Co-op needs to bring in top-class chiefs from outside, says Myners: Former Labour minister welcomes compromise Board needs to be on par with major competitors
(Guardian (UK) Via Acquire Media NewsEdge) The troubled Co-op group must now bring in a top-class chairman and chief executive from outside the company, Lord Myners warned, after members backed the bulk of his proposals to reform the mutual business.
The City grandee, who this year published a damning report on the governance of the group following a pounds 2.5bn annual loss, welcomed Saturday's vote and insisted that the commitment to reform must not falter.
Myners, who was formerly a government minister and chair of the Guardian Media Group, publisher of the Guardian, said: "It's a serious step forward and I am pleased to see a progressive solution was backed. But it is only part of the journey.
"The key thing now is to respect the principles that underlie my report. In particular the Co-op needs to create a board that is on par with the board's major competitors. This is not about ticking boxes, it's about the spirit in which they approach executive appointments. It has to be done in an open and transparent way, but [it's] not good if decisions are made in the equivalent of an old smoke-filled room. The big question now is: can the Co-op recruit the kind of top executives such as a retiring chief executive of a Unilever or of another major company?"
His warning comes before this week's interim financial figures, which will show a big improvement in the position of the Co-op group, which has just sold off its farm and pharmaceutical assets to raise cash. Myners' comments follow speculation inside some parts of the Co-op movement that Richard Pennycook, the group finance director, and Ben Reid, a former group board member who is chief executive of Midcounties Co-operative, are being lined up for the chief executive and chairman jobs.
Pennycook joined the 150-year-old Co-op from Morrisons supermarket; Reid previously offered to take on the chief executive post at the Co-op group after the resignation of the chief executive, Euan Sutherland, this year.
A spokesman for the mutual insisted that no decisions had yet been made and that the new chairman and chief executive would be chosen purely on the basis of talent.
"We are searching for the best candidate . . . the chairman will be completely independent," the spokesman explained.
The reforming vote took place at a specially convened general meeting in Manchester, at which 83% of votes were cast in favour of a resolution proposed by the board and backed by the executive team. Among other measures this change reduced the size of the ruling Co-op board from 20 to 11 persons, but it left in place three seats to be filled by those elected by the wider Co-op membership.
Myners wanted the whole board to be filled with businessmen and women who could contribute relevant experience, as part of an attempt to make sure the Co-op was run more like a traditional company.
In his 180-page review of the Co-op issued in May, Labour's former City minister described a "dysfunctional" board in which some directors did not know the difference between debits and credits, and were "clearly out of their depth when financial concepts and terminology are used".
The old board was made up of 15 lay members, including an engineer, a plasterer and a retired headteacher.
Myners expressed astonishment that a group with 8 million members and 100,000 staff at the time could have run up debts of pounds 1.4bn and reported such high annual losses.
He believed the recent sale of the group's 774 pharmacies to Bestway for pounds 620m and its 15 farms to the Wellcome Trust health charity for pounds 250m had been good transactions that relieved the concerns of banks lending money to the Co-op.
But the former government minister said the retail arm of the Co-op - placed at number five behind Tesco, Sainsbury's, Asda and Morrisons - was under "serious pressure" and only protecting its already comparatively low profit margins by losing market share.
"There is still a lot to be done, but it would be churlish to express anything other than pleasure for the progress so far," he said.
Percentage of votes
cast at the Co-op's special meeting in Manchester approving the board's proposals for modernisation
Former City minister Lord Myners warned the Co-op's executive appointments needed to be transparent and high calibre Photo: Christopher Thomond for the Guardian
(c) 2014 Guardian Newspapers Limited.
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