Easter Adjournment

Debate between Bob Russell and Meg Hillier

Thursday 10th April 2014 Commons Chamber

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I shall talk about the future of the Co-operative Group. I am proud to be a Labour and Co-operative MP.

We have seen a lot of turmoil in the Co-operative Group recently, and the resignation of former chief executive Euan Sutherland, following the revelation of the scale and nature of his total remuneration package, carries a stark warning to the remaining Co-operative Group leadership, who must now reflect carefully on what that means for the future. Lord Myners resigned overnight, although I understand his review of the Co-operative Group and its management continues.

The new leadership came in without experience of the co-operative or mutual sector, and must understand the importance of maintaining strong relationships with the rest of the co-operative movement. There is scant evidence that that has so far been considered important, and the swift decision dramatically to reduce funding for Co-op organisations such as Co-operatives UK will dismay long-standing co-operators further now that the hypocrisy of the executive pay policy has been laid bare.

The immediate response to the fresh crisis has been to accelerate the agenda for reforming the Co-operative Group’s structure. That is continuing even following the departure of Lord Myners from the board. No one, active co-operators least of all, doubts that governance changes are needed. Much has been said about the weakness of non-executives, although few have benefited more from that weakness than the current executive team. Rather than rushing headlong into irreversible changes, however, we and the Co-operative Group’s board should take a breath and calmly reflect on the issues.

Eminent as Lord Myners may be, it is not credible to base the Co-operative Group’s future governance on the views of one man. To date, all seven regional boards have now rejected his plan, and the response has to be one of calm reflection and compromise. There are three immediate actions that should be taken to steady the co-operative ship and set a fresh course that will begin to build trust and confidence between the Co-operative Group’s leadership and members.

The first is one about which I have received a lot of correspondence from members and customers across the country. There is no place in a consumer-owned co-operative business for unearned executive bonuses, and 100% retention payments should be scrapped. How those payments came to be requested by management, and then approved by the board, must be explained. Equally, no member of the current executive will carry the membership’s confidence if they do not immediately and publicly declare that they will not accept such payments.

Alistair Asher, who is now the Co-operative Group’s general counsel, was formerly a partner at Allen & Overy, where he was involved with building society demutualisation. He may have worked on demutualisations in the past, but the Co-op does not want to demutualise. Another member of the team is Nick Folland, the director who deals with communications. Both those men have been given a retention package of more than £1 million this year and next year that is not performance-related. I repeat that such gross, over-inflated handouts must stop.

There are other costs of this misguided approach to altering the way the Co-op runs itself. The “Have Your Say” consultation with customers cost £1.5 million.

[Sir Bob Russell]

The hon. Lady is making a powerful speech about the co-operative movement. Will she confirm that the Labour party was established some 60 years after the establishment of the Co-op, and that it is therefore in the best interests of the Co-op to embrace people of all political parties?

[Meg Hillier]

Up and down the country, co-operatives embrace people of all parties. The Co-op party has a sister arrangement with the Labour party, but that is not the thrust of my comments. I am talking about the Co-operative Group, which is ratcheting up costs at a high rate.

The Kelly review is costing £2,000 a day and the current total is £3.5 million. Millions of pounds have been spent on a new office next to the stock exchange, despite the Co-op Group having a brand new head office in Manchester.

Secondly, an eminent co-operators group should be established to advise and support Lord Myners in the valuable work that still needs to be carried out. The current leadership of the Co-op Group should reconnect with the wider co-operative movement. The best way to do that would be to establish a panel that can provide advice and support as the group goes through its reform process. Ideally, it would be chaired by someone like the former chief executive officer Sir Graham Melmoth or the former chairman Keith Darwin who have the credibility, experience and ability to provide candid advice to help steer the group to the next phase in its co-operative future.

Thirdly, an interim chief executive should be appointed who has mutual sector experience. The next chief executive will be perhaps the most critical person in the Co-op Group’s 170-year history. It is important that the recent errors are not repeated. It is critical that the new chief executive officer has a track record in the mutual sector. Confidence among member owners will simply not return without the trust that that would bring. The individual must understand the Co-op Group and be able to work across its diverse range of businesses.

We would do well to remember that the most successful CEO of recent years was Graham Melmoth. He was not a trader, but managed a team of skilled executives who ran the individual businesses while he oversaw the corporate strategy and provided leadership in line with the Co-op’s core principles. Such an approach would ensure that there was appropriate expertise in each division, while militating against the excessive micro-management of recent years.

The next few weeks will bring new challenges for the Co-operative Group. It will succeed through this period only if all its members and managers pull in the same direction and co-operate. Without an active and successful Co-op Group, our economy will lose a richness of choice and be the poorer for it. Members and customers up and down the country have been in touch with me to say that they are concerned about “our Co-op”. The management need to understand that feeling. They must listen to members. The Co-op is not just a brand; it is about mutual benefit and the sharing of profits among members. In my view, the Co-op is worth fighting for.