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Co-op Group to continue overhaul despite Lord Myners' resignation Co-op set to reveal how it lost £1.3bn
(about 5 hours later)
The embattled board of the Co-operative Group is pressing ahead with the dramatic overhaul of the loss-making business proposed by Lord Myners even though the former City minister has resigned from his post as senior independent director. The scale of the challenge facing the Co-operative Group will be underlined on Friday when its banking arm reveals how it crashed £1.3bn into the red last year.
The Group confirmed Myners' departure in just a month's time after a dramatic two day board meeting. The chain of supermarkets, pharmacies and funeral homes said Myners' is to leave at the annual general meeting on 17 May. The loss will be revealed as the Co-op Group battles to heal internal divisions caused by the reforms being proposed by Lord Myners, who resigned on Wednesday in the midst of a fractious two-day board meeting.
His shock resignation on Wednesday night after just four months in the job was the result of sustained criticism of his reforms to scrap the current boardroom structure and replace it with one akin to a plc . But the chair of the Co-op, Ursula Lidbetter, said the board still hoped to drive through his reforms. Myners – parachuted in to the troubled chain of supermarkets, pharmacies and funeral homes only in December – resigned after just four months in the role following criticism of his proposals to scrap the current boardroom structure and replace it with one akin to a stock market-listed company.
Myners – who had admitted he faces resistance to his plans – said he was pleased he would be able to complete his review and that it would be put to members. "I am confident that there is a good future for the Co-operative Group if it commits to doing the right things on governance and leadership." At the end of the tumultuous board meeting, the chair of the Co-op, Ursula Lidbetter, attempted to demonstrate a united front. She said the board still hoped to drive through the Myners reforms and would bring forward the date for the vote on his plans to next month.
His proposals, which are to published in full later this month, are to be put to a vote at the AGM, rather than a specially-convened meeting a few months later as previously announced. "We are committed to reforming our governance and know that Lord Myners' report will provide invaluable stimulus for the changes we need to make," she said.
But the acceleration of the timetable may infuriate those members and owners of the Co-operative who have been calling for more time to debate the future of the UK's largest mutual. Myners, who has warned the group could collapse if his reforms are not endorsed by the 8 million members and array of independent societies that own the business, will stay until the vote at the annual meeting on 17 May. "I am confident that there is a good future for the Co-operative Group if it commits to doing the right things on governance and leadership," Myners said.
It also flies in the face of outspoken remarks by the Midcounties Co-op which has pledged to vote against the reforms, one of the independent societies which together control 22% of the votes at the AGM. The chief executive of the Midcounties, Ben Reid, sits on the board of the Co-op Group. But the departure of Myners – who had been cited as potential future chairman of the mutual – was described as a "worrying sign" by the Institute of Directors, a business lobby group. "During the last few years, the board of the Co-op has proved itself to be a poor steward of the organisation's resources," said Roger Barker, the IoD's director of corporate governance.
Myners, who was chairman of Guardian Media Group until 2008 when he resigned to join the Labour government, was appointed in December when the Co-op's bank unit was mired in the scandal surrounding allegations of drug buying by its former chairman Paul Flowers. Myners rushed out a rough outline of his reform proposals last month in the wake of the shock resignation of chief executive Euan Sutherland following a leak of his £6.6m two-year pay deal.
Myners was named as the only independent non-executive director on the board which also includes five members from the independent societies and 15 from the seven regional boards, which ultimately represent the organisation's eight million members. But they provoked sustained criticism in their initial form. As recently as Tuesday the Midcounties Co-op pledged to vote against the reforms as one of the independent societies which together control 22% of the votes at the AGM. The chief executive of the Midcounties, Ben Reid, sits on the board of the Co-op Group. Myners was the only independent director on the board, made up of five members from independent societies and 15 representatives from the seven regional boards. The regional boards represent the views of 8 million members.
Lidbetter, the boss of the Lincolnshire Co-op, said the board was determined to push through reforms. Chairman of Guardian Media Group until 2008, when he resigned to join the Labour government, Myners was appointed in December when the Co-op's bank unit was mired in the scandal surrounding allegations of drug buying by its former chairman Paul Flowers.
"We are committed to reforming our governance and know that Lord Myners' report will provide invaluable stimulus for the changes we need to make. I would like to thank Lord Myners for the work he is doing to ensure The Co-operative Group is best placed to reform and, in due course, thrive," she said. The bank is now just 30% owned by the group after last year's £1.5bn cash injection from its parent and bondholders led by US hedge funds.
The board's backing for the Myners' proposalsfollows the sudden departure of Euan Sutherland, who quit as group chief executive a month ago in the wake of a leak of his £6.6m two-year pay deal. But the hasty publication last month of Myners' outline of his proposals – to tear up the boardroom structure and create a national members council to represent the members – sparked controversy. The focus will now turn to the bank and how its new boss – Niall Booker – is being paid. Part of the team assembled by Sutherland, Booker stunned the City last month by admitting the bank needed another £400m to cover the cost of misselling scandals.
As recently as Tuesday, the president of the Midcounties Co-op said his board would not back Myners' plans as they stood. The bank is expected to stress it is withholding pay from previous directors in an attempt to calm any fresh controversy over pay.
At a series of meetings over the weekend, the members of the regional boards who elect their 15 representatives to the Group board also voted off three of their representatives who had sat on the pay committee which ratified the payments to Sutherland and other members of his executive team. They are Steven Bayes, who was deputy chair, Patrick Grange and Liz Moyle. The group needs to decide if it can find another £120m to pump into the bank as part of its fundraising. Richard Pennycook, who is standing in as chief executive and himself receiving £900,000 of retention packages, told the Evening Standard. "We look forward to seeing the outcome of his review. I'm sure people will take its findings seriously."
Lidbetter was re-elected along with Mark Smith while five new regional representatives will join after the AGM. These are·Andrew Donkin, Bob Harber, David Morrow, Frank Nelson and David Smith. Myners will not be the only one to leave the board at the upcoming annual meeting as at a series of meetings over the weekend, the members of the regional boards who elect their 15 representatives to the group board also voted off three of their representatives who had sat on the pay committee that ratified the payments to Sutherland and other members of his executive team. They are Steven Bayes, who was deputy chair, Patrick Grange and Liz Moyle.
Lidbetter was re-elected along with Mark Smith while five new regional representatives will join after the AGM. These are Andrew Donkin, Bob Harber, David Morrow, Frank Nelson and David Smith.
Myners has a wide range of business interests and while a statement was being drawn up about his resignation at the Co-op another business he chairs, Nomad Holdings, was floating on the stock market with a view to making acquisitions.