Co-op chief executive quits over issues with leaks and an ‘ungovernable’ board

Euan Sutherland left his post after only 10 months, plunging the struggling group into chaos again

File photograph of Co-operative Group chief executive Euan Sutherland, who has offered to resign in a letter in which he describes the member-owned group as "ungovernable" (Reuters)

The chief executive of the Co-operative Group has quit with a £1.5m payoff after being angered when leaks in the boardroom made public his controversial £3.6m salary and bonus deal.

Euan Sutherland resigned after taking to Facebook to criticise the “disaffected people” in the “ungovernable” Co-op boardroom who had leaked his pay details.

While volunteering to forgo his controversial £3m retention bonus, he is still expected to walk away with a year’s pay, or £1.5m, and leave the struggling society in chaos.

Mr Sutherland had only been with the Co-op for 10 months and was thrown into a firefighting role after a £1.5bn black hole was found in the accounts of its banking division.

He then had to face the humiliation of seeing lurid details about the alleged drug taking of the so-called Crystal Methodist former chairman Paul Flowers.

Mr Sutherland, 45, had become increasingly frustrated by a succession of leaks from the unwieldy 20-strong board about his plans for the organisation, and when his pay details – branded “excessive” by many – were disclosed to a Sunday newspaper, he was evidently furious.

He tendered his resignation on Monday, prompting chairman Ursula Lidbetter to convene an emergency meeting of the board to thrash out a sustainable route forward. This will take the form of a sweeping overhaul of the member-dominated boardroom, which currently consists of representatives elected or appointed by independent co-operative societies across the country.

On the advice of Labour peer Lord Myners, that board will be disbanded and replaced by a more conventional set-up, with a plc-style board of two executive directors answerable to an independent, non-executive chairman and five or six independent non-executives.

There will also be a member-representative board which will give oversight of the main board’s activities and ensuring, to quote a spokeswoman “that they continue to deliver co-operative values”.

This was precisely the set-up Mr Sutherland had wanted, but was not enough to make him change his mind about quitting. In a development that must have further frustrated Mr Sutherland, his resignation, and the emergency board meeting which finished late on Monday night, were also comprehensively leaked this morning.

The board finally announced it was accepting his notice hours later in a joint statement with him in which he declared: “I now feel that 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.”

His resignation letter was described by the BBC as a back-me-or-sack me ultimatum. However, in the event, it appears he had made up his mind to go regardless.

He will be replaced with immediate effect by Richard Pennycook, currently the chief financial officer, who has been appointed interim group chief executive. He is well-regarded in business circles for having stabilised Morrison’s when he was the finance boss there.

Ms Lidbetter said: “Euan’s resignation must now act as a catalyst for the real and necessary change which the group must go through.”

Mr Sutherland insisted in his resignation letter that further sweeping changes were needed, including many more job losses. That is also expected to mean an end to donations to Labour MPs.

Meg Hillier, the Labour and Co-operative MP for Hackney South and Shoreditch, told the BBC: “He is running an organisation that is still run by its members, and he needs to be accountable to them. The Co-operative movement is a mutual movement where we make decisions together.”

Ms Hillier’s views are typical of many who want it returned to financial health but also seek to retain the mutual governance which Mr Sutherland found impossible to work with. Now his successors must persuade members to vote for the Myners reforms at an AGM on 17 May.

Profile: Euan Sutherland

Euan Sutherland, at 6ft 6in, has been described as the tallest man in retail. In the end, it was a bank which cut him down to size.

When he accepted the chief executive’s role at the Co-op Group in 2012, he thought he was joining a business on the up. But by the time he’d started in May, Co-op Bank was unravelling and dragging the whole society down with it.

Mr Sutherland set about rescuing the organisation from collapse, culminating in handing over 70 per cent of the bank to US vulture funds.

He would probably never have joined from his post as chief operating officer at B&Q-owner Kingfisher if its chief executive Ian Cheshire had not said he fancied staying on for a few more years. His decision to quit the Co-op this week may have looked hasty. But Mr Sutherland has only ever stayed in jobs for a few years before moving on, meaning that, at 45, he has worked at Boots, Mars, Coca-Cola, DSGi, Matalan, Superdrug and Kingfisher.

Jim Armitage

Timeline: Countdown to crisis

21 October 2013

The Co-operative Group is forced to give up majority control of its bank due to a £1.5bn shortfall in capital, allowing US hedge funds to take charge.

6 November 2013

The bank’s former chairman, the Rev Paul Flowers, gives a disastrous performance before the Commons Treasury committee, quoting wildly inaccurate figures.

17 November 2013

Mr Flowers is outed as buying and using illegal drugs a few days after his committee appearance.

19 November 2013

The group’s chairman, Len Wardle, resigns over the Flowers scandal.

12 December 2013

Lord Myners appointed to the Co-op board to review the group's governance

11 March 2013

Chief executive Euan Sutherland resigns