‘Shocking’ debt and ‘reckless’ deals have left the Co-op in crisis, warns new director Financial guru Lord Myners spent three months analysing Co-op Group He blasts leadership and boards lack of business and financial knowledge Reckless attitude worse than culture at banks pre-2008 crisis, he says Calls for change in leadership and reinstatement of democracy By EMILY KENT SMITH PUBLISHED: 09:40, 15 March 2014 | UPDATED: 13:06, 15 March 2014 10 shares 26View comments The future of the scandal-hit Co-operative Group is in crisis today after it emerged that the company has been weighed down by with debt and riddled with bad governance. Financial expert Lord Paul Myners has spent the past three months looking at how the Group is run. In a scathing report on the state of the company the former Financial Services Secretary branded the organisation reckless. The Labour peer warns that the company has been run with a dealmaking mindset by undemocratic board members with limited business knowledge. +4 Lord Myners, who was the Financial Services Secretary during Gordon Browns Labour government brands the Co-operative group as reckless. Lord Myners describes the debt and governance standards as worse than the banking culture before the 2008 credit-crunch Lord Myners says that unless governance at the company is radically changed, the group could run out of the money to keep its businesses afloat. He says that the company had been in decline for more than half a century and blamed the system of governance for its demise. In an interview with The Guardian he says: The rate of deterioration has increased over the last half dozen years because of the recklessness of the strategy being pursued and supported by the board. More... This beats work! Councils jolly in Cannes with sun, sea and booze as they talk property deals on Riviera Boris Beckers Spanish villa to be confiscated and auctioned off for £6million after he failed to pay £340,000 builders bill Mr Myners adds that the Co-operative Group, which prides itself on values such as openness and social responsibility, was not a democratic organisation. The group has been engulfed in scandal over the past 12 months. In November, the Mail on Sunday revealed former non-executive director of the Co-Operative bank, Paul Flowers, had allegedly purchased cocaine and crystal meth. Mr Flowers, formerly a Methodist minister, had resigned from the group six months prior to the scandal, over criticism of alleged lavish expenses. Another high-profile resignation occurred earlier this week when Euan Sutherland, chief executive of the Co-operative Group stepped down. Lord Myners described Mr Sutherlands departure as tragic and said that he was responsible for keeping Co-op Bank afloat during the economic crisis. Just days before his resignation on Monday, Mr Sutherland had lashed out on Facebook against fellow board members for leaking details of his £3.7 million pay package. +4 +4 Former chairman of the Co-Operative bank, Paul Flowers (left) stepped down in June 2013. Months later, he was allegedly caught on camera purchasing cocaine and crystal meth. The company also lost its chief executive earlier this week when Euan Sutherland (right), who Lord Myners credits for keeping the company afloat during the crisis, stepped down. Lord Myners described Mr Sutherlands departure as tragic Lord Myners warns that the future of the retail group, funeral home, pharmacy and farming arm of the company, would all suffer if the groups culture did not radically change. He blames the Co-operative banks demise on its directors, who he says allowed senior managers to squander billions on corporate transactions. Poor decisions were made because of the directors lack of business knowledge, he adds. Elected directors at the company include a plasterer, a lecturer, a tax official a nurse and a farmer. Lord Myners describes deals such as the takeover of the Somerfield supermarket chain and the Britannia building society as destructive. The Britannia takeover left the Co-op bank with £1.5bn of debt which resulted in the bank being bought out by a U.S. hedge fund. The purchase of both companies have not boosted the value of the business, Lord Myners believes. +4 In a report on the group released this week, Lord Myners concluded that the Co-operative had been left in a vulnerable position because of its governance In a report on the group released this week, the director concluded that the Co-operative had been left in a vulnerable position because of its governance. Although the Co-operative is owned by its employees, Lord Myners say that they have no input in decisions made by managers or by the companys board. Despite the criticism, he describes Mr Sutherlands resignation as tragic and said that the groups survival had been down to his governance. Lord Myners, who has had experience as ex-chairman of Marks & Spencer and of the Guardian Media Group says that the companys governance was the worst that he had witnessed during his career. He has spent the past three months analysing the organisations structure - but the payment for his work will total just £1. He hopes that by restructuring the company, the Co-op will become a more democratic workplace. Lord Myners also plans to ensure that senior roles are held by individuals with business experience. DEMISE OF THE CO-OP: A SUMMARY OF THE YEAR THAT ROCKED THE GROUP January 2013: Co-op admits to selling burgers contaminated with horse meat. Four out of 17 burgers tested positive for equine DNA. June 2013: Paul Flowers, then chairman of Co-op Bank, stood down from his £132,000 a year role. The company launched an inquiry into his lavish expenses claims. November 2013: Co-operative Group chairman Len Wardle resigns after six years in his position. Mr Wardle led the board when Flowers was appointed. In a statement, Mr Wardle admitted that the revelations surrounding Paul Flowers had raised serious questions for both the Bank and the Group. November 2013: Paul Flowers exposed allegedly purchasing cocaine by The Mail On Sunday. Details later emerged about the former Methodist minister including allegedly filing false expenses claims when he was chairman of charity Lifeline. March 2014: The Observer revealed that the groups chief executive Euan Sutherland received a salary of more than £3.5 million. March 2014: Mr Sutherland, stood down after 10 months in the job. He said that part of the reason for his resignation was the companys management structure. March 2014: Independent director Lord Myners blasts the Group for its reckless culture and poor governance. Read more: dailymail.co.uk/news/article-2581530/The-Co-op-crisis-warns-independent-director-Lord-Myners.html#ixzz2w36CKwA3 Follow us: @MailOnline on Twitter | DailyMail on Facebook
Posted on: Sat, 15 Mar 2014 16:19:54 +0000
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