Co-op Bank’s board was ‘like the UN’

The Co-operative Bank was run by a board so unwieldly that looked like corporate equivalent of the United Nations, at least according to the people who sat on it.

Another likened it to Parliament and so it is scarcely a surprise that they were gravely concerned about the lack of “effective debate and challenge” concerning “long-term strategy, the competitive landscape and executive succession”.

Those damning observations were made by directors during interviews conducted by Dr Tracy Long and her colleagues at Boardroom Review, an organisation which offers assessments of the effectiveness of company boards.

Her 2010 report into Co-operative Financial Services, including the bank and its insurance businesses, stressed it was “not for external use including the FSA”, a reference to the Financial Services Authority, then the chief City watchdog and the bank’s regulator.

In it one director moaned about the “lip service” paid to conducting useful discussions and another asked plaintively whether the institution was becoming “the emperor with new clothes” in relation to its business transformation programme.

Most of his colleagues wouldn’t have been able to answer that – while the report found that they understood the institution’s financial plan they were not at all clear on “what the business is going to look like or become”.

The paper was published by one part of the UK Parliament that does work; Andrew Tyrie’s Treasury Select Committee, as part of its investigation into Co-op’s disastrous failed bid for the 600-branch-strong Verde business. It was followed by the bank’s near collapse as a result of the Bank of England identifying a £1.5bn hole in its accounts.

The committee has got into the habit of saving the publication of its most eye-opening materials for a Friday, and the review is certainly that.

Its recommendations include slimming the board, a point made repeatedly during the committee’s hearings.

The two characters that emerge with the most credit are Paul Flowers, the former chairman who was described as a “skilful and effective” as well as “focused, diplomatic, perceptive and conscientious”. The review found that he “commands respect”.

Meanwhile, the chief executive Neville Richardson was praised as an “effective and inclusive leader” who was “a breath of fresh air”.

The former has since been disgraced amid a series of lurid revelations. The latter has been publicly criticised by the Bank of England. These two, according to their colleagues, were the best of them.