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Lord Myners tells Co-op: Reform or die

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. 

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Let’s not forget that Myners doesn’t know a consultation from a summary removal. Nor doe she know a parliamentary debate from a loss of human rights.

    How can anybody take seriously the posits of the man who misled the Joint Committee on Human Rights regarding the removal of the 15 year longstop.

  2. I was working with CFS in 2009 whilst many of the events which led to CFS’ undoing were taking place. I think it would be fair to say that many of the problems primarily arose from the fact that the senior executives within the bank were focusing upon the personal exit strategies rather than examining the strengths of Britannia as a lender. The merger (it was never sold to the membership as an acquisition) was a fiasco, with the Coop leadership ceding control to their Britannia counterparts.

    What then ensued was an unceremonious removal of the next tier of Cooperative management, who were all invited to apply for their jobs in the new merged entity. What this left was a largely ex-Britannia management who had little understanding of the business which they had inherited; and a organisation lacking direction or vision (not that there was much vision prior to the change).

    In many ways Lord Myner’s and Sir Christopher Kelly’s reports should be largely retrospective as the banking operation is now 70% owned by the hedge funds.

    That said, Coop does need to wake up and realise that it is not just a retailer that does some financial services. It should look hard at itself and competitors such as Tesco and Sainsbury’s, both of whom have successfully developed their own banking operations.

    It also needs to separate itself from the quite frankly bizarre behaviour of its wider membership. A modern business cannot support a loose federation of “issues” in the name of having a social conscience. True, the movement sprang from a desire to offer products fairly priced, but it cannot be governed by individuals with a plethora of agendas and expect to be able to operate effectively.

    I therefore suggest that it perhaps adopt a more enlightened and pragmatic approach; leave the management in the hands of the professionals; set a target for a reasonable profit and see that the staff are properly rewarded for there contribution and not in accordance with some formula which is frankly out of touch with the real world.

    If it really wants to turn a corner, then it needs to find ways of buying back control of this business.

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