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'Thrown out of the pram': Co-op

14 March 2014

Earlier this week, Euan Sutherland, ex-group chief executive of the Co-op Group resigned, after details of his remuneration package were leaked.

Sutherland resigned on Tuesday 11 March, after details of his £3.6m remuneration package were leaked to the media over the preceding weekend. In response, before tendering his resignation, he took to Facebook to comment on the unprofessionalism of one or more individuals ‘determined to undermine me personally ... regardless of the uncertainty and disruption this causes’, on the Co-op employees page. 

In an interview with Radio 4, Shoreditch and Hackney South MP Meg Hillier compared Sutherland's resignation to that of having thrown all his toys out of the pram. The resignation has been likened to, not just throwing his toys, but himself, out of the pram.

Speaking to Governance & Compliance, Tom Nixon, co-founder of digital transformation consultancy NixonMcInnes, commented: ‘He threw himself out of the pram. My guess is that he was in over his head. The job requires getting a huge democratic organisation to take a hard look at itself and create fundamental reform. It's a job for a real leader of people, not just a corporate CEO who can restructure their way out of trouble and then exit a couple of years later.’ 

Nixon also adds that, sure, ‘the board may well have been difficult to manage. But that’s why he was hired and offered a top tier salary. It’s part of the job.’

Membership organisation difficulties

However, ICSA Policy Director Peter Swabey says that perhaps, ‘Sutherland faced an almost impossible task.

‘The problems experienced by the Co-op demonstrate the key problems for a membership organisation trying to get corporate governance right: a clash of cultures between the ideals of modern corporate governance and a perhaps slightly old-fashioned corporate model; and the difficulty of successfully mixing the slightly cosy ideal of stakeholder representation, with a variety of committees and elected representatives, some of whom may, or may not, have the relevant knowledge and experience to run a modern company, with the need for strong, commercial leadership.’

Problems with the membership structure at Co-op is something that Lord Myners has also highlighted in his update of the independent governance review that he is chairing; ‘the Co-operative Group’s three-tier system of elected member representation has consistently produced governors without the necessary qualifications and experience to provide effective board leadership and to monitor, challenge and provide guidance to management ... [which] has massively raised the cost of decision-making and diminished genuine accountability throughout its governance hierarchy.’

To tackle this, Lord Myners has put forward a set of proposals changing the way board appointments are made and how it will run; Swabey comments, ‘Lord Myners’ proposals, ... seem ideally suited to bringing together ... two conflicting models, creating a board structure in which the members will have the skills and experience to enable the Co-op to compete with commercial organisations in those markets in which it has chosen to engage whilst at the same time having a National Membership Council which can, as he says, “ensure that the group adheres to co-operative values and principles, and that these are reflected in its corporate vision, strategy and operating practices”.’

The challenge here, according to Swabey, ‘for Lord Myners, and for the Co-op, will be to have these proposals accepted through the current governance structure where there will still be some emotional adherence to the belief that it is a bad thing for the Co-op governance structure to “become more akin to a publicly limited company” and where as Lord Myners comments, “few ... have any serious business experience and many of whom are drawing material financial benefits from their positions.’

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