Lord Myners’ has labelled the Co-operative Group’s board as “manifestly dysfunctional” in his review into the governance structure of the organisation. He added that the group needed to urgently reform or else risk its value becoming “a lot less” than what members currently think it is.
Last month, the Co-op Group revealed “disastrous” losses of £2.5 billion, with many blaming the governance structure currently in place. The new report backs this up, stating that the present structure is “not fit for purpose” and adding that “deplorable governance failure” led to the near collapse of the group.
Myners, a former City minister, calls for radical reform and warns that without action the group’s level of debt will see its “autonomy and independence being strictly curtailed”.
He said, “There is no shortcut to recovery from its present weakened state. It will require retrenchment and some painful choices. Financial health can only be resorted through steady, step by step, rebuilding of the group’s profitability and repayment of its excessive debt.”
He called on elected members to support the reforms set out in the report and stated that they do not advocate the adoption of a plc model, as some of the report’s critics have claimed.
“Radical decisions on governance structure need to be taken very soon – and with resolution – if the Co-op […] is to be saved. The decision lies in the hands of the elected democrats”, Myners added.
The reforms focus on three areas, including ensuring that board members possess the skills and experience the role demands and that co-operative values and principles are embedded in the future governance architecture. It also states that all members of the co-operative should receive tangible benefits.
The Co-operative Group said it welcomed the comprehensive report. Ursula Lidbetter, chair of the group, commented, “The board of the group has made clear its commitment to far-reaching and fundamental reform of our governance.
“A resolution containing four key principles on reform is being put to members at a general meeting in May and we will build from there to ensure we put change in the right place. [The] report will be an invaluable contribution to that work.”
She added that it was “essential and urgent” that reforms take place in order to build a more effective organisation.
Lord Myners’ review follows a separate independent review carried out by Sir Christopher Kelly, which looked at the crisis at the Co-op Bank. It concluded that bad management and governance, along with a “culture of mediocrity”, led to the troubles the institution is experiencing.
The Co-op Group has already committed to putting in more than £200minto the bank this year and reports suggests that it now plans to sell some of its options to avoid having to put additional money into the struggling organisation.
Photo: The Co-operative Group