Co-op Group accepts resignation of chief executive Sutherland

Euan Sutherland Euan Sutherland says in the letter he believes the group is "ungovernable"

Related Stories

The Co-operative Group said it has accepted Euan Sutherland's resignation as chief executive, and that chief financial officer Richard Pennycook will act as interim boss.

His departure comes after he said efforts to overhaul the business became "impossible" because of the Co-op's failure to change its governance.

Mr Sutherland said in a statement that he resigned with "with great sadness".

He said he will "not accept" retention and bonus payments previously agreed.

Co-op chairwoman Ursula Lidbetter said she accepted Mr Sutherland's resignation with "deep regret".

She added: "Euan's resignation must now act as a catalyst for the real and necessary change which the group must go through."

Ed Mayo, Co-operatives UK, says these are "very challenging times" for the Co-op Group

In his resignation letter Mr Sutherland said the governance structure of Co-op limited the reforms he wanted to implement.

"Until the group adopts professional and commercial governance it will be impossible to implement what my team and I believe are the necessary changes and reforms to renew the Group and give it a relevant and sustainable future."

'Disaffected'

His resignation comes after reports suggested the group was recommending he should get a remuneration package worth £3.66m for 2013.

After the revelations over executive salaries, Mr Sutherland said on the Co-op's Facebook page that there seemed to be "an individual, or individuals, determined to undermine me personally". But he said he was "determined" to see through "the vital transformation of our business".

He added: "We appear to have disaffected people who are determined to make life difficult and embarrassing for the Co-operative at a time when what we need most are professionalism and loyalty to the business."

Mr Sutherland, who joined last May, said last month that 2013 had been "perhaps the worst year" in the Co-op's long history and it had "lost its way".

Start Quote

They got in a good professional to run the place, and it seems he looked, and decided it wasn't for him”

End Quote Lord Levene

It followed a year of financial problems in its banking division and the scandal involving the division's former chairman Paul Flowers, who was arrested for alleged drug offences.

'Misfortunes'

BBC business editor Robert Peston said Mr Sutherland was thought to be "demoralised and fed-up" and that his initial offer of resignation letter was broadly a "back-me-or-sack-me move".

Lord Levene, who headed a rival bid for Lloyds TSB branches in competition with the Co-op Bank, told the BBC that Mr Sutherland's resignation offer seemed to be part of a "never ending" series of misfortunes for the group.

"They got in a good professional to run the place, and it seems he looked, and decided it wasn't for him," Lord Levene said.

Co-op Bank was rescued last year under a deal with its bondholders after it emerged that it faced a £1.5bn black hole.

That black hole caused the bank's proposed takeover of more than 600 Lloyds TSB branches to fall through.

Later that year the company was hit by a fresh scandal when Mr Flowers was arrested in connection with a drug supply investigation. He remains on police bail.

The Co-op last month launched a nationwide poll - open until 24 March - to ask people for their views on its future.

The results will be published at the group's annual meeting in May.

'Clash of cultures'

John Thanassoulis, professor of financial economics at Warwick Business School, told the BBC that Mr Sutherland's resignation underlined a "clash of cultures" about the way forward for Co-op Group.

"This is a comment on how viable the Co-operative Group's business model is - can it survive or does it not work?," he said.

Mr Sutherland was seeking to evolve the business in a way that would have resulted in job losses, the sale of co-operative farms, and the possible sale of the co-operative pharmacy business, Prof Thanassoulis said.

Members may have seen this as being against the ethical business model of the group, and resisted such changes, he said.

The acceptance of the resignation means the board may have to hire a new chief executive "who's going to have their hands tied in terms of cost-cutting measures", Prof Thanassoulis added.

"I'm wondering whether the end game will actually be selling off the bank."

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

BBC Business Live

  1.  
    12:59: Rebecca Marston Business reporter, BBC News

    That's it from the machine shop for today. We'll be here tomorrow, from 06.00. Thanks for your company.

     
  2.  
    IPHONE BLING 12:54:
    iphone 6

    Has luxury design company Brikk let the proverbial cat - or iphone 6 in this case - out of the bag? If you've got between £2,500 to £5,200 to spend and want to bling up your new iphone then this is for you. But have they guessed at the new iphone design or do they know something we don't? Still, if you do want a 24 carat gold iphone 6 with a diamond encrusted Apple logo you'll have to wait another month after the 6 is released. (As always, we must point out other luxury iphone bling merchants provide similar services - we think).

     
  3.  
    GKN RESULTS 12:46:

    We like companies that make things. We now catch up with results from GKN. The car and plane parts business reports a 6% rise in first-half profits to £296m. "We have continued to outperform our key markets and report good underlying financial results in spite of sterling's strength and some end market weakness - we expect these trends to be maintained," says chief executive Nigel Stein. Commentator Howard Wheeldon hails these as "an excellent set of results".

     
  4.  
    SUPERMARKET SALES 12:24:
    A sign for Lidl and Aldi

    Something else to pull out of the supermarket figures from earlier this morning. The Daily Telegraph has had a good delve and reckons German discount supermarket Aldi is poised to overtake Waitrose as the UK's sixth biggest supermarket. Given shoppers can buy a pheasant for a fiver in Aldi maybe Waitrose may have to consider lowering its prices? The Kantar Worldpanel figures show sales at Aldi grew 32.2% in the 12 weeks to 20 July, while Lidl saw sales grow 19.5%.

     
  5.  
    MORRISON'S CHAIRMAN 12:16: Via Email

    More on Andy Higginson's appointment at Morrison's. Matt Woodhams of retail consultants Added Value says: "Appointing Andrew Higginson seems like a bright idea... Higginson has a track record as one of the leaders of Britain's biggest grocery retailers during its halcyon days. The problem is that shoppers' needs and expectations have changed." Morrison's "will need much more than a high profile appointment" he adds.

     
  6.  
    UKIP SHOP 11:57:
    Anti EU bag

    Sales of hi-vis vests, silk ties and even jewellery raised £80,000 for UKIP in the past year reports the Financial Times. It has seen its Companies House filings. Recalling disgraced party member Godfrey Bloom's exhortation to women to clean behind the fridge, it notes UKIP steers clear of the fridge area entirely and does not do fridge magnets.

     
  7.  
    MORTGAGE LENDING Via Email

    Of course you don't have to take our word for it. Here's the ubiquitous Howard Archer, chief UK and European economist at IHS Global Insight: "The appreciable rise in mortgage approvals reported by the Bank of England in June fuels uncertainty as to whether the recent loss of momentum in housing market activity is likely to be lasting or just a temporary development related to changing mortgage regulations, and whether there will be a significant easing back in house price growth." Can't say fairer than that.

     
  8.  
    MARKET UPDATE 11:34:

    European shares are scraping a living now - all show minor (very minor) gains. Retailer Next stays a winner though - up 2.65% after giving a positive account of itself.

    • The FTSE is up 15 at 6803.01
    • Germany's Dax is up 11 at 9609.19
    • The French Cac-40 is up 3 at 4347.55
     
  9.  
    MORTGAGE LENDING 11:30:
    Table showing mortgage approvals for house purchase from March to June

    This table shows the potential impact of the MMR. Mortgage approvals were ticking along at around the 67,000 mark and then suddenly dropped in April when the new rules came in. Some feared the new rules were stifling lending. Others that it was an indication of rampant house price growth and borrowers over stretching their finances.

     
  10.  
    MORRISON'S CHAIRMAN 11:20: Via Email

    Andrew Higginson's new job as new chairman of Morrison's has generated something of a buzz in the City. Jon Copestake, retail analyst at the Economist Intelligence Unit says: "Having been passed over by Tesco for Philip Clark this Morrison's appointment gives Andrew Higginson an opportunity to prove himself with a big four retailer."

     
  11.  
    MORTGAGE LENDING 11:05:
    Chart showing mortgage approvals in June

    Monthly mortgage lending for house purchases rose in June to £10.8bn from £10.1bn, said the Bank of England. May mortgage approvals jumped to 67,196 in the month from 62,007. What has changed? Well, it's entirely possible that the regulatory bottleneck caused by European mortgage affordability rules introduced in April - given the catchy title of the Mortgage Market Review (MMR) inexplicably - is getting to the point of being cleared now mortgage lenders have got their heads around them.

     
  12.  
    AIRBUS CANCELS ORDER 10:44:

    Back to Airbus for a moment and it is worth pointing out that it is very unusual for a planemaker to cancel an order from a customer. Reuters news agency carries a statement from Skymark that explains (sort of) from its point of view how the cancellation came about: "[Airbus] said it would charge overpriced breakup fees for cancelling the purchase of A380s if our company decides to cancel," Skymark president Shinichi Nishikubo said.

     
  13.  
    SUPERMARKET SALES 10:30:
    A shopper selecting fruit

    The latest figures on supermarket sales are out from the well-watched Kantar Worldpanel. Tesco sales fell 3.8%, Asda sales rose 0.9%, Sainsbury sales were up 1.2%. All figures are for the 12 weeks to July 20. Overall sales were up 0.9% - the slowest pace of growth for 10 years.

     
  14.  
    AIRBUS CANCELS ORDER 10:15:
    A380

    Airbus confirms it has cancelled a deal for six A380 superjumbos for Japan's Skymark airline. The statement came a few hours after Skymark said it was locked in "difficult" talks over the order. There doesn't seem to be the vastest amount of confidence in Skymark's finances. Shares closed down 13% in Tokyo earlier.

     
  15.  
    BITCOIN BIG IN ROMANIA 09:58:
     bitcoin medals

    Bitcoin is big in Romania, says Reuters. The citizen's of Europe's second poorest country apparently remain distrustful of officialdom but are also tech savvy. Reuters adds Romania is among the worst at collecting taxes and fighting fraud, making it poorly equipped to manage the bitcoin.

     
  16.  
    INSOLVENCY FIGURES 09:47:

    Some 27,029 people went into personal insolvency in the second quarter of this year, a 5.1% increase on the same quarter last year, official figures from the Insolvency Service show.

     
  17.  
    MARKET UPATE 09:36:

    European shares are mixed. They started out good after a batch of encouraging company results. Retailer Next is among the big winners - up 2.45% to 6680p on the FTSE 100 so far.

    • The FTSE is 0.12% higher at 6796.35
    • Germany's Dax has just turned negative and is now 0.09% lower at 9589.54
    • The French Cac-40 is also down 0.18% at 4336.92
     
  18.  
    Via Twitter Adam Parsons Business Correspondent

    tweets: "Next now worth slightly more than Sainsbury's and Morrison's put together."

     
  19.  
    GHERKIN SALE 09:14:
    An aerial view of the "City", London"s business disctrict

    London landmark and general troubled child of the City's tall buildings, the Gherkin - otherwise known as 30 St Mary Axe - has been put up for sale for £650m. It was put into receivership with accountants Deloitte managing the place since April. Co-owners Evans Randall and German firm IVG told it to put it up for sale after they failed to reach a deal with their lenders over restructuring the building's mounting debts.

     
  20.  
    BANKERS ETHICS 08.58:
    Book

    Back to the proposed bankers' oath. Would it mean an end to such fines as the £218m Lloyds received yesterday for fiddling rates? Think tank ResPublic, which operates "on the premise that human relationships should once more be positioned as the centre and meaning of an associative society", hopes so. Click here to read what it suggests are the magic words.

     
  21.  
    RUSSIAN SANCTIONS 08:45: BBC Radio 4
    Russian President Vladimir Putin

    Former foreign secretary Sir Malcolm Rifkind is talking to the Today programme about the potential impact of sanctions on Russia. He says President Putin is unconcerned about his popularity at home. "This isn't about his popularity this is about imposing sanctions that will require Putin to change his policy," he says. Up to now, he says, sanctions have been "pretty useless". Sanctions need to be about serious economic damage to Russia, he adds.

     
  22.  
    UBS PROBE 08:35:
    The floor of the New York Stock Exchange on 28 March, 2014.

    The "Dark Pools" investigation widens to include UBS. The Swiss bank became the latest bank to say it is cooperating with inquiries about these alternative trading systems. Its second quarter report this morning said a clutch of US regulators, including the Securities and Exchange Commission, the New York Attorney General, and the Financial Industry Regulatory Authority had made inquiries. Banks Barclays and Credit Suisse are also involved in probes.

     
  23.  
    RUSSIAN SANCTIONS 08:25:

    Separately the US State Department has accused Russia of violating a key arms control treaty by testing a nuclear cruise missile. Russia tested a ground-launched cruise missile, breaking the Intermediate-Range Nuclear Forces Treaty signed in 1987 during the Cold War, the US says. A senior US official described it as "very serious" but gave little more in the way of detail.

     
  24.  
    PAY KICK? 08:13:

    Two fund managers overheard on the 06:45 to Vauxhall: "It's called a pay away, not a kick back." Business Live (not being perfect) does not know what this means. Any ideas?

     
  25.  
    HEADLINES
  26.  
    RUSSIAN SANCTIONS 08:05: BBC Radio 4

    One more from Malcolm Bracken on Today. He doesn't mince his words. He says: "Putin has looted an enormous amount of money from the Russian people." Mr Bracken adds he doesn't think the aim of sanctions will be to "devastate the Russia economy or isolate it from the world." But squeezing "the cronies" will be language Mr Putin can understand, he says.

     
  27.  
    NEXT PROFITS 07:53:
    Woman in picture

    Next also has results. First half profits at the clothing and homeware retailer rose 10.7%. Next tells investors to stand by for better profits of between £775m and £815m. Sales at the physical stores were up 7.5% and through the Next Directory were 16.2% higher.

     
  28.  
    BP PROFITS 07:43:

    BP says rising oil and gas production from new or recently started projects led to increased processing of heavy crude oil by the newly-modernised Whiting refinery contributed to operating cash flow of $7.9bn in the quarter. Total operating cash flow for the first half of 2014 was $16.1bn.

     
  29.  
    RUSSIAN SANCTIONS 07:36: BBC Radio 4

    The purpose of sanctions is to target the regime and [Russian president] Putin's cronies, not really the Russian people, Malcolm Bracken, analyst at Redmayne Bentley, tells the Today programme. "The mismatch," he says "Is that Russia needs German money from gas sales even more than Germany needs Russia gas." Germany can get its gas from countries other than Russia, he adds. But Putin can impose far greater economic pain on his people than Angela Merkel can on hers.

     
  30.  
    MORRISON'S CHAIRMAN 07:30:
    Signage for Morrisons supermarket on a trolley handle

    There's confirmation that former Tesco finance director Andrew Higginson will become the the new chairman of rival supermarket Morrison's when Sir Ian Gibson retires in 2015. Mr Higginson will join the board on 1 October as non-executive deputy chairman. He was finance director at Tesco between 1997 and 2012. He is currently chairman of Poundland, N Brown Group and McCurrach UK as well as a non-executive director at BSkyB.

     
  31.  
    BP PROFITS 07:17:
    British Petroleum sign

    BP has reported profits (second-quarter replacement cost profit - which strips out the effect of oil price movements) of $3.2bn, compared with $2.4bn a year earlier.

     
  32.  
    BIG CHEESE 07:13: BBC Breakfast
    Cheese

    The biggest event in the global cheese calendar starts today in Nantwich in Cheshire. Steph McGovern is at the International Cheese Fair for Breakfast along with the 4,500 cheeses there. Andrew Loftus, agriculture manager for Morrison's supermarkets says: "Customers need a big variety, the block cheese, the cheddars, but we also have our own range that we cut and grate in our factories."

     
  33.  
    BANKING ETHICS 07:03: Radio 5 live

    Control Risks' Charles Hecker on Wake Up to Money pulls together the two big topics of the morning - Russia and banking ethics. He says it's the ethics that attract them: "There is a reason why the British banking sector is by a mile the preferred destination for Russian financial transactions. It's seen as transparent and liquid market that is well regulated and is seen as clean." And they also like the flight time and the restaurants, he says.

     
  34.  
    UBS RESULTS 06:53:
    The logo of Swiss bank UBS

    Swiss bank UBS reports second quarter net profit of 792m Swiss francs (£516m), up from 690m francs last time. Results were whacked last year by a $885m settlement with the US housing regulator over the mis-selling of mortgage-backed bonds. The bank has still had to set aside 254m euros (£165.4m) this year, mainly to settle legal claims that it helped wealthy Germans to dodge taxes.

     
  35.  
    RUSSIAN SANCTIONS 06:41: BBC Radio 4

    In case you were wondering why sanctions were back on the news menu, last week, European leaders agreed there should be tougher sanctions on Russia after Ukrainian separatists brought down Malaysia Airlines MH17. This week they decide what sanctions should be applied and against whom or what.

     
  36.  
    BANKING ETHICS 06:31: Radio 5 live
    Triumph of Virtue and Nobility

    Would getting bankers to swear an oath promising good behaviour work? That's a suggestion by one think tank, ResPublica. It wants to introduce "Virtuous Banking". But the chairman of the Banking Standards Review Council, Sir Richard Lambert, tells Wake Up to Money an oath won't help to bring that about.

     
  37.  
    GAS GUZZLER 06:21:
    Mayor of London Boris Johnson

    London mayor Boris Johnson wants the drivers of diesel cars to pay an extra £10 - on top of the congestion charge it should be noted - for the pleasure of driving into the centre of the capital according to a report in the Daily Mail today. Other cities are also considering introducing low-emission zones to crack down on diesel fumes. These cars were once encouraged as being less polluting...

     
  38.  
    RUSSIAN SANCTIONS 06:08: Radio 5 live

    More from Charles Hecker. He tells Wake Up to Money: "I don't think anybody is that keen on sanctions that are going to impact on their own economic sectors." Part of the problem with European sanctions against Russia is the French have defence deals with Russia, there is a substantial amount of Russia money in the UK's financial services sector and Germany has energy deals with Russia, he adds

     
  39.  
    RUSSIAN SANCTIONS 06:01: Radio 5 live

    Charles Hecker of consultancy Control Risks tells Wake Up to Money targeted sanctions, whether against sectors of the Russian economy or against individuals, would have a potential impact and suggests the Russian economy is already teetering on the edge of recession. But he adds both Cuba and Iran have been subject to far more stringent sanctions and that further sanctions against Russia are unlikely to change the country's behaviour.

     
  40.  
    06:00: Rebecca Marston Business reporter, BBC News

    Yes, we're back. And we're here: bizlive@bbc.co.uk @bbcbusiness - should you wish to get in touch.

     
  41.  
    06.00: Matthew West Business Reporter

    Morning everyone. Yesterday afternoon we had a £218m fine for Lloyds for its part in the 2012 Libor scandal, while the think-tank ResPublica has suggested this morning bankers should take an oath - a bit like doctors - to fulfil their "proper moral and economic purpose". We also have second quarter trading updates from BP and Next this morning, plus more on Russian sanctions.

     

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.