Editorial: Not much co-operation at the top of the Co-operative Group

At six-foot-six he was a towering breath of fresh air for the thousands of Co-operative Group employees who pined for change. And, for a while, co-op democrats inside...

At six-foot-six he was a towering breath of fresh air for the thousands of Co-operative Group employees who pined for change.

And, for a while, co-op democrats inside and outside the Group were in awe of a fresh change in management from Euan Sutherland; a renewed business focus.

But as will undoubtedly become clear in the Kelly Report next month, there is and always has been a deep divide between the elected board members at the Group and the management they appoint – a phenomenon not just exclusive to this co-operative.

Recent revelations from the Treasury select committee’s investigations, such as private emails from former Bank deputy chair Rodney Baker-Bates, highlight such a divide; and ex-CEO Peter Marks has talked of the same struggles.

It was a bold move for the Group board to break with Co-op tradition and appoint a CEO from outside the movement. But the decision was presumably grounded in the realisation of the need to be a more serious business. There was initially a sense of scepticism from many across the sector – although this quickly grew to relief, especially once the scale of the problems at the Co-operative Bank were unveiled in what, at the time, seemed like a weekly soap opera.

But an already battered board, that had watched the Bank fail on its watch and witnessed the difficulties of integrating Sommerfeld and Britannia, must have been at the height of paranoia. Particularly when the business they had so proudly helped to grow was being slowly dismantled and forensically analysed by a new executive team.

The BBC’s Robert Peston reported in his blog this morning that what tipped Euan Sutherland over the edge was the stream of leaks over the past few weeks. From the revelations about the potential sell-off of farms and pharmacies to news of his remuneration package and the leak of his resignation offer: Mr Sutherland believed he was being undermined specifically by one or more directors.

It will be difficult to know if indeed a director leaked the information; it could easily have come from elsewhere. But what seems to have been the motive behind the leaks is a belief that this will stop things moving quickly.

Co-operatives are member-owned business and, as such, careful and timely consultation is needed. So some must have felt things were moving too fast – but as a consequence, governance reform may be moving even faster than initially thought.

In further leaks from Robert Peston, he outlined that plans have been escalated to adopt a new governance structure. A dual board structure, with one exclusive management board and a supervisory board of democrats, is believed to be the favoured model.

Governance has played a significant part of the story of the Group’s troubles over the past 12 months. All reviews, and especially the Treasury select committee deliberations, point to apparent failures within governance. Although co-operatives are traditionally governed by non-executives, it is becoming more apparent that the bigger a co-operative is, the greater the expertise needed on the main board.

Director elections can be a lottery, so it seems that with talk around a dual board it is focusing on bringing in experts to run the business. Looking at the Rodney Baker-Bates emails, he recalls a conversation with a director that said they felt more at ease knowing some of this expertise (over the Bank) was helping with key decisions.

But, a dual board structure seems to be a step away from co-operative principles. The John Lewis Partnership model was once seen as an extreme step for a co-operative to take by including executives in its structure. Today, however, faced with a management takeover of a co-operative, the John Lewis structure seems like a sensible solution that would bring both executives and directors to the same table, to solve the same problems and to run the same business.

This may even be the first step to bring management and elected members closer together, and to solidify a relationship of trust that should have been unbreakable over the past ten months of Euan Sutherland’s reign.

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