After only 10 months in the job as Chief Executive, Euan Sutherland resigned saying that the Manchester-based group was “ungovernable”. He also attacked the group’s “professional and commercial governance”.
Mr Sutherland was brought to the Co-op to bring out change as it tried to recover from huge losses incurred by its Bank and from a series of damaging revelations and scandals. Focus has been centred on alleged poor governance by the board that was made up, largely, by members of the Co-operative, which includes a nurse, a farmer and a tax official. They are voted onto the Board in accordance with the democratic roots of the mutual society.
What is clear is that the Co-op is going through very difficult times. It is also clear that a lot of the blame seems to be laid at the structure of the board. Mention of the fact that the board is made up of a “nurse, farmer and a tax official” gives a view that the board is made up of ill-qualified people. The attack on the governance of the group means that there is a suspicion that the structure and governance is not fit-for-purpose for such a large group.
My hope is that this does not damage the case for mutuals and social enterprises. Let’s not forget that businesses go bust all the time, businesses of all sizes and shapes. The bank crisis of the past decade shows us that multinational banks are as susceptible to poor governance as any. The collapse of Enron shows that corporate giants can demonstrate terrible behaviours at the highest level.
My guess is that the Co-op’s board failed to adapt to changing circumstances and did not reflect on its governance model as it grew and as the bank grew. Part and parcel of a Board’s responsibilities is to review it’s own performance and make-up to make sure it recruits the right people to help it meet new challenges. If that does not happen, the Board can become detached from its role of setting strategy and scrutiny. That does not mean that the mutual model is wrong, it just needs to undertake the right level of reflection as any other business.
I am a big fan of the Co-operative, I am a member myself. I hope it recovers and grows, but I also hope it does so without losing sight of its principles and ethics.
Now I don’t pretend I can take on the task of fixing the Co-op, but if you own a business and want to review your governance models and make sure you have the right skills to meet your new challenges, contact me.