CO-OPERATIVE GROUP chief financial officer Richard Pennycook has taken over as interim boss of the embattled mutual after its chief executive Euan Sutherland quit the business when details of his £3.7m pay packet were leaked to a Sunday newspaper.
Brought in after a £1.5bn black hole was found in the accounts of the Co-op’s banking division, Pennycook, who joined the Co-op from supermarket chain Morrisons last year, will be tasked with patching up deep divisions within the group’s board, which Sutherland reportedly described as “ungovernable” in his resignation letter to group chair Ursula Lidbetter.
Sutherland yesterday quit the supermarkets-to-funerals group amid increasing frustrations as to the unwieldy nature of the Co-op’s board, having hit out at “an individual, or individuals, determined to undermine me personally” on the Co-op’s Facebook page over the weekend.
In a statement, Sutherland said he had resigned “with great sadness” but was withering in his assessment of the group’s governance structure.
“Until the group adopts professional and commercial governance it will be impossible to implement what my team and I believe are the necessary changes and reforms to renew the group and give it a relevant and sustainable future,” Sutherland said.
“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” he added.
Members of the Co-operative elect a 20-manned non-executive directorship, formed from regional boards and independent co-operative societies. These oversee the executive.
Lidbetter thanked Pennycook for stepping up to lead the organisation at “this critical juncture” and said that Sutherland’s resignation must “act as a catalyst for the real and necessary change which the group must go through.”
Pennycook is seen as a safe pair of hands to steer the group until a long-term successor can be found, having previously established himself as a turnaround specialist par excellence, as he delivered the seemingly impossible by restoring the City’s faith in Morrisons after its botched Safeway acquisition.
He was awarded the Lifetime Achievement Award in Financial Director’s inaugural Business Finance Awards last year.
Nick Lubb, a retail analyst, told The Times the Co-op was “lucky to have someone like Richard Pennycook in situ”, but added: “He will be wary of sticking around and suffering reputational damage and the Co-op will find it hard to attract management talent.”
On being appointed Pennycook moved to restore a semblance of order yesterday, stating that the business continues to “perform in line” with commercial plans put in place under Sutherland’s leadership.
“I and the team will plot a steady course in the coming months,” Pennycook said.
The group is also under investigation by the UK’s reporting watchdog, which announced in January that it would inspect the preparation, approval and audit of the Co-op Bank’s financial statements up to and including the year ended 31 December 2012.
The bank’s auditor, KPMG has faced criticism for failing to discover problems within the bank that led to a £1.5bn capital shortfall being revealed in June, as well as signing off its calamitous takeover of Britannia Building Society in 2009.
The Bank of England’s regulation arm, the Prudential Regulatory Authority, and the City watchdog, the Financial Conduct Authority, have also launched enforcement investigations into the Co-op Bank.
The bank is also subject to an independent Treasury-commissioned inquiry which will look at the its failed attempt to buy 631 branches from Lloyds Banking Group, and an internal review, led by Sir Christopher Kelly, into the circumstances surrounding the discovery of the £1.5bn shortfall.