The Co-op STILL doesn’t have a banker on board
...but don’t worry. A year after being warned about lack of experts at the top, it is now hiring the self-styled ‘boat-rocker’ Hazel Blears
THE CO-OPERATIVE Group has still not appointed a banker to its board a full year after a probe into the scandal at its banking arm called for such an expert to be taken on.
Though it has sold much of its stake in Co-op Bank, the parent group still holds 20 per cent and the failure to appoint a banker to its own board to help oversee its interest in the business is raising questions over its commitment to the bank.
The group says it is ‘actively engaged’ in trying to make new appointments to address gaps in its governance – but has yet to select a banker a year after a damning report into the bank’s near-collapse.
The row over the bank – which is the UK’s seventh-largest lender and which is still heavily loss-making – comes as the grocery and funeral care business prepares for a stormy annual meeting, where it will be criticised over elections to its board and moves to ditch donations to Left-wing political organisations.
The mutual was urged to bring an experienced banker on to its board a year ago by Sir Christopher Kelly, a former Treasury mandarin who carried out a review into the bank’s problems. His report highlighted poor governance issues at the bank among other issues. The bank’s chairman at the time it got into difficulties was Methodist minister Paul Flowers, whose drugtaking was exposed by The Mail on Sunday in 2013.
‘There is a strong argument for ensuring that at least one of the group board members should be an experienced banker. It is striking that both J. Sainsbury plc and Tesco plc, which are trading companies with wholly-owned banking subsidiaries smaller and less complex than the Co-operative Bank, have experienced bankers on their main boards,’ Kelly wrote.
The recommendation was part of a raft of reforms to overhaul the Co-op’s governance and stem its losses. The bank’s problems hit the group with a £2.5billion loss in 2013. Kelly, who joined the group’s board last year, is helping to lead the search for new nonexecutive directors.
Mark Garnier, Conservative parliamentary candidate for Wyre Forest in Worcestershire and a former member of the Banking Commission, said the fact the group had not yet appointed a banker could be ‘a sign they will divest and will give up on financial services altogether. What does it say about their long-term intentions?’
The group also has a right to a seat on the board of the bank, which lost £264million in 2014, but has yet to take it up. Critics say that if the group had exercised this right, it might have been able to limit bank chief executive Niall Booker’s £5million pay deal.
A flurry of appointments is expected in the coming weeks from both the bank and the group. The bank’s chairman, Dennis Holt, said last month that it was in the process of getting approval for several selections for its board, with announcements imminent.
The group said: ‘The Co-operative Group is actively engaged in the process of building a board with the necessary skills and experience to oversee all our businesses and avoid the catastrophic events of the recent past. We are making good progress on the appointment of three additional fully independent non-executive directors. When this process is complete we will take up our seat on the bank board, choosing the member with relevant experience for this important role.’
The group is already facing criticism over separate appointments to its board to be voted on at next month’s annual meeting. It has whittled down a list of possible candidates, blocking three who failed to meet selection criteria.
Dame Pauline Green, president of the International Co-operative Alliance, and Nick Eyre, a former group secretary of the Co-op, were among those rejected. Former Labour Cabinet Minister Hazel Blears’s name will go to a vote, as will Paul Chandler, ex-chief executive of fair trade organisation Traidcraft, and Ruth Spellman, boss of the Workers’ Educational Association. Long-term Cooperative member Peter Hunt said the moves to block candidates was ‘jaw-dropping’ and suggested a ‘dictatorship’ rather than a democracy.
Group chairman Allan Leighton said: ‘Candidates had to meet strict selection criteria, demonstrating clear commercial acumen as well as a strong affinity with the co-operative model.’
The annual meeting will also see a vote on political donations. The group gives almost £1million a year to the Co-operative Party, which fields candidates for Parliament who sit as Labour and Co-operative Party MPs. Members are being asked to approve a move to distribute funds to several political parties.