Co-op needs ‘urgent reform’ to stay alive, Myners warns
Myners, who was appointed in December to chair a review into how the organisation is run, criticised the Co-op’s board for its lack of experience and said he was “deeply troubled by the disdain and lack of respect for the executive team” among some members.
He added: “Unless the group takes urgent steps to reform its governance so that it generates sustainable economic value, it will run out of capital to support its business.”
Euan Sutherland resigned as the group’s chief executive on Tuesday after less than a year in the role, following an outburst on Facebook in which he blamed “an individual, or individuals” in the boardroom for trying to undermine his position.
The Scots-born former chief operating officer of B&Q parent Kingfisher took the helm of Co-op in May, but quit after concluding that the UK’s fifth-largest food retailer was “ungovernable”. He was also angered by the leaking of details about his £3.6 million pay package.
In his damning review of the Co-op’s governance, Myners heaped praise on Sutherland and his former colleagues, saying that it was “only due to the exceptional skill and tireless efforts of a new executive team, led by Euan Sutherland, that the group survived”.
Sutherland has been replaced by chief financial officer Richard Pennycook, who has been named as interim chief executive.
Myners said that, until the Co-op overhauls its constitution, “it would be inappropriate and premature to proceed with the appointment of a new chief executive” because it would be unable to attract a “best-in-class” leader from the retail sector.
Along with a complete boardroom overhaul – to include an independent chairman with no previous links to the Co-op – Myners recommended the establishment of a 100-strong national membership council to hold the board to account and have powers to make sure the group adheres to “co-operative values and principles”.
Myners joined the Co-op as senior independent director in December after a disastrous year for the group, in which its banking arm needed to be bailed out following the discovery of a £1.5 billion hole in its finances.
The mutual, which has been left owning just 30 per cent of the bank following the rescue by bondholders, is now facing a series of investigations into what went wrong, as well as continuing questions over the appointment of the lender’s disgraced former chairman Paul Flowers despite a lack of knowledge of the sector.
A spokesman for the Co-op Bank, which is led by chief executive Niall Booker, stressed that Myners’ stinging criticism was aimed at its former parent, and the financial services firm has made “significant advances in reforming its governance and leadership”.
He added: “The bank has a separate board with its own chairman, chief executive and a new management team.”
The lender is facing a Treasury-commissioned probe into its near downfall, which was brought about by its disastrous takeover of Britannia Building Society in 2009. Plans to buy more than 600 branches from Lloyds Banking Group for £750m fell apart a year ago.