It is unpalatable medicine. But the Co-op must embrace Myners's reforms
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Version 0 of 1. By this time next week it will be known whether the Co-operative Group is ready to embark on the sweeping reforms that Lord Myners warns are needed if the UK's largest mutual is to survive. Behind the closed doors of its annual meeting in Manchester, the lucky few able to attend in person will have voted on resolutions intended to set in train an overhaul of the boardroom structure and put in place a "one member, one vote" system for the 8 million owner-members. Much is at stake. The group's bankers, Myners has warned, are expecting these changes if they are to continue to extend it a staggering £1.4bn of loans without adding penalties. For the group's owners – the 8 million who own 78% and the 21 independent societies that own the rest – it is a moment of truth. As forthright and unpalatable to some as Myners's views on the boardroom are, it is difficult to disagree with the former City minister when he says the current governance structure has not worked. Since 2009 the group has allowed its banking arm to merge with Britannia building society – a deal that probably should never have happened – and its supermarkets to take over the Somerfield chain, the cause of much of its debt pile and costly bills for leases on empty shops. Myners, who has chaired Marks & Spencer and run a big fund management firm – where he made his fortune – is no stranger to boardrooms (he also chaired Guardian Media Group until the 2008 banking crisis). So when he says that within 30 minutes of his first Co-op board meeting in January he had already decided his fellow members were not up to the task, he should be taken seriously. A reflection of his arrogance? Perhaps. Evidence he is publicity-hungry? Possibly. Diplomatic? Anything but. Some of his fellow board members could not tell the difference between debits and credits, he told the Today programme. They discussed the happiness of their chickens rather than focusing on strategies for the crucial supermarket business or analysing the fortunes of other parts of a diverse empire that includes funeral homes, pharmacies and farms. Myners would argue there is no time for niceties. The Co-op matters not just because it employs almost 90,000 people in the UK – 15 times more than AstraZeneca, which is currently winning political backing for its fight against merger-hungry Pfizer – but because it provides an important competitive force on high streets up and down the country. After all, the Co-op is meant to be different, a friendlier and more ethical place to do business and a force for good against the excesses of capitalism. Except, of course, it has shown that it too can fall victim to the follies many big businesses succumb to: especially under a charismatic chief executive, Peter Marks, hell-bent on expansion. Some co-operators – as proponents of the co-operative movement are known – put forward the argument that capitalism has not been reformed, despite the calamity of the banking crisis, so why should they be forced to make changes? It is a weak argument. Members of the Co-op have the chance to show they will learn from the mistakes of the past. If they are going to reject Myners, they should not do so just because he has proved to be a divisive character. They should reject his proposals only if they really believe they can come up with a credible alternative. And they should ask themselves whether, at this late stage, that is a realistic prospect. It is worth remembering what the four-pronged resolution proposes – the creation of a board of directors elected by members, establishing a structure that gives members powers to oversee the board, a "one member, one vote" system and provisions to protect against demutualisation. It is the only real option on the table next Saturday. Not backing the plan could thwart any chance that the Co-op has, not just to survive but to thrive for another 150 years. Now Barclays boss can call the shots Barclays's boss Antony Jenkins last week laid out his plans for a radical overhaul of the bank that his predecessor Bob Diamond built. Out will go 7,000 investment bankers – more than one in four of that division's workforce. Never again, Jenkins pledged, will he give in to their demands for bigger bonuses when profits decline, as he did last year because they threatened to walk out otherwise. Whole operations are being shut down, in areas such as commodities and derivatives trading. Global scale will no longer be the key ambition behind the bank's investment banking strategy. Instead, Jenkins said, Barclays would be "a focused international bank, operating only in areas where we have capability, scale and competitive advantage". The plan is for the business to account for just 30% of assets, rather than the current 50%. Rewind five years, however, and you find John Varley – the Barclays boss before Diamond – setting out exactly the same 30% plan. Nothing happened. What is different this time is that Jenkins now has the power base to do it. The band of lieutenants who shared Diamond's relentless focus on scale has been broken up. Rich Ricci, the head of the investment bank, Asia-Pacific chief Robert Morrice, investment bank chairman Hans-Joerg Rudloff, co-head of securities Larry Wieseneck – all are gone. Skip McGee, Diamond's US boss, who had a reputation for lobbying hard for his investment bankers to be better paid, has also left. Like most investment teams this one always had good ideas for new money-making wheezes. But there was never any suggestion of trimming bits that didn't pay. So the business ate up increasing amounts of capital. Varley was chief executive, but he was surrounded by an entrenched team who were never going to give ground and who were raking in money. Now, with investment banking profits in decline and the division demanding ever more capital, it is to be hoped Jenkins can reassert control in a way Varley never could. Mixed emotions over energy profits fall Big energy companies such as Centrica – the owner of British Gas – and power station operator Drax have been issuing profit warnings, and it is tempting to celebrate this news. Indeed, it should be good for the consumer that part of the reason for the lower earnings is that wholesale electricity prices are very low and this allows domestic suppliers to offer cheaper deals. British Gas's problems are compounded by the fact that its own domestic supply customers are fleeing for the exit as they can get better offers from Ovo Energy, Good Energy or another independent. But there is no cause for celebration: the shares are part of every pension fund. Also, Drax needs cash to invest in a move from coal to greener fuels like wood pellets; and Centrica plans to sell off three modern but loss-making gas-fired power stations, despite warning that the lights will go out if new capacity is not brought on stream. |