Ex-minister Lord Myners quits Co-op must visit

Former City minister Lord Myners has quit the board of the troubled Co-operative Group, amid criticism of his plans to reform the business.

His departure is another significant blow for the business, which is facing losses of up to £2bn.

The largest of the group's independent societies has opposed his proposals, aimed at making the Co-op's governance more like a publicly listed company.

But the Co-op says Lord Myners' review will continue, despite his resignation.

The group's chief executive, Euan Sutherland, resigned last month after he described the business as "ungovernable".

Continue reading the main story Kamal Ahmed BBC Business editor

It looks like the Co-op called for the cavalry and then decided it didn't much like the look of them.

Lord Myners' resignation, following the resignation of the CEO Euan Sutherland last month, reveals that the organisation was very uncomfortable with the radical changes being proposed.

Many in the Co-op are convinced that it was not the organisation's democratic structures and mutual status that were to blame for the business's woes. Rather, they argue that it was hubristic managers who have since left.

Lord Myners, who said that the governance standards he found at the Co-op were "shocking", would beg to differ. But, after leaving the board, the prospects of his review succeeding have diminished markedly.

'Democratic deficit' Lord Myners' initial findings said the group's elected directors had overseen "breathtakingly value-destructive" decisions, like the Co-op's takeovers of Britannia building society and supermarket chain Somerfield.

He also found its three-tier system of elected member representation - made up of area committees, regional boards, and the group board - had "consistently produced governors without the necessary qualifications and experience to provide effective board leadership".

Too many directors, he said, did not have any serious business experience and were therefore not qualified to keep senior managers in check.

Instead, he recommended new group board directors should be appointed against clear criteria of skills and experience.

And he proposed a new, smaller board that would replace the current 20 elected directors with an independent chair, six or seven non-executive directors with business experience, and two executives from the group.

But some of the Co-op's most influential members are worried the changes could damage the group's values.

'Deeply concerned'

Its largest independent society, Midcounties, which along with about a dozen others accounts for 20% of board votes, has already said it will oppose Lord Myners' plans.

Lord Myners was appointed as a senior independent director in December

Patrick Gray, president of Midcounties, told the Today programme on Wednesday that any changes would only take place with negotiation.

"Most of the independent societies are deeply concerned, as we are," he added.

"We all support reform, but we want it to be done in a measured way. We don't want to be pushed into a corner and told either you accept this, or nothing.

"If he [Lord Myners] puts forward simply a menu on a take-it-or-leave-it basis, then we will vote against it."

Peter Hahn, of the Cass Business School, told the BBC that after "all these years of poor management, maybe Co-op Group is just not manageable in its current form".

But, he added, some of the regional Co-ops are very well run, "so maybe [the group] needs to be split into smaller more manageable units".

Bank troubles

Lord Myners was appointed as a senior independent director by Co-op Group chair Ursula Lidbetter in December, to undertake a full review of the entire business.

It followed the collapse last year of Co-op Bank's deal to take over 632 Lloyds Bank branches and the arrest of the bank's chairman, the Reverend Paul Flowers, on drug allegations.

Its banking arm alone is preparing to announce a loss of about £1.3bn for 2013.

Last November, it announced that a group of private investors, made up mostly of hedge funds, would inject nearly £1bn into the bank in exchange for a 70% ownership stake.

Last month it announced plans to raise another £400m by issuing new shares, after the discovery of additional costs related to past misconduct and poor documentation.

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