Salisbury JournalLord Myners to unveil Co-op reforms (From Salisbury Journal)

If you have a story call our newsdesk on 01722 426511 or email us. To advertise call 01722 426500.

Lord Myners to unveil Co-op reforms

Salisbury Journal: The Co-operative Group announced record annual losses The Co-operative Group announced record annual losses

Former City minister Lord Myners is this week expected to publish long-awaited proposals for sweeping changes to the governance of the Co-operative Group, which recently announced record annual losses of £2.5 billion.

It will come days after the running of the food-to-funerals mutual was sharply criticised in a review by Sir Christopher Kelly into the near-collapse of its banking arm - a report which backed the need for change.

Sir Christopher's damning conclusions appeared to strengthen the hand of those who want to shake up the group's democratic structure - but have faced bitter resistance which saw the departure of chief executive Euan Sutherland earlier this year.

Lord Myners is expected to call for the abolition of the group's 21-member board to be replaced by a slimmed-down "plc-style" body to take commercial decisions.

He has rejected the description, claiming his proposed board would be far more accountable than that of any listed company while other reforms would place increased power in the hands of its employees and eight million members.

The peer has pinned the blame for the disastrous losses at the group on former managers "who were allowed to run amok like kids in a sweet shop".

He said in a recent article in the Daily Mirror: "They bought up businesses willy-nilly - from Britannia Building Society to Somerfield supermarkets - and made catastrophically inept decisions over and over again. In the process they crippled the group with huge debt."

Regional membership boards and independent societies that currently hold sway in the group are reported to be unhappy about the Myners proposals.

But in an interim review published in March, he said the group must take urgent steps to reform a "massive failure" of governance or it will go bust.

The group has already set out details of a resolution based on measures drawn up by Lord Myners that will be put to its annual general meeting on May 17

Further backing for reform came as interim chief executive Richard Pennycook published annual results last month, the worst in its 150-year history.

He painted a picture of staggering mismanagement and chaotic governance at the group which meant even its own board was unaware of its £1 billion-plus debt mountain or that it was paying for 650 properties it did not need.

The group's massive losses for 2013 were mainly caused by the debacle at its banking arm which was picked apart in Sir Christopher's report last week.

Sir Christopher said: "I have no doubt at all that the methods used over the last few years to appoint members to the board of the Co-operative group and its subsidiaries have led to serious failures in relation to oversight and governance of the bank.''

The bank had faced near-collapse last year after the discovery of a £1.5 billion hole in its balance sheet, and had to be rescued by bondholders in a move that saw the group's stake reduced from 100% to 30%.

There is speculation that the cash-strapped group will see its holding in the bank fall still further when details of a £400 million rights issue are announced within the next seven to ten days.

It has admitted it will have to go to its lenders if it wants to put in a further £120 million that will be needed to preserve the size of the stake.

But debts at the end of last year stood at £1.4 billion and the Co-op's backers are already keeping a close eye on the progress of bitterly-contested reform plans which the group's leadership insists are vital for its survival.

According to the Sunday Telegraph, the Co-op will give up most of its rights to the fund-raising but do enough to retain a holding of more than 20% in the bank - and avoid the possibility of losing any effective control over it.

If the stake in the bank falls below 20%, a guarantee that it must uphold its ethical cooperative values will no longer stand though the business can choose to keep it.

click2find

About cookies

We want you to enjoy your visit to our website. That's why we use cookies to enhance your experience. By staying on our website you agree to our use of cookies. Find out more about the cookies we use.

I agree