This is the worst of all systems because much like Communism it only works on paper. In the short term your guild will trust what the officers say, but in the long term enough people will feel slighted that items are only going to the favorites (true or not). Eventually this system will tear the guild apart as members split off until it finally dies.
someone has had bad experiences with loot council. both dkp and loot council are great systems and both have the capacity to be misused or for loot to go to the wrong place at the wrong time. personally i prefer loot council even when i'm not on the council itself. it helps to have council members that have a clear vision of where gear should go when and why. every form of loot distribution has the potential for drama. the key is to weed out the players who don't understand or like the way your system is, regardless of which one you choose.
to me, loot council has within it the capacity to be both the best system and the worst system. dkp is slightly more forgiving, but only if there is decay.