8th August 2014
The Co-operative Group has confirmed it will bring in an experience board to oversee its affairs as it struggles to overcome a year of scandal in which its bank was pushed to the brink of collapse.
The group will replace the lay members of its board with experienced and independent directors in a bid to ‘mark the end of the rescue phase’ but retain three member-nominated board directors despite this going against the advice of former City minister Lord Myners.
Myners, who was brought in to overhaul the governance of the business but resigned before the job was done citing the opposition and reluctance to change, said the plan could create a ‘half-competent, half-incompetent’ board.
Chair of the Co-op Ursula Lidbetter said the ‘bar will be high’ for the member-nominated directors, who must pass a competency threshold.
The current board, made up of lay members, will be replaced and new rules governing the board will be put in place:
The Co-op group board came under criticism in the aftermath of the banking scandal as it emerged the board was made aware of the capital problems within the bank and concerns about the takeover of Britannia during the credit crisis and the failed attempt to takeover more than 600 Lloyds Bank branches.
Former Co-operative Bank executives blamed the group board for pushing the ethical bank to its limits and leaving it with a £1.5 billion blackhole in its balance sheet that was identified by Moody’s rating agency in May 2013. The bank was downgraded which started a downward spiral that culminated into consumer holding Co-op bonds bailing the bank out and the group giving up 70% of its stake in the bank to seven hedge funds, all of which have a 10% share.
The group’s debt problems have still not been resolved and it posted a £2.5 billion loss for 2013 and debts of £1.4 billion which it is now trying to clear by selling off non-core parts of the business such as pharmacy and faming.