Lord Myners resigns: Co-op left floundering after shock departure

The Co-op was scrambling last night to bring some order to the beleaguered group after the shock resignation of Lord Myners. The peer, a senior independent director, is in the throes of a review of the society's governance.

The group issued a terse statement after a board meeting saying that Lord Myners would in fact remain a director until its annual meeting on 17 May when he had been due for re-election. He will not stand for a fresh term.

The group, which includes grocers, pharmacies and funeral directors, is preparing to announce a record loss next week thanks to a series of disasters, notably the near failure of the Co-operative Bank after a £1.5bn hole was found in its accounts. It will publish its results today and is expected to seek to claw back millions of pounds in bonuses from former executives. Details of new boss Niall Booker's pay will also be revealed.

Lord Myners, Labour's former City minister, is still expected to complete his review, which has infuriated powerful factions within the movement – notably the independent Midcounties Co-operative, which has indicated it will vote against it.

His presence on the board was increasingly viewed as "toxic" and a potential block to reform. He has complained of "bullying tactics".

A Co-op source said: "I don't think anyone disagrees with the need for reform. It is just how the Co-op goes about it."

The other regional Co-op boards – each of which has a seat on the 22-strong group board as it is currently constituted – have yet to state their opinions on his proposals.

An interim report from Lord Myners, suggesting a plc-style board with a majority of "independent" directors with "business experience", was hurried out after the departure of Euan Sutherland, the former chief executive. The report also stated that the group's elected directors had overseen "breathtakingly value-destructive" decisions including the takeovers of the Britannia Building Society and Somerfield the grocer.

It further found that the mutual's three-tier system of elected member representation – made up of area committees, regional boards and the group board – had "consistently produced governors without the necessary qualifications and experience to provide effective board leadership". Any plan for change will, however, require the support of two-thirds of that board.

Richard Pennycook, the group's interim chief executive, said he believed it would still be possible to reform the Co-op. He said: "We look forward to seeing the outcome of his review. I'm sure people will take its findings seriously."

Five new directors have been voted in after members threw out three involved in approving a controversial £6.6m pay package for Mr Sutherland. They all owed their positions to their membership of the group's network of regional boards, which supply 15 directors.

Each has served between three and 17 years on regional boards, holding memberships with a Co-operative society for between nine and 50 years. But it is their qualifications to oversee a big business that trouble people like Lord Myners.

Current directors include a nurse, a telecoms engineer and a computer technician. Several members are local councillors, although there are also people with finance and grocery experience among their number.

Lord Myners would have hived most of these directors off to a council charged with overseeing the group's much-vaunted "values" and ensuring that the business board lived up to them.