Skip to main content

'Co-operative Group had poor strategic direction and made bad choices'

Professor John Thanassoulis, Warwick Business School, gives his analysis of the release of Lord Myners' recommendations to reform the Co-operative Group.

He said: "Lord Myners has proposed a Board with no membership from the members and instead composed of the executive office holders and non-executive independent members. This is the key proposal and it eschews the learning from all other governance models outside those of the Plc. If members do not have a seat at the top table then the independent directors will be almost unassailable. Independent directors are liable to be chosen from those experienced in running supermarkets/banks/pharmacies from the private sector. Those who have made a career successfully defending shareholder interests are liable to behave in a similar way on the co-operative board.
 
"Lord Myners is right that a Board needs talented individuals who are not corrupt. But the challenge surely is to create a governance structure whereby this is achieved.

"He has succinctly identified the problem at the Co-operative group. The co-operative group had poor strategic direction and made bad decisions. These decisions were taken by a Board which Lord Myners convincingly argues were not up to the job, consider for example the press surrounding Paul Flowers the former chairman of the Co-op bank. The decisions were also enacted by a professional managerial team drawn from the private sector. This poor decision-making and poor delivery has cost the co-operative group dearly. Lord Myners highlights that in the last four years the Co-operative group has lost about half of its value.
 
"The challenge then is to find a governance structure which can deliver services customers want to buy, at prices they are willing to pay, while representing the long term interests of the current and future co-operative members. These members are the customers themselves, the workers and the suppliers. There are several models which Lord Myners can look to for inspiration. Plc’s have a governance geared to maximising returns for shareholders; universities have a governance which seeks to marry the pressures of academic rigour and excellence with profitable nous; charities have to be true to their purpose while delivering services under very tight cost control; John Lewis has perfected an employee ownership model."

To speak to Professor Thanassoulis, contact Ashley Potter, Press and PR Officer, Warwick Business School, ashley.potter@wbs.ac.uk, (0)7733 013264