Peter Marks: Co-operative Group democracy needs to change

The former Chief Executive of the Co-operative Group has blamed the organisation’s board and democratic structures for failures within the Co-operative Bank.

The former Chief Executive of the Co-operative Group has blamed the organisation’s board and democratic structures for failures within the Co-operative Bank.

In presenting evidence to the Treasury Select Committee, as part of its investigation into the collapse of the deal with Lloyds TSB, Peter Marks said it was the running of too many businesses that allowed the Group to lose focus.

Mr Marks, who departed from the Group in May, said it was “tragic” and “sad” that the Group’s ownership in the Bank is due be set at 30 per cent.

Though he said this scenario was inevitable due to the Group’s wide-ranging businesses across many sectors. He commented: “There is a degree of inevitability because it was trying to stretch its capital across too many businesses. I don’t know of any other businesses that tries to be a major bank, a major food retailer, a major funeral services provider, a pharmacy chain, a motor group chain, a legal services business, a security business, a property business — with limited capital resource how can you do that in today’s world? This crisis will be beneficial to the co-op in making it focus on what its good at.”

The Bank’s capital shortfall of £1.5 billion was only realised earlier this year, according to Mr Marks. He added that the Group could “survive” in financial services, but to be a serious in this sector it needs to sell all its other businesses and focus on the bank.

He said the democratically elected board has “emotional ties” to businesses and it was “difficult” during his period as Chief Executive for the Group to make “big strategic decisions”. In an effort to focus the business, Mr Marks said he once suggested selling off the farms businesses, which would have raised an estimated £100 million. He told the select committee: “These are things we discussed in the group boardroom on many occasions. The problem with the governance of the Group is that because you have all these constituencies around the table — 20 of them — and they all have emotional ties to various businesses.

“It’s very difficult to get them to make big strategic decisions, like for instance, selling farms and focusing on core businesses, or one core business. If I’ve failed in anything, I think I've failed to get the Group to consider that.”

Mr Marks added: “I was warning them that they really needed to focus on less businesses, they were stretching their capital and still do over too many businesses.”

He explained that being a chief executive in a co-operative is a “very different” role to that of a chief executive in a PLC. He said his role was “to try to persuade the board with regards to strategy” and that he nominated discussions in the boardroom on his views of the democratic structure.

Mr Marks said the failure of the Co-operative Bank was a “tragedy”, but added: “In many ways it could be seen as a good thing, because in actual fact it will force the co-op to focus on less businesses and not stretch its capital the way it has done.”

When asked by the committee if the movement’s democratic structure needs to change in the 21st century, Mr Marks said: “Yes it needs to change.”

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