Co-op Group delays full-year results as it revamps management

http://www.theguardian.com/business/2014/mar/19/coop-delays-results-management-revamp

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The embattled Co-operative Group has been forced to delay its full-year results, it admitted on Wednesday, as it announced a management overhaul in the wake of the sudden resignation of chief executive Euan Sutherland.

The chain of supermarkets, pharmacies and funeral homes, which is on course to report losses of at least £2bn, also revealed it intended to hold a special meeting of its members in June or July to vote on proposals by Lord Myners for a radical overhaul of its complex management structure.

Sutherland quit a week ago after just 10 months in the job, after details of his £6.6m two-year pay deal were leaked to the Observer along with revelations that his newly assembled management team was also being offered "retention" packages for 2013 and 2014.

It is understood that the remaining members of the team, including Sutherland's temporary stand-in, Richard Pennycook, are considering whether to accept those controversial retention deals, which were agreed by the board last July in the midst of the battle to stop the Co-op bank collapsing.

Pennycook, the respected former finance director of supermarket chain W M Morrison, was left to front the management overhaul that Sutherland had set in train before his resignation and insisted the changes would mean the group was "better positioned to tackle the complex issues we face".

He is eventually to become chief operations officer, the group said on Wednesday, and according to the Observer leak he would receive a £900,000 salary and be entitled to a £900,000 rentention package.

The results, expected to include a deep write-down of the value of the Somerfield supermarket business which has left the group saddled with debt, will now be presented on 17 April instead of 26 March to give Pennycook more time to prepare.

The results of the bank – of which the group owns just 30% after least year's £1.5bn rescue fundraising – may also be delayed.

The Co-op confirmed for the first time that Rebecca Skitt, the personnel director, had left but would not comment on the leak that she had been handed a £2m pay-off. Such information would be expected to be included in the annual report, also now scheduled for publication on 17 April.

The search for a full-time replacement for Sutherland – hired from Kingfisher where he ran B&Q – is being delayed until agreement can be reached on the changes proposed by Myners, who was brought in three months ago as non-executive director. Myners wants the board – currently comprising him and 20 members of the Co-operative movement – to be transformed into one more akin to a plc, with a chief executive, independent chairman and non-executive directors. The views of the 7m members would then be represented by a national members council.

But Myners said in a webcast this week that he was facing resistance to his changes and had been told his election to the board at the annual meeting in May would be resisted.

Myners, who was chairman of Guardian Media Group until his elevation to the Lords to become City minister during the banking crisis, has also called for an audit of "controls over money spent on social goals and given to affiliated bodies".

An internal investigation is already underway into some small-scale issues. Myners had told the webcast that he had found no evidence of fraud, but had found poor record-keeping and poor management and a conflict of interest.

The management committee now includes individuals brought in by Sutherland when he quit Kingfisher – Alistair Asher, the City lawyer who is now general counsel; Claire Davies, who has joined as group secretary from Lloyds Banking Group; Paula Kerrigan who is chief strategy officer; and Nick Folland, head of external affairs. Rod Bulmer, who had been a stand-in boss at the bank during the height of last year's crisis, is to join the group in the new role of chief executive of customer services while Steve Murrells remains in an enhanced role running the supermarket arm. Skitt is being replaced by the internally promoted Sam Walker.

Three former members of the executive committee are losing their seats at the table but will remain with the group although Mark Craig, a 30-year veteran, is losing his job as director of Co-operative relations and is expected to receive a sizable payoff.