Co-op results

Euan Sutherland, the chief executive of the Co-operative Group who resigned Tuesday, was treated with “disdain” by some of his board members, according to Lord Myners, the senior independent director reviewing its governance.

“I have been shocked by how one or two directors have spoken to our executive team,” he said.

Lord Myners, whose proposed governance changes were part of Mr Sutherland’s showdown with the board, made the comments in an interview published on the group’s website on March 7.

The former Labor minister said the board “struggles to understand the basic issues around commercial efficiencies. Even the scale of loss we are about to announce does not seem to have hit home with some members of the board. We have suffered catastrophic losses and we have to fix the system which led to those losses because otherwise we are going to be in very deep difficulties.”

The mutually owned group’s sprawling businesses range from farms to convenience stores and funeral homes. It has been in constant turmoil since the discovery last year of a £1.5bn capital shortfall in its banking arm.

Richard Pennycook, the finance director and former Wm Morrison finance director, has stepped in temporarily as chief executive. He said: “Our businesses continue to perform in line with the clear commercial plans put in place under Euan’s leadership and I and the team will plot a steady course in the coming months.”

One person close to the Co-op said there was a minority of board members who were prepared for the mutual to lose market share in order to preserve the co-operative model. That person said this group had “shot themselves in the foot” by resisting Mr Sutherland’s attempt to run the 150-year-old mutual in a commercially sensible way, even after the bank almost collapsed.

“Once the emergency of the bank rescue was over they thought they could carry on as they were,” the person said. “It is very difficult to push change through.”

In his letter of resignation as chief executive of the struggling Co-operative Group, Euan Sutherland said he found it “impossible” to modernise the mutual.

Leaving after just 10 months in the job, Mr Sutherland said he resigned “with regret” but said the group needed “to drive major efficiencies and growth in all of its businesses”.

“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”.

It had to reduce its “significant debt”, he added.

Mr Sutherland, who joined the group in May from Kingfisher, owner of retailer B & Q, will leave without the bonuses that were part of a £3.5m pay package leaked to the media over the weekend and which sparked outrage among some Co-op members.

It was the third leak in a few weeks after news of a plan to sell its farms and details of an expected £2bn loss in this month’s annual report also reached the media. The Co-op said it was investigating.

Mr Sutherland believed he was undermined by his own board, which includes individuals elected by the 7m lay members of the Co-operative movement.

After an emergency teleconference on Monday night the 20-strong board agreed to back proposed changes in Lord Myners review, which completes next month. d

However, the changes must still be adopted by members’ representatives at the annual general meeting in Manchester on May 17.

Ursula Lidbetter, who became chairman of the Co-op in November after Len Wardle resigned over scandals at its banking arm, praised Mr Sutherland’s tenure.

She said: “Last year, Euan and his team saved the Co-operative Bank, without recourse to the taxpayer, and in doing so rescued the group from the biggest crisis in its 150-year history. They have worked night and day to renew the organisation and to give it a sustainable future.”

She said it needed “real and necessary change”.

The resignation follows an outburst by Mr Sutherland on social network Facebook in which he said individuals on the Co-op board were determined to “undermine me personally” after details of his pay were leaked to the media.

Mr Sutherland joined the Co-op just as the capital shortfall was identified at its banking arm. He oversaw a sweeping recapitalisation of the bank last year, which cut the Co-op’s stake to 30 per cent and is faced with the task of cutting costs at the highly indebted group.

Some of the Co-op’s elected members have resisted his attempts to reform the group and shake up its unwieldy governance structure.


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