The Co-operative Group, which has faced criticism in recent months for problems in its banking division, is set to be put under further scrutiny after documents revealed its most senior staff will be given pay rises and lucrative bonuses.
The news comes after it emerged in February that the group was considering selling parts of its business to make up for an expected 2013 loss of around £2 billion. It said this was “part of the wider strategic review” it was conducting across the entire Co-op Group.
The measures are also partly as a result of a turbulent year in the Co-op’s banking division, which revealed a £1.5 billion shortfall in its balance sheet in June – and a subsequent rescue plan. It floated on the stock market for the first time in its history and is now 70% owned by outside investors, some of which are hedge funds. The bank insists its ethical policy remains intact.
The Co-op’s reputation was damaged further when the bank’s former chairman Paul Flowers became embroiled in a drugs scandal.
Despite all this, “private and confidential” documents seen by the Observer allegedly suggest that senior employees could be in line for pay rises and large bonuses.
Euan Sutherland, the group’s chief executive, will get a £1.5m salary and receive a £1.5m retention payment, which with extras will mean he will have earned £3.66m for 2013. In contrast, his predecessor Peter Marks got £1.3m in total in 2012. A number of other senior figures will receive six or seven-figure pay packets.
The remuneration packages are justified because “the [Co-op’s] executive agenda is possibly the most complex one facing a large business in the country today”, the documents apparently say.
The Observer’s revelations are set to further stoke the executive pay debate. At the end of February, the Royal Bank of Scotland (RBS) revealed its employee bonus pot was worth nearly £600m – despite the bank posting losses of over £8 billion for 2013. RBS said this was because it needed to retain the best staff in order to truly turn its fortunes around.
Meanwhile, a study of the financial services industry found last week that 28% of firms expect to pay higher bonuses in 2014.