A former deputy chair of the Co-operative Bank has questioned how the ‘co-operative alternative’ related to the purchase of 632 Lloyds bank branches.
In a series of emails, released as part of the Treasury select committee’s investigation into the Project Verde bid, Rodney Baker-Bates attempted to dissuade directors and executives from the Bank and Co-operative Group in going ahead with the transaction.
He said that although affordability was his key concern, he also questioned how the “co-operative alternative” fitted into the plan. In a message to Len Wardle (former Group chair) and Paul Flowers (former Bank chair), he said: “Does the concept of a ‘compelling co-operative alternative’ offer an economically sustainable alternative in two key markets (banking & food) where price and quality are key drivers: and what does that alternative mean to the customer on the shelf, at the counter, through the internet and on the telephone?”
He added that while he can articulate the co-operative alternative, he “would be hard pressed to express these persuasively in terms that would be substantially different from where our larger competitors aim to position themselves at the individual supplier, shop, branch or telephone conversation level”.
“If the Group, particularly in banking and food, is to prosper as a clear alternative then the customer needs to understand, agree and invest in that difference with every transaction not only as clear principles of Group & bank behaviour but as a practical and visible benefit at the transaction level,” he added.
He cited an example of where this difference has been understood by shoppers with competitors. Waitrose has been “highly successful in defining a unique and sustainable alternative in food retailing”, he said, looking at the example of how a “decrepit Somerfield” store bought from the Group has become Waitrose’s “busiest and most profitable smaller shop in less than three years”.
Looking at the Group board itself, Mr Baker-Bates said decisions and views were driven more by an “individual political agenda” than “open discussion of the economic alternatives”, as well as objective analysis.
He further criticised the board by saying it lacked “broad business expertise relevant to the aspirations and complexity of a major UK retail conglomerate”, especially in the area of finance.
Mr Baker-Bates added that a “clearly visible” and “privately expressed distrust of the executive management” existed, as well as deep divisions about the outcomes of the Somerfield acquisition and the Thomas Cook travel joint venture.
However, he was encouraged by the members of the Group board who appreciated the value of having independent non-executive directors (IPNEDs) during deliberations on Project Mars. He said “business understanding, informed discussion, debate and decision making at the Group board would be markedly improved by the inclusion of strong and experienced IPNEDs”.