Last week the Co-operative Group came under the spotlight again as Lord Myners, the man brought in to reform the businesses, resigned.

Last week the Co-operative Group came under the spotlight again as Lord Myners, the man brought in to reform the businesses, resigned.

Britain’s biggest mutual business has been caught up in various scandals this past year, including a £1.5 billion hole in its balance sheet and its previous chairman Paul Flowers being accused of taking class A drugs.

Myners was therefore brought in to look into the corporate governance of the mutual and write up proposals for a restructure.

The need for a review of its corporate governance structure has been a key focus for the mutual. Euan Sutherland – who walked out of the Co-operative Group as chief executive earlier this year – said when he left that the group was “ungovernable”. 

That comment showed how unusual the company’s board is compared to other British businesses of a similar size.

The Co-op board has 21 directors - twice the size of a typical Plc board - and beyond that there are a total of 56 decision making groups.

The mutual also has 28 area committees – which feed into seven regional boards – which then feed into the group board.

To address this issue the reforms proposed by Myners include ripping out the existing boardroom structure and replacing it with a Plc-style structure. While this has met criticism, it may be exactly what is needed to reform the mutual.

The present structure of the group, from an executive perspective, is extremely difficult to govern, mainly because there are so many different constituent parts to the mutual.

Plus, each region has representation on the board and each inevitably has different agendas and views. Too much power has been given to non-commercial stakeholders who most likely have their own interests at heart rather than the Co-op’s.

Furthermore, under the present governance structure, it is unlikely that the operational overhaul needed will be voted through.

Yet until the mutual recognises its unwieldy nature it will carry on performing inefficiently. In the long term, its liquidity problems could snowball, because third parties won’t want to invest until they feel confident that this capital will be used correctly to deliver real change the business and a healthy profit.

With these restraints, and the departure of Myners, the direction that this 170-year-old organisation will take remains uncertain.

However it is clear to me that the Co-op needs to overhaul its corporate governance and put a plan in place for the future.

Only then will it generate a sustainable business model and ensure that this much-loved institution continues to grace our high streets for many more years.

  • Dan Coen, director, Zolfo Cooper