The Co-operative Group has launched an immediate review of its democratic structure after former Co-operative Bank chairman Paul Flowers was captured on film buying the Class A drug crystal meth.
The scandal surrounding Flowers has once again highlighted The Co-op’s eccentric governance. Flowers was elected chairman despite having no senior banking experience. And, at the Treasury Select Committee’s inquiry last month, chair Andrew Tyrie asked former CEO Peter Marks why the organisation was at one point run by “a plastering contractor, a farmer, a telecoms engineer, a computer technician, a nurse, a Methodist minister and two horticulturists”.
A “root and branch” review was announced earlier this week. It will be led by Ursula Lidbetter, CEO of Lincolnshire Co-op, who was appointed chair of The Co-op Group, replacing Len Wardle, who stepped down after admitting responsibility for the appointment of Flowers.
“These are very difficult times for The Co-op Group and the wider movement, but I believe that we can and will come through this period stronger than ever by facing up to our challenges,” Lidbetter said.
“I look forward to working with the new management team, who have already started on the important work of turning around our businesses. In addition, I look forward to working with my fellow board members and the wider membership as we change the way we are organised and governed in the interests of all our seven million members.”
In a statement, the Co-op also promised to conduct a “fact-finding process to look into any inappropriate behaviour at The Co-operative Group or The Co-operative Bank and to take action as necessary” due to “the serious and wide-ranging nature of recent allegations.”
“In addition, the board of The Co-op Group has launched a root and branch review of the democratic structure of the organisation. We need to modernise to ensure that the interests of all our seven million members are properly and directly represented in the oversight of our business activities.”
The Co-op Group’s board is currently made up of 20 non-executive directors comprising 15 heads of regional boards, and five CEOs of regional co-op societies. Below the group board are seven regional boards and several area committees.
The Co-op Bank currently has eight non-execs: chairman Richard Pym, a former group CEO of Alliance & Leicester, who replaced Flowers in June, Co-op Group CEO Euan Sutherland, Midcounties Co-op CEO Ben Reid, as well as former chief cashier of the Bank of England Merlyn Lowther, former Norwich & Peterborough Building Society CEO Anne Gunther, former Northern Rock non-exec Richard Coates, former HP Enterprise Services senior vice president Bill Thomas, and former FSAadviser Graeme Hardie. It is also looking to recruit two further non-execs and a Co-op representative.
Both Wardle and former Co-op Group CEO Peter Marks have previously called for the corporate governance of the society to change.
Speaking before the Treasury Select Committee’s inquiry into the collapse of The Co-op Bank’s deal to acquire 632 Lloyds Bank branches last month, Marks said there were “areas of governance within The Co-op that absolutely need to change”.
When Wardle announced his plans to step down last month, he called for the appointment of an independent chair. He reiterated his call this week.
“The recent revelations about the behaviour of Paul Flowers, the former chair of The Co-op Bank, have raised a number of serious questions for both the Bank and the Group,” Wardle said.
“I have already made it clear that I believe the time is right for real change in our operations and our governance and the board recently started a detailed review of our democracy. I hope that the Group now takes the chance to put in place a new democratic structure so we can modernise in the interests of all our members.”