Bonuses at Co-op are to be withheld
Heavy losses and doubts over reform of ‘snake-pit’
THE Co-op Bank is planning to withhold millions of pounds of bonuses still owed to former bosses who steered it to the brink of collapse, writesJames
Salmon.
Among those likely to be affected are Neville Richardson, the former Britannia boss, who took the helm of the Co-op Bank after its ill-fated 2009 takeover of the building society.
But the move is unlikely to defuse anger over huge losses and the pay and perks handed to the bank’s current chief executive Niall Booker.
Having delayed the publication of its annual report twice due to the chaos both at the lender and at the Co-op Group, the Co-op Bank will today finally publish its figures for last year.
It has braced members for a £1.2bn to £1.3bn loss after identifying £400m in costs linked to various mis-selling scandals.
Last month it announced a £400m emergency fundraising which would require the Co-op Group to inject £120m to maintain its 30pc stake.
But the pay and perks for Booker, the former HSBC executive parachuted in last summer to help plug a £1.5bn black hole in the bank’s finances, will be revealed today.
The bank is likely to face criticism if his package is similarly generous to those handed out to the bosses of the Co-op Group – including a £6.6m two-year pay deal awarded to former group chief executive Euan Sutherland.
‘OMNISHAMBLES’ was how Professor Andre Spicer of the Cass Business School summed up the sudden resignation of former City minister Lord Myners from the Co-op board.
The term, coined by the writers of political satire The Thick Of It, spread into the vernacular after it was used to describe the Coalition’s blundering ‘pasty-tax’ Budget in 2012.
Certainly the Oxford Dictionary’s ‘Word of the Year’ for 2012 would appear to be an apt description of the Co-op Group as it stumbles into yet another crisis.
Today the Co-op Bank, which is now majority owned by hedge funds after a rescue deal to plug a £1.5bn black hole in its finances, is expected to confirm it made a loss of £1.3bn last year amid a row over pay to the bosses drafted in to preside over the lifeboat operation.
It is a sign of just how desperate things have got at the Co- op Group, which still has a 30pc stake in the bank, that this almost pales into insignificance against even more pressing problems – namely, its very survival.
Barely a month since chief executive Euan Sutherland quit, after concluding the group was ‘ungovernable’, the Co-op confirmed yesterday that Lord Myners is heading for the exit.
His move came shortly after the Midcounties Co-operative – Britain’s largest independent co-operative society – said it would not be backing his proposals to overhaul the labyrinthine structure of the mutual. Sources said that Ben Reid, chief executive of the Midcounties, is so far the only candidate to throw his hat in the ring to replace Sutherland. ‘It is a snake-pit,’ said one. Lord Myners said he will stay on to try to push through his reforms, which will be revealed in full when the group publishes its annual report on April 17. This is expected to confirm a record loss for the 150-year-old mutual of more than £2bn. In a bland statement issued yesterday, the peer maintained a stiff upper lip, saying only he is ‘confident that there is a good future for the Co-operative Group if it commits to doing the right things on governance and leadership’.
The elected members of the group’s board have already signalled their support for his reforms, which were rushed out in draft form following Sutherland’s resignation. Myners is of the view that if these do not go through, the Coop faces inevitable decline.
But he has also made plain that he has faced stubborn opposition from the Co-op old guard. Thanks to the group’s arcane three-tier voting structure, Co-op’s regional board members and independent societies could block the overhaul, which i ncludes proposals to replace the group’s 20- strong board with a plc-style board.
The reforms require at least twothirds of votes cast for them to go ahead. Midcounties, combined with seven other independent societies and affiliated groups, controls 22pc of the vote.
Lord Myners has previously likened the Co-op diehards voting for his reforms to ‘turkeys voting for Christmas’ but warned that the mutual will go into terminal decline without radical change.
Professor Spicer agrees with this bleak prognosis. He said: ‘Lord Myners’ resignation signals that the traditionalists have won the governance war.’
The Institute of Directors also waded in with director of corporate governance Dr Roger Barker describing the peer’s resignation as a ‘worrying sign for the troubled mutual’. ‘ Their current model doesn’t work,’ he added.
Labour and Co- operative MPs were insisting that all is not lost and that members of the mutual do not oppose radical reform.
Gareth Thomas, chairman of the Co- operative Party, which is the sister party to Labour, said: ‘Nobody I have spoken to in the Co-operative movement backs the status quo.’
In another development yesterday, three directors were voted off the group board. They are thought to have been ousted by regional Co- op members because they approved a £6.6m two-year pay deal for Sutherland.