Lord Myners has unveiled an update of his review of the Co-operative Group in which he hopes to achieve “radical reform of the Group Board”.

He said he also wants to ensure that the Group remains “fully in accord with its core co-operative values and principles”.

Myners opted to unveil his initial findings early because of the “considerable interest within and outside the Group”. The Co-operative was thrown into further crisis this week after group chief executive Euan Sutherland quit after details of his proposed pay packet were leaked to the press.

Myners said his review aims to develop a “reformed governance framework that simultaneously achieves three objectives”.

They are to:

  • Produce a highly competent and qualified Group Board with non-executive directors who possess the skills and experience to exercise leadership and effective oversight of executive management
  • Ensure that genuine co-operative values and principles are protected and securely embedded in the future governance structure
  • Ensure that as a customer-owned organisation, the interests of the entire membership are properly understood and promoted and their fundamental rights are respected

In the report he backs Sutherland.

“The past year has been traumatic for the Group. The massive losses caused by the near collapse of its banking subsidiary brought the entire organisation to the brink of failure. It was only due to the exceptional skill and tireless efforts of a new executive team, led by Euan Sutherland, that the Group survived. This near catastrophic loss by itself dramatically highlighted the need for the most rigorous examination of the Group‟s governance.”

He added he was “deeply troubled by the disdain and lack of respect for the Executive team that I have witnessed from some members of the Group Board”.

He stated that The Co-operative Group’s three-tier system of elected member representation “has consistently produced governors without the necessary qualifications and experience to provide effective board leadership and to monitor, challenge and provide guidance to management”.

He added: “Indeed, it is clear to me that in recent years, the Group Board has spent far too much time on transactions such as Somerfield and Britannia that have been breathtakingly value-destructive.”

Myners recommended that the Co-op ensures that in future “all appointments to the Group Board should be decided on the basis of objective criteria” determined by the need to fill specific skill gaps on the Board. Applicants for Group Board positions will, in addition, need to  demonstrate strong commitment to cooperative values and principles, Myners said.

He has also recommended the formation of a National Membership Council (NMC) to act as the guardian of the Group’s commitment to co-operative values and principles and to ensure that these are reflected in its corporate vision, strategy and operating practices. It would also act as a consultative body that would regularly engage with the Group Board and hold it to account.

Myners also wants to strengthen the rights of ordinary members. He pointed out that at present ordinary members do not have the right to attend Annual General Meetings or vote to elect or re-elect Group Board directors. “In my report, I will focus on the fact that The Co-operative Group does not function as a real democracy,” he said. “Ordinary members have very little power.”

He also stated that a “fundamental concern” is that this lack of effective governance exists in a situation where the Co-operative Group’s core business is in food retailing, “a sector with high competitive intensity”.

Myners’ proposals will be finalised “over the next several weeks” and set out in detail in the forthcoming Phase One report to be put forward at the 2014 AGM.

Myners said: “Until the outcome of these constitutional changes is decided, it is my opinion that it would be inappropriate and premature to proceed with the appointment of a new CEO, in view of the risk that, while these governance issues remain unresolved, The Co-operative Group will be unable to attract applications from best-in-class retail executives.”