Co-op axes dividend and kicks out the amateurs

THE CO-OP Group is set to scrap its dividend to members and distribute profits to community projects instead as part of a root and branch reform of the mutual.

The end of the traditional annual divi came as part of wider overhaul of the troubled group, which will see its elected board of lay members replaced by a professional executive team.

Interim chief executive Richard Pennycook outlined the plan’s for dividends yesterday at the Co-op’s annual general meeting.

‘Any surplus we generate will go back into communities where our members live and work. It will stay in the communities where they are generated,’ he said.

Currently, anyone who has a Co-op loyalty card earns points entitling them to a share of the dividend.

Despite the reformers’ victory, activists are expected to fight to keep at least some grassroots members on the board of the battered business.

The group approved proposals to overhaul the Co-op’s governance, but any new proposals are likely to be rejected if they stop all contributions from lay directors.

The group’s complicated structure has been blamed for its recent failures, including the neardemise of the banking arm and a £2.5billion loss.

Lord Myners, hired to review the group’s structure, said earlier this month that lay members of the board had not scrutinised executives properly.

The 15 lay directors, part of a 20-strong board, have complained in the past that some information was ‘too complex’ and have been accused of contributing only personal anecdotes to discussions.

Their inexperience allegedly created long and fruitless board meetings, with one nonexecutive commenting that contributions from them were ‘so poor and mundane that I felt sorry for the management team’.

One of the regional board members, Munir Malik, was axed by the group only last week amid suggestions he had lied in claiming that he was a chartered accountant.

At the AGM, 100 representatives of the Co-op’s eight million members voted on four proposals for reform: to create a suitably qualified board of directors; to create a separate structure to hold the board to account; moving to ‘one-member, one-vote’; and protections against demutualisation.