that have been used in acid attacks.

Question – Why don’t you restrict sales of drain blocker etc.
Answer – Will talk to Jo and see how we’re doing on this.

Question: What is the Co-op Doing about the Sainsbury’s – Asda merger?
Answer: Sainsbury-Asda is not something we can affect, so there’s not a lot that we can do about what they are doing. We are in a much better position that some other retailers though, as we are a convenience retailer rather than a discounter; the merger should therefore have less of an impact on us.

Question: Just wanted to say that, as a Member Pioneer he has been working with the local Council to reduce plastic waste and he was able to do this due to the Member Pioneer system.

The motions
All were a poll vote and just needed a majority to pass, apart from motion 9 which required a majority of 2/3rds. Withheld votes did not show on the screen but were counted.

Motion 1 To receive the Annual Report and Accounts for the period ended 6 January 2018.
For 97,284 (98.19%), Against 1,794 (1.81%), Withheld 8,830 – Motion Carried (agreed).

Motion 2 To approve the Directors’ Remuneration Report (PDF) for the period ended 6 January 2018. For 82,964 (88.34%), Against 10,950 (11.66%), Withheld 13,011 – Motion carried (agreed).

Motion 3: To approve a change in the Executive Remuneration Policy (for details see the summary of Stevie Spring’s presentation above. For 74,979 (84.13%), Against 14,140 (15.87%), Withheld 16,861 – Motion carried (agreed)

Motion 4: To re-elect Ian Ellis as an Executive Director. For 88,156 (95.99%), Against 3,685 (4.01%), Withheld 11,063 – Motion carried (he was re-elected).

Motion 5: To re-elect Lord Victor Adebowale as an Independent Non-Executive Director.
For 85,321 (93.17%), Against 6,254 (6.83%), Withheld 11,492 – Motion carried (he was re-elected).

Motion 6: To re-elect Simon Burke as an Independent Non-Executive Director.
For 85,820 (95.37%), Against 4,169 (4.63%), Withheld 11,523 – Motion carried (he was re-elected).

Motion 7: To re-elect Stevie Spring as an Independent Non-Executive Director.
For 91,589 (95.72%), Against 4,095 (4.28%), Withheld 11,558 – Motion carried (she was re-elected).

Motion 8: To re-appoint Ernst & Young LLP as our auditors and authorise the Risk and Audit Committee to fix their remuneration.
For 86,459 (94.60%), Against 4,932 (5.40%), Withheld 10,526 – Motion carried (they were re-appointed).

Motion 9: To approve changes to our Rules.
Notes on motion 9: [my summary – the motion basically said that the Co-op can stop sending things to people who no longer shop there – Dormant members. It also extended Member Nominated Directors’ terms of office from 2 years to 3, making their term of office the same length as that of a Members’ Council Member] you can Download a tracked change document (PDF) that shows exactly what changes were proposed to the Rules.
For 81,446 (88.91%), Against 10,155 (11.09%), Withheld 14,838 – Motion carried (those rule changes were agreed).

Motion 10: To seek approval to incur political expenditure, including donations and/or subscriptions to political parties, not exceeding £750,000 in total for the year commencing 1 January 2019.
For 73,805 (79.38%), Against 19,168 (20.62%), Withheld 13,737 – Motion carried (the political expenditure was approved).

Motion 11: [A rather long motion saying how many good things the Co-op has done on recycling, you can see the detail here, leading up to the following paragraph] ‘We call upon the Board to maintain our leadership position in identifying and reducing the sources of plastic pollution and maximising the recyclability of packaging, especially plastic packaging, used in the UK and report each year on the detailed progress made to that end’.
For 94,915 (99.06%), Against 900 (0.94%), Withheld 6,693 – Motion carried (making our packaging easier to recycle can continue and the Board can keep updating us on their progress).

 AGM 08

Motion 12: Members’ Motion on Responsible Advertising
‘This AGM notes the concern from the United Nations and hate crime experts that some media outlets in the UK are fuelling and legitimising prejudice and an increase in hate crime…We call upon the Board to review the impact of the current advertising policy and report to members…If the Board’s review finds it unable to report impact, we ask it to…ensure adverts do not appear in media that are incompatible with co-operative ethics, values and principles. We ask the Board to report on progress to the AGM in 2019’.
For 92,811 (96%), Against 3,868 (4%), Withheld 8,387 – carried (as Members’ Motions are advisory, the Board does not legally have to honour this; though a majority of 96% does make it more likely that something will happen).

Presentations on the future of the Co-op

Steve Murrells’ 3rd presentation

AGM 09
He told us that more work is needed to close the virtuous circle and deliver the vision of a community helping the business to help the community.

  • The core focal points for the business going forward will be price, convenience, location, quality and ethics. When making decisions for the Co-op, Steve intends to think about members of the whole consumer Co-op community, whichever co-operative society they are shopping with.
  • Next week would see launch of cremations without ceremony. The Co-op would also start a new 3 month trial of beating anyone else on home insurance cover. Other new products would include Insurance for motorcycles.
  • Meanwhile Co-op Digital is developing a mobile phone app to scan products in the aisles. The new shifts app has seen over 10,000 colleagues sign-up in first 48hours, over 24,000 colleagues have signed-up so far (nearly 50%). Shifts is likely to be especially helpful for a manager wishing to see who is working each shift.
  • The Co-op’s Guardian system, for Funeralcare colleagues to use when arranging funerals, is market leading, and results in the Co-op using far less paper. Simplify Probate is currently being integrated right now following the Co-op’s purchase of that business.
  • The Co-op’s purchase of Nisa, and deal with Costcutter have enabled us to grow our purchasing power, making it cheaper for the Co-op to buy products from suppliers.
  • The Co-op’s new business ventures will include: health and wellness, money, and marketplace; it is expected that they will probably be digital businesses.

Helen Webb (HR) – Closing the gap for our colleagues

AGM 10
It takes time for words to mean something and Helen is aware that terms like the ‘Virtuous Circle’ might take a while to mean much to people.

Some great colleagues have shown what Being Co-op looks like and they were going to receive awards at a tea party that afternoon, after the Annual General Meeting.

The Co-op is developing its leadership capability and the people who hold that capability. They now have 81 colleague Diversity Pioneers, the Co-op is also one of Times Top 50 employers for women to work for. The average colleague has £6,000 of debt so they’re finding ways to help them with that debt. The Co-op also has 742 new apprentices, enabling them to achieve the overall target of hiring 1,000 apprentices.

Matt Atkinson – Chief Membership Officer

AGM 11
New rewards are going very well, with a great deal of money going to members and causes. [Kat’s note – if all 1% is being divided between causes, whether we select a cause or not, this may not be the best measure of engagement; it all depends on what percentage of active members are actually selecting a cause].

Matt told the meeting about changes to the application process which will open the community fund up to non-charities; he also mentioned that the application form now includes an extra question on ‘how does this cause promote Co-operation’. The Community Fund has now gone from 7,000 to 12,000 applications with the help of Member Pioneers.

Those who select a cause spend £171 extra a year, but we don’t know whether there is a causal link, whether there is a link is not a major concern. Next week, please try to get more people to select a cause as we do a big push. Our cause over the coming year will be community and profit, corporate retailers etc are just about profit.

Steve Murrells on Costs and Savings
Steve confirmed that organisational changes are being made at the Retail Service Centre to ensure that the Co-op has the right people in right job. He also stated that £100m of savings will be made to fund new growth. The Co-op is now developing its new retail service centre.

Allan Leighton – Chairman of the Board
Allan closed the meeting, while summing-up he told us that Peter Plumb is standing down as a Director of the Co-op to focus on Just Eat. Allan said that the main test is whether the Co-op is in a better position than it was before, and it has.

—————

Then we headed-outside to listen to students from our Co-operative Academies perform.

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