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Comment: Sutherland out of ‘ungovernable’ Co-op

Martin Flanagan

Martin Flanagan

  • by MARTIN FLANAGAN
 

ONE is beginning to get the impression that, as outgoing chief executive Euan Sutherland claims, the Co-operative Group is ungovernable.

What a catalogue of distress and waywardness it has been in the past three or four years.

The final straw for Sutherland seems to have been the leaking of his £3.6 million pay deal to a Sunday newspaper by a member, perhaps more than one, of the Co-op board.

Sutherland followed it up with what was effectively a back me or sack me challenge to the Co-op board. The board, whose motley composition includes a civil servant, nurse, university lecturer and plasterer, appears to have been less than unanimous.

The board is entirely non-executive, and is elected from regional boards and independent Co-operative Societies.

Sutherland has been less than a year at the helm, but he has obviously been frustrated by the group’s failure to fundamentally reform the fuzzy corporate governance that got it into trouble with its acquisition of the Britannia building society and failed attempt to buy some 600 bank branches from Lloyds.

He succeeded in filling the £1.5 billion black hole in the mutual’s banking arm’s balance sheet, but only at the expense of giving control of the Co-op Bank to hedge funds.

While it solved a massive problem, perhaps this stuck in the craw of too many members of the parent group’s board. A pity, in many ways.

Sutherland’s core plan to refocus the Co-op on fewer businesses, allied to a revamped, 21st century corporate governance, seemed sensible.

He had called time on the farming business and indicated to the market he was not wedded to pharmacies, either, in the hope of flushing buyers out of the woodwork.

It did at least seem a plan after years of the Co-op fluctuating between hubris and homespun incompetence. It is pretty likely that those divestments will still happen whoever moves into the swivelling executive chair at the mutual.

But it makes you think that any new person should insist on copper-bottomed agreed changes to corporate governance at the group before taking on the poisoned chalice.

Ironically, Co-op Bank, with added Britannia and Lloyds’s Project Verde assets, was supposed to be a government-cheerleading new challenger to the established British banking industry, the latter tarnished by the financial crash.

Many think it will take at least another ten to 15 years before that section of the financial industry recovers its image.

However, it looks that it might take the Co-op Group a similar period to restore its once wholesome reputation. Sutherland’s departure is another embarrassing episode, and the mud has stuck.

Yes independence vote technically floored?

The governor of the Bank of England is maintaining a strictly “technocratic” approach to the issue of Scottish independence, and whether a Yes vote would allow Scotland to retain sterling as its currency and the Bank as the country’s lender of last resort.

But Mark Carney’s comments to the Treasury select committee yesterday made clear the significant hurdles to this outcome.

The language was studiedly neutral, but you wonder whether there is a possibility the referendum battle could be lost, a la boxing, on a technocratic knockout.

 

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