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Co-operative Group chief executive Euan Sutherland offers to resign Co-operative Group chief executive Euan Sutherland tenders resignation
(35 minutes later)
The Co-operative Group was thrown deeper into crisis on Tuesday after the new boss Euan Sutherland threatened to resign in the face of opposition to his reforms for the mutually owned chain of supermarkets, funeral homes and banks. The Co-operative Group was thrown deeper into crisis on Tuesday after the new boss Euan Sutherland tendered his resignation in the face of opposition to his reforms for the mutually owned chain of supermarkets, funeral homes and pharmacy chains.
Sutherland offered to resign in a letter to the chair Ursula Lidbetter – herself promoted once the bank's problems were exposed – on a point of principle that the group was too difficult to govern. Sutherland is said not to have turned up to work on Monday and instead offered to resign in a letter to the chair Ursula Lidbetter – herself promoted in the fall-out of the crisis at the banking arm – on a point of principle that the group was "too difficult to govern".
The board convened a late night telephone conference call to agree to recommend changes to its management structure to give Sutherland a seat on the board in a more conventional style for a major company. The board convened a late night telephone conference call to agree to recommend changes to its management structure that would have given Sutherland a seat on the board in a more conventional style for a major company's chief executive.
The resignation of the 45-year-old former boss of B&Q came after he used Facebook to criticise leaks of his £3.6m pay deal to the Observer last weekend. He took the helm on 1 May – just as the scale of the problems inside the bank were being uncovered – and claimed that "an individual or individuals" were determined to undermine him.
If Sutherland does go, it is unclear what the scale of his pay-off would be – but he was on course to receive £6.6m over two years.
Currently the board is made up of 20 elected members from the Co-operative movement and an independent member – Lord Myners, the former City minister – appointed last year when the scale of the problems at its bank first emerged.Currently the board is made up of 20 elected members from the Co-operative movement and an independent member – Lord Myners, the former City minister – appointed last year when the scale of the problems at its bank first emerged.
Myners is in the process of drawing up a series of proposed changes to the governance of the group and is due to publish them next month while a review by Sir Christopher Kelly into the group's problems is also to be published shortly.Myners is in the process of drawing up a series of proposed changes to the governance of the group and is due to publish them next month while a review by Sir Christopher Kelly into the group's problems is also to be published shortly.
Sutherland threatened to quit after using Facebook to criticise leaks of his £3.6m pay deal to the Observer last weekend. Sutherland, who took the helm on 1 May after leaving B&Q owner Kingfisher, said that "an individual or individuals" were determined to undermine him. While the group board may have voted to make changes to its structure, the regional board of the complex organisation also needs to approve any changes, which could still be difficult to achieve.
While the group board may have voted to make changes to its structure, the regional board of the complex organisation also need to approve any changes, which could still be difficult to achieve.
At a meeting two weeks ago in Manchester, where Co-op is headquartered, the group's 100 senior regional elected members are thought to have been briefed by Myners. He is said to have criticised the board, frustrating many of those present.At a meeting two weeks ago in Manchester, where Co-op is headquartered, the group's 100 senior regional elected members are thought to have been briefed by Myners. He is said to have criticised the board, frustrating many of those present.
When he was appointed senior independent director last year, there was speculation Myners was being lined up to be the next chairman – an independent one rather than one from within the co-operative movement.When he was appointed senior independent director last year, there was speculation Myners was being lined up to be the next chairman – an independent one rather than one from within the co-operative movement.
He is thought to have considered recommending that the board comprise an independent chair and also include executive directors – but also looked at the idea of a German-style supervisory board and management board set-up. He is thought to have considered recommending that the board comprise an independent chair and also include executive directors – but also looked at the idea of a German-style dual supervisory board/management board set-up.
There is thought to be resistance among some members to reducing the influence of "democrats" from a group that can trace its roots back to the Rochdale pioneers in 1774. There is thought to be resistance among some members to reducing the influence of "democrats" from a group that can trace its roots back to the Rochdale pioneers in 1774 with one source with knowledge of the group saying it would be "disingenuous to say there aren't people already uncomfortable with the changes".
Sutherland and seven of his top managers are to controversially receive retention deals – essentially guaranteed bonuses – for 2012 and 2013. He has been planning to announce changes to his top management team on Monday. "Euan wants it his way or nothing and that isn't how the Co-op works. I have a degree of sympathy with him but not to the extent that we undermine what has been here for 160 odd years. It is a coming together of people – it's a co-operative. You need different leadership skills in a co-operative than at a plc, where you are just the man. There's more selling than telling in the Co-op," the source said.
"What we have here is a clash of cultures between plc people and the Co-op people. Euan is a plc animal and he is used to responses on a timescale and of a type that the Co-op isn't used to. We have tried this in the past to bring people in from outside at a senior level and it has never worked. Because they have not grown through the culture they try to make the beast dance in a way that the beast doesn't want to dance," according to the source.
Controversially Sutherland and seven of his top managers are to receive retention deals – essentially guaranteed bonuses – for 2013 and 2014. As recently as Sunday he had been planning to announce changes to his top management team next Monday, including the promotion of finance director Richard Pennycook to chief operations officer.
Sutherland joined as the bank's capital shortfall was uncovered, sparking a battle with bondholders, including US hedge funds, which has left the group with just a 30% stake in the bank. The Co-op's reputation was further damaged when Paul Flowers, chairman of the bank and deputy chairman of the group, was alleged filmed buying illegal drugs.Sutherland joined as the bank's capital shortfall was uncovered, sparking a battle with bondholders, including US hedge funds, which has left the group with just a 30% stake in the bank. The Co-op's reputation was further damaged when Paul Flowers, chairman of the bank and deputy chairman of the group, was alleged filmed buying illegal drugs.
The group, which is on track to report £2bn of losses on 26 March, declined to comment.The group, which is on track to report £2bn of losses on 26 March, declined to comment.