Role and responsibilities of a director of the Customer Union for Ethical Banking

The Customer Union for Ethical Banking is a co-operative society as defined by the Co-operative and Community Benefit Societies Act 2014. It is not a company, however many aspects of company governance also apply to co-operative societies.

Like all co-operative societies, the Customer Union for Ethical Banking has a board of directors (sometimes called a committee of management), which is responsible for managing the affairs of the society. Directors have a number of responsibilities, and the guidance below outlines some of these.

The Customer Union board meets every quarter by Zoom video conference. Board members may also be asked to participate in decisions between meetings and to assist the team on issues where they have expertise.

If you are considering applying to become a member of the board, please read the information below.

Co-operatives UK guidance

The following information summarises the legal duties of directors of a co-operative society. It is taken from Co-operatives UK website here.

Duty to act within powers

A director of a co-operative must always act in accordance with the powers granted to directors in the co-operative's governing document.

Duty to promote the success of the co-operative

A director must act in the way s/he considers, in good faith, would be most likely to promote the success of the co-operative for the benefit of its members as a whole.

Duty to exercise independent judgement

A director must exercise independent judgment. This duty requires a director to act in what s/he considers to be in the interests of the co-operative and not someone else. This duty is not infringed if s/he acts in a way authorised by the co-operative's governing document or with an agreement entered into by the co-operative that restricts the directors from exercising this discretion in the future.

Duty to exercise reasonable care, skill and diligence

A director of a co-operative must exercise reasonable care, skill and diligence. An assessment as to whether a director has carried out this duty adequately will consider the knowledge, skill and experience the director has and measure this against the standards expected of another person carrying out similar duties to the director in question.

Duty to avoid conflicts of interest

A director must avoid a situation in which s/he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the co-operative.

Duty not to accept benefits from third parties

A director must not accept any benefit from a third party if this benefit is connected with his/her carrying out, or not carrying out, the duties associated with him/her being a director.

Duty to declare interest in proposed transactions or arrangements with the co-operative

If a director has directly or indirectly an interest in a proposed transaction or arrangement with the co-operative s/he must, before the co-operative enters into the transaction or arrangement, declare the nature and extent of that interest to the other directors.

Duty to declare an interest in existing transactions or arrangements

A director must declare an interest to the directors in any transaction or arrangement that has been entered into by the co-operative. However, if a director has already declared an interest before the co-operative entered into such a transaction or arrangement s/he does not have to declare it again. The declaration must be made at a meeting of the directors, by notice in writing or through a general notice. If at any time, the declaration of interest becomes inaccurate, the director must make a further declaration.

A director is not required to declare an interest if: it cannot reasonably be regarded as likely to give rise to a conflict, the directors are already aware of the conflict or it concerns a director’s service contract that had been considered at a Board meeting.

Duty to declare interest in proposed transactions or arrangements with the co-operative

A director has a general duty to avoid conflicts of interest and a duty to declare interests in proposed transactions or arrangements with the co-operative.

Duty to declare an interest in existing transactions or arrangements

Non-conflicted directors can authorise a conflict, provided that the co-operative's governing document permits such an authorisation in relation to the specific transaction or arrangement.

For more information on the roles and responsibilities of directors and chairs of co-operatives see Co-operativess UK’s in-depth guides.

Companies Act 2006

The following information is an overview of Directors' Duties under the Companies Act 2006.

The Companies Act 2006 codified directors’ duties for limited companies. Although this codification does not apply to co-operative societies, the general duties set out in company law are based on developed common law and equitable principles and although society directors are not obliged to follow them, it is best practice to do so.

Section 171: Duty to act within your powers

These are the powers as specified in the co-operative’s Articles of Association, and they should only be exercised for the purposes intended, i.e. for the good of the c-operative rather than the director concerned.

Section 172: Duty to promote the success of the company for the benefit of its members as a whole

When making decisions as a director, you must consider:

  • The potential long-term consequences for the co-operative
  • The interests of your employees
  • Maintaining your co-operative’s good business reputation
  • The need to promote good relationships with suppliers and customers
  • The co-operative’s impact on the environment and local community
  • The need to act fairly between members, for example, treating those with few shares in the same manner as institutions with a large shareholding.

Section 173: Duty to exercise independent judgement

You must consider all members when exercising judgement, rather than an individual or a particular group of shareholders.

Section 174: Duty to exercise reasonable care, skill, and diligence

This applies to both executive and non-executive directors. Anyone with specific training and skills would be expected to apply them to their role as director, for example.

Section 175: Duty to avoid conflicts of interest

This includes actual and potential ‘situational’ and ‘transactional’ conflicts, as well as direct and indirect interests. If a conflict is disclosed, the co-operative’s constitution may allow the board of directors to approve it as long as it is sanctioned in the proper manner.

Section 176: Duty not to accept benefits from third parties

It can be difficult to gauge the difference between accepting a ‘benefit’ and simply trying to engender good relationships with a supplier/customer. Some companies have a written policy to clarify such situations.

Section 177: Duty to declare an interest in proposed transactions or arrangements

Your interest must be declared before the co-operative enters into the transaction or arrangement. The co-operative’s Articles of Association may set out the procedures and requirements for doing so, and how the board should deal with the matter.

You can read more about the Companies Act here.