Former City Minister Lord Myners has warned the Co-operative Group it must reform if it wants to survive.
In a report on the Co-op’s governance structure, published this morning, Myners says the group’s “deplorable governance failures” have led to its near-collapse.
It says a co-operative management model often has advantages but in order to benefit the Co-op must make its board more effective and deal with the “significant” democratic deficit within the organisation.
In a statement published with the report, Myners says: “Radical decisions on governance structure need to be taken very soon – and with resolution – if the Co-op is to be saved.”
The report calls on the Co-op to create a new group board with up to seven non-executive directors who can hold it to account and a new, independent chair with no previous association with the group. He also wants more rights for individual members and for a National Membership Council to be established to advise on ethical matters.
Speaking on the Today programme on BBC Radio 4 this morning, Myners attacked board members for not knowing the difference between a crdit card and debit card. He added the group had lost £3.5bn – half of its net worth – over the past four years.
He said: “It is one of the great national business calamities and it is being led by a board totally unable, because of a lack of experience, to hold them to account.”
The Co-op has been struggling with big losses and has been battling to raise capital. The bank was forced to pull out of its bid to buy 632 Lloyds Banking Group branches last year after it revealed a £1.5bn capital black hole. The capital shortfall prompted a rescue deal which saw Co-op Group cede control of the bank to bondholders, mainly hedge funds.
The group’s former chair Paul Flowers stepped down last June amid allegations of drug use. He will appear at Leeds magistrates court today charged with two counts of possession of Class A drugs.
Lord Myners’ suggestions will be voted on at the Co-op’s annual general meeting on 17 May.
Last week an independent review by Sir Christopher Kelly highlighted the merger between the Co-op and Britannia Building Society as a key casue of many of the bank’s ills. The Co-op is also subject to an FCA enforcement investigation and three internal reviewa.