Mutuals are wonderful things and I am a huge supporter but the Co-Op has got to watch out. If it does not steady the ship it will start to founder. And once again the regional board members are not keen to accept the restrcturing plan.
To misquote Oscar Wilde to lose one man who was asked to sort the troubled mutual out – [chief executive Euan Sutherland] - and then lose another in a matter of weeks [this time key director Lord Myners] smacks of a rudderless organisation. It could mean it does not pay the £383 million it owes as part of the bank’s ongoing recapitalisation programme, and potentially a lot more.
I stress that I wish the Co-Op well. But it has lost over £2 billion and is not listening to those who could actually save it. The way Sutherland was dealt with was totally wrong, and the Co-Op members should be furious with their board members. If the mutual does not sort itself out it will need to go cap in hand to shareholders to raise the additional money owed, and see the Group’s current 30% stake diluted further. The remaining 70pc of the Bank’s shares are owned by a number of debt and hedge funds.
Myners announced last week that he is to leave the board of the Co-op Group at the annual meeting in May, when his proposed corporate governance reforms will be voted upon.
The reforms propose the creation of a two-tier board structure and the recruitment of City-style non-executive directors - but at last week’s board meeting all regional board representatives are understood to have rejected the reforms. The probolem is that medecine never tastes nice.
The rift threatens to derail the restructuring process initiated by Mr Sutherland on his arrival in May 2013. The sad reality is that this is a mutual which has been poorly mismanaged for some time, and the regional directors need to recognise that if they continue to reject the rescue plans there will be nothing left to salvage. And that would be a tragedy, because what we do need are well run mutuals. For too long that has not been a fair description of the Co-Op.
You bring in people to turn something around and then ignore and obstruct them. Not clever. It is like going to the doctors and telling them they got the diagnosis wrong, or buying a dog and barking yourself.