Plans have emerged to double the wage bill for the Co-operative Group’s executive team to £12m a year.
“Private and Confidential” documents, prepared for the Group’s remuneration and appointments committee, were viewed by the Observer newspaper, which published the figures on Sunday 9 March. The documents recommend the wage increases due to the “complex” job the executive team faces and to keep them in-line with the size of the organisation.
Salary consultants New Bridge Street, which promotes “alignment with the market”, recommended a pay increase that would compare favourably with similar-sized FTSE 30 and FTSE 100-listed companies.
Chief executive Euan Sutherland will be paid a base salary of £1.5m, plus a retention payment of £1.5m. With other extras such as pension contributions, this figure is set to reach £3.66m. Former CEO Peter Marks received £1.3m last year.
Chief operating officer Richard Pennycook is set to receive a £900,000 salary, with a matched retention payment. Six other executives will be paid between £500,000-£650,000 with the same retention amount matched. In previous years, the executive team received between £200,000–£400,000.
The documents that suggest the pay levels state the packages are necessary because the “executive agenda is possibly the most complex one facing a large business in the country today”.
In a note to Group employees and elected members, Mr Sutherland blamed the media leak on a director set out to “undermine” the executive. Said Mr Sutherland: “It appears that, once again, the leak has come from our Group boardroom.
“We seem to have an individual, or individuals, determined to undermine me personally, my team and the rest of the Group board regardless of the uncertainty and disruption this causes to our 90,000 colleagues and our supportive members. Despite this, I am determined that we will see through the vital transformation of our business.
“The executive and board directors are working our way through significant changes made necessary by very poor decision making in the past. Along the way we are making sure that the widest possible consultation takes place and that rigorous debate and challenge is allowed and encouraged.”
He added that the remuneration report in still not finalised and will be published, along with the annual results, on 26 March. Changes to the executive team will also be announced on 17 March.
The documents seen by the Observer also mention that the Group’s chief human resources officer, Rebecca Skitt, who was appointed in February 2013, left last month with a pay-off totalling more than £2m.
In response to the remuneration leak, Labour/Co-op MP Chris Leslie and shadow chief secretary to the Treasury, said it was “disappointing”. He added: “I believe in mutuality, I believe in the co-operative principle. I happen to think that Co-op should be acting differently.
“They recently put out a questionnaire to the public about their objectives. I didn’t see in that questionnaire anywhere anything about ‘do you agree with extending high remuneration to senior executives’, so I have to say it’s a bit disappointing.”
In a statement, Group chair Ursula Lidbetter said: “Last year the Co-operative Group faced the biggest crisis in its 150-year history with the need to recapitalise its Bank. We saved the Bank, without recourse to the taxpayer and we are now embarking on the long and complex journey to revitalise the wider Group. That means reducing debt, improving performance and streamlining a business that had become grossly inefficient.
“It is against that backdrop that we recruited Euan Sutherland and a top team with the skills and experience needed at this crucial stage in our history, reflecting the necessity for change. The remuneration packages of our executives are in the middle of a range of comparable companies. This represents an increase on the pay of their predecessors to reflect the greater commercial, management and turnaround experience they are bringing to bear. Euan and his team have already made a significant contribution to the Co-operative Group and we are confident that they will continue to do so.”
In his apology to employees and elected members, Mr Sutherland added: “I wish I could promise you that this kind of occurrence will not happen again. You deserve to hear information in a proper, orderly and considered fashion. But we appear to have disaffected people who are determined to make life difficult and embarrassing for the Co-operative at a time when what we need most are professionalism and loyalty to the business.
“In a few weeks we will report large losses for the Group in 2013 and in April the inquiry by Sir Christopher Kelly into the Bank crisis will be published. These will bring further low points for us and the reputation of the Co-operative will take another hammering. But then we will be able to move forwards, first through Lord Myners’ report on our governance, and then in May we will have a much brighter story to share with you and with our members and customers as we unveil our new purpose and strategy.”