COVENTRY MESSAGE BOARD

The Co-operative Group has defended plans to pay new chief executive Euan Sutherland more than £3.6m for his first year in the job.


“We seem to have an individual, or individuals, determined to undermine me personally”

On Sunday the embattled group insisted the proposed pay package – almost treble that paid to his predecessor - was necessary as the Co-op sought to recover from the biggest crisis in its 150-year history.

The mutual, which has close links to the Labour party, is reeling from a series of scandals including the discovery last year of a £1.5bn black hole in its banking arm and allegations that Co-op Bank chairman, the Reverend Paul Flowers, bought hard drugs including crystal meth.

The proposed salary package, put together by consultants and leaked to the Observer newspaper on Sunday, show the Co-op is preparing to pay Mr Sutherland a basic salary of £1.5m, plus a £1.5m retention payment.

With pension contributions and other extras, including buying him out of his previous job, Mr Sutherland would receive a total of £3.66m. His predecessor, Peter Marks, was paid just over £1.3m last year.

Other senior executives will also be in line for big pay increases, the newspaper reported.

Ursula Lidbetter, Co-op Group chair, confirmed the organisation planned to increase executives’ salaries compared with the “pay of their predecessors” and said this reflected “the greater commercial, management and turnaround experience they are bringing to bear”. She said the pay packages were “in the middle of a range of comparable companies”.

"Last year, The Co-operative Group faced the biggest crisis in its 150-year history. It is against that backdrop that we recruited Euan Sutherland and a top team with the skills and experience needed at this crucial stage in our history, reflecting the necessity for change," she said.

Mr Sutherland took the unusual step of posting a personal response on the Co-op’s Facebook page on Sunday over the leak of his salary details.

“We seem to have an individual, or individuals, determined to undermine me personally,” he wrote. “We appear to have disaffected people who are determined to make life difficult and embarrassing for The Co-operative at a time when what we need most are professionalism and loyalty to the business.”

Mr Sutherland said the remuneration report is yet to be finalised.

He added that the Co-op was preparing to "take another hammering" in coming weeks as it reports large annual losses and an inquiry by Sir Christopher Kelly into the Bank crisis is published.

Co-op accepts resignation of chief executive Euan Sutherland

The Co-operative Group has accepted the resignation of chief executive Euan Sutherland, who described the mutual as "ungovernable", in a fresh blow for the troubled group.

Mr Sutherland apparently offered to stand down on a point of principle, after it was reported over the weekend that the Co-op was planning to offer him and other executives huge pay and bonus increases- including a £1.5 million base salary and £1.5 million retention payment, plus other perks.

In a statement, Mr Sutherland said he had given "his all" to lead the Co-op's revival but warned that, under its current governance, it is" impossible to implement" the necessary reforms.

He added:"The Group must reduce its significant debt and drive major efficiencies and growth in all of its businesses, but to do so also urgently needs fundamental governance reform and a revitalised membership."

Mr Sutherland will not accept his retention and long term incentive payments. Chief Financial Officer Richard Pennycook will act as interim boss.

Chairwoman Ursula Lidbetter said she accepted Mr Sutherland's resignation with "deep regret".

She added: "Euan’s resignation must now act as a catalyst for the real and necessary change which the Group must go through. I would like to thank Euan for his hard work and leadership and to wish him the very best for the future."

Mr Sutherland joined the company in May last year, having been chief operating officer of B&Q owner Kingfisher. His predecessor, Peter Marks, earned only £1.3 million last year.

At the weekend, Mr Sutherland appeared to hit out at "an individual, or individuals, determined to undermine me personally" on the Co-op’s Facebook page.

He said: "We appear to have disaffected people who are determined to make life difficult and embarrassing for The Co-operative at a time when what we need most are professionalism and loyalty to the business."

Last month, the Co-op announced plans to abandon key parts of its business as the reverberations from its banking scandal continue to shake the operation, ahead of it reporting what could be a £2bn loss later in May.

Questions about the management of the Co-op were raised after the bank unveiled a £1.5 billion hole in its balance sheet last summer. The recapitalisation of the bank left the Co-op Group with a 30 per cent stake- with the rest held largely by hedge funds.

The crisis at the bank deepened after former chairman and Methodist minister Paul Flowers was arrested over drug allegations in November last year. Former chairman Len Wardle resigned in the wake of the scandal

Ms Lidbetter described the mutual's management woes as "the biggest crisis in our 150-year history", but insisted the group is on a "long and complex" road to recovery.