Will Co-op officials vote themselves out of power?

 
Co-operative bank branch

Lord Myners wants the Co-op Group's elected officials to make what they may see as the supreme sacrifice - in voting for reforms that would give them a lot less power, and would give executives, professional non-executives and millions of Co-op members more power.

But the former City minister and ex fund-management boss, hired by Co-op to recommend changes to the way this sprawling mutual is governed and managed, fears that failure to adopt the reforms would be catastrophic.

He argues that it was the commercial naïveté of the elected officials that almost destroyed the group, by permitting Co-op Bank to manage itself in a near suicidal way, and by approving the too-expensive takeover of the Somerfield supermarket chain.

They failed to rein in dangerous ambition - and because Co-op has no conventional shareholders, because it is a mutual, the institutions of the City of London failed to restrain the Co-op in any way (not that these institutions would be seen as models of intelligent oversight for public companies, but maybe they are better than nothing).

Myners says Co-op Group only avoided total collapse by the skin of its teeth and thanks to the exhausting and exhaustive efforts of the executive team - who was led by Euan Sutherland till Tuesday, when he quit in frustration at what he saw as the intransigent opposition to reform of the elected officials.

But Co-op is not out of the woods. As Myners says, its takeover spree has left it lumbered with too much debt, around £1.5bn.

And as I mentioned earlier this week, the appalling financial performance of Co-op gives its banks, led by Barclays, the ability to seize its assets - which they would be obliged to do if they perceived Co-op Group to be in a death spiral.

To placate the banks, Co-op is selling important assets, its farms and - probably - its pharmacies.

But the banks will also want to see top quality management of its most important business, its supermarkets - which have been losing market share, and whose profits are likely to be squeezed by a prolonged and vicious price war that is the expected consequence of Morrison's rehabilitation plan.

But a decent successor to Sutherland is unlikely to be found unless and until the Co-op is perceived to be governable and manageable.

As Myners points out, just 50 of these - many of them remunerated by Co-op for their elected positions - have the ability to veto reforms that would threaten their status and rewards.

But if they do block the establishment of a more conventional board structure, and don't accept a future role for themselves largely as guardians of the mutual ideal, then - in Myners view - they may find they will have ringside seats as this most important of all co-operative organisations is destroyed in a conflagration of its own creation.

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +10

    Comment number 6.

    I am a Co-op member and supporter, but as Myners says we are hardly consulted. I don't know how the 'elected' officials get there, what they do, etc. So I think the members directly voting for the board would be a big improvement. Seems like it has been like many of the trade unions - run for the officials benefit and not the members.

  • rate this
    +8

    Comment number 2.

    This is a Bank that gave cheap loans to Ed Balls, lied about its debts, lost billions, made "Reverend" Flowers Chairman and Myners thinks the Co-op will do the right thing?

    Of course Myners was the one who signed off on "Sir" Fred`s double pension thinking it was quite modest really.

  • rate this
    +8

    Comment number 27.

    As a long standing member of the Co-op , and having attended members meetings along with the AGM I know Lord Myners is right and that this old pals club and mutual admiration society, which is the Board of Directors, needs to change and come into the current century as the movement needs to move on and survive we deserve better.

  • rate this
    +7

    Comment number 18.

    Simply put, what was the official recommendation of the independent financial advisers who were brought in as oversight for the both the take-over of Somerfield and Britannia Building Society.... You know the ones who were paid and supposedly qualified/learned to give impartial advice.

  • rate this
    +7

    Comment number 7.

    The board still seems to operating a 19th century business model, with all the naivity of a country bumkin in the big bright city

    Unless they get their act together they won't have to worry so much about voting for anything, but more about signing-on at the jobshop

 

Comments 5 of 47

 

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