Lord Myners has launched an excoriating attack on the way the Co-operative Group’s board works and in particular its non-executive directors, “few of whom have any serious business experience”.
Lord Myners, the City grandee who was brought in at the end of last year to shake up the Co-op’s governance, yesterday appeared clearly to back the former chief executive Euan Sutherland, who resigned this week describing the business as ungovernable.
The Co-op has been battered by a series of crises, including the £1.5bn black hole at its bank, drug allegations over the bank’s chairman Paul Flowers and Mr Sutherland’s angry departure. It is expected to announce losses of more than £2bn next month along with potentially thousands of job cuts.
Lord Myners said the Co-op should not go ahead with appointing a new chief executive until after major reforms to the board. He said: “While these governance issues remain unresolved the Co-operative Group will be unable to attract applications from best-in-class retail executives.”
Lord Myners has brought out an interim report ahead of his one he plans to complete in April.
Yesterday he said: “I am deeply troubled by the disdain and lack of respect for the executive team that I have witnessed from some members of the group board. There is a phrase frequently used in Co-operative Group circles that the executive should be ‘on tap but not on top’.
“It is now clear to me that this is a widely held but deeply flawed representation of the reality in recent years. Elected directors have simply not been up to their task of holding the executive to account.”
Lord Myners continued: “The Co-operative Group suffers from acute systemic weaknesses in its governance framework that over many years have gravely damaged the organisation.”
He accused the board in recent years of spending far too much time on deals like the takeover of Somerfield and the merger of the bank with Britannia Building Society, rather than focusing on improving the performance of the existing business.
He said: “Without fundamental change in its governance, it is difficult to envisage a major strengthening of the group’s competitive position.”
Lord Myners said he would recommend creating a new board under an independent chairman with no previous involvement with the Co-op, seven independent non-executive directors and two executive directors. The non-executives should have the skills and experience of those who sit on public supermarket companies’ boards.
He recommends a 100-strong National Membership Council elected on a one-member, one-vote basis. This body would guard Co-operative values and hold the group board to account.
The name game cracked: Codes in deals
Lloyds Banking Group has revealed that it gave the rival bidders for its Project Verde utterly inappropriate codenames when they were discussed in its boardroom.
As chief executive Antonio Horta-Osorio (bonus £1.7m) updated his fellow directors during the more than year-long attempt to sell off 632 branches, he referred to Lord Levene’s start-up venture, NBNK, as Lotus, while Co-op Bank, the favoured but then-abortive buyer, was referred to as Ferrari.
Nothing, of course, could have been further from the truth than the shiny, red Italian sports dream machine. When the bonnet was raised on Co-op Bank last year it turned out to have a £1.5bn hole where the turbo-charged engine should have been.
But Ferrari and Lotus continue a long tradition of bizarre codenames chosen by overpaid, over-imaginative bankers in takeover battles.
When Kraft launched a controversial bid for British chocolate giant Cadbury, the assault was dubbed Project Helix. While the target was called Chromium, the aggressor hid behind Krypton, an odourless, colourless gas which bears little relationship to processed cheese.
When Électricité de France decided to pull the plug on 8 million homes in the UK and sell the business it bizarrely named it Operation Eclipse.Reuse content