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Co-op chief Richard Pennycook to step down Co-op CEO Richard Pennycook to step down
(about 3 hours later)
Co-op chief executive Richard Pennycook, who rebuilt the group in the wake of its banking crisis, is to step down. The Co-operative Group chief executive, Richard Pennycook, who rebuilt the company after its banking crisis, is to step down.
Steve Murrells, chief executive of Co-op’s food division, will step up to replace Pennycook. Steve Murrells, the chief executive of the Co-op’s food division, will replace him.
Pennycook was a key figure in saving the Manchester institution from collapse after the financial problems of the Co-op Bank were compounded by a 2013 tabloid sting that revealed drug use by the bank’s former chairman Paul Flowers. Pennycook was a key figure in saving the Manchester institution from collapse after the dire financial problems of the Co-operative Bank were compounded by a 2013 tabloid sting that revealed drug use by the bank’s former chairman Paul Flowers.
Murrells joined the Co-op in 2012 and has led a successful turnaround of its food business. He will join the group board on 1 March and Pennycook will leave his full-time role at the end of the month. However, Pennycook will be retained as an adviser for a fee of £20,000 a month. Murrells joined the Co-op in 2012 and has led a successful turnaround of its once ailing grocery chain. The former Tesco executive will replace the outgoing chief executive on the group board on 1 March.
“Richard Pennycook saved our Co-op,” the company said in a statement. “In three short years he has rescued and rebuilt our business and restored pride to our 70,000 colleagues and 4.5 million members. We owe Richard a huge debt of gratitude and his place in Co-op history is secured.” Pennycook will then leave the business at the end of March, after the company agreed to forego his six-month notice period, leading to speculation that he has another role lined up.
Allan Leighton, chair of the Co-op, said: “Steve has transformed our food business and put it back at the heart of communities across the country. His leadership has seen our Co-op consistently outperform the market in food and he is the right and unanimous choice to now take the whole group forward for the next phase of our transformation.” “Richard Pennycook saved our Co-op,” said the Co-op chairman, Allan Leighton. “In three short years he has rescued and rebuilt our business, and restored pride to our 70,000 colleagues and 4.5 million members. We owe Richard a huge debt of gratitude and his place in Co-op history is secured.”
Pennycook said: “Leaving the Co-op was always going to be hard, but the time is right. The CEO who is to lead the renewal phase in 2018 has to be the CEO who builds the plan in 2017. In passing the baton to Steve, I leave safe in the knowledge that the Co-op will be taken forward by a leader who shares our vision of what can be achieved in the future. Steve has a terrific team around him and an organisation that has rediscovered its self-confidence. ” Pennycook will remain on the payroll, however, as he is being retained as an adviser for a fee of £20,000 a month. The role will be focused on the fate of the mutual’s 20% stake in the loss-making Co-op Bank. Concerns about the bank’s future have intensified in recent days after it announced that its capital ratio, a key measure of financial strength, would fall below 10%.
Murrells said: “All the signs are that consumers are looking for a different type of business, one that looks after them and their communities and I truly believe that the Co-op is that business.” Leighton described the handover to Murrells, who previously ran Tesco’s One Stop convenience chain, as a “classic piece of succession”. Pennycook said his next career step would involve “going plural” – a phrase popularised by Leighton in the 2000s, which refers to building a career out of multiple directorships.
Pennycook first signalled plans to build a portfolio career when he resigned from Morrisons in 2012. He joined the Co-op as an interim finance director in the summer of 2013, but stepped up in 2014 to lead the group after Euan Sutherland quit, following the leaking of details of his £6.6m two-year pay package to the Observer.
“This time I mean it,” joked Pennycook, 52. “If I had 10 years of executive life ahead of me, I would want to do that with the Co-op. This is the Co-op’s time, but it is not the time for me to do another long stint as an executive.”
The Co-op said Murrells’ pay package would remain the same despite the promotion. He earns a salary of £750,000 a year, but also participates in annual and long-term incentive plans that can each pay out up 100% of his salary.
Co-op members used a 2015 executive meeting to protest against high executive pay, and last year, Pennycook won plaudits for asking for a 60% cut in his multimillion-pound pay package. He agreed to cut his basic salary from £1.25m to £750,000, which kicked in last summer, but he will no longer be around to work for the lowered bonus thresholds that came into effect in 2017.
Pennycook is leaving as the Co-op looks to move on from its troubled financial past. Murrells is tasked with shaping the group’s next steps as it looks to return to its roots by “championing causes” and “trading with an ethical heart and a social conscience”.
When Murrells took charge of the Co-op’s food business, it was struggling following the £1.57bn acquisition of Somerfield in 2008 and he set about reinventing it as a convenience chain, shedding many of the supermarkets it had acquired, a shift that paid off.
However, discount rival Aldi overtook the Co-op to become the UK’s fifth-largest grocer on Tuesday. Despite this, Co-op sales have risen by 2%, well ahead of its larger rivals, continuing a run of growth stretching back to July 2015, helping it maintain a 6% market share.
Murrells said he was not concerned about supermarket league tables. “That’s not what we do,” he said. The Co-op had been closing more stores that it was opening in a drive to become more efficient, he added.
Leighton said: “Steve has transformed our food business and put it back at the heart of communities across the country. His leadership has seen the Co-op consistently outperform the market in food and he is the right and unanimous choice to now take the whole group forward for the next phase of our transformation.”