Co-op in crisis as Sutherland quits
The Co-operative was thrown back into crisis today after its chief executive quit the "ungovernable" group in the wake of a meltdown in boardroom relations.
The mutual accepted Euan Sutherland's resignation after he used an extraordinary Facebook rant to blame "an individual, or individuals" at the top of the group for deliberately seeking to undermine him by revealing details of his £3.66 million pay deal to a Sunday newspaper.
He has been replaced by chief financial officer Richard Pennycook, who has been appointed as interim chief executive.
Mr Sutherland's departure after less than a year at the helm leaves the Co-op without a permanent boss and facing the biggest governance overhaul in its history.
In an emergency call last night following Mr Sutherland's resignation, t he board agreed to be abolished in favour of a new "plc'' style board including only executive and non-executive directors, responsible for taking commercial decisions.
It is understood t he move came after former City minister and new board member Lord Myners brought forward details of his governance review - not due to be announced until next month.
But the board shake-up still needs to be finalised and agreed by Co-op members.
A source confirmed Mr Sutherland claimed in his letter of resignation to group chairman Ursula Lidbetter that the business had become ''ungovernable''.
He said today his decision was made after efforts to overhaul the business had been made "impossible" by the mutual's failure of governance.
But it is not thought he offered a "back-me-or-sack-me" ultimatum, with his resignation yesterday his final decision.
The Co-op confirmed he will forgo a £1.5 million bonus and long-term incentive payments due to him for securing the future of the Co-op Bank, which came close to collapse after it was found to have a £1.5 billion hole in its finances.
But he still picked up more than £2 million in 2013 after earning more than £1 million in pay and benefits between May and December, as well as a further £1 million in compensation for shares he was due in his previous role as chief operating officer of B&Q owner Kingfisher.
He said: "Saving the Co-operative Bank and with it the Co-operative Group from administration was a huge task, but the changes required do not stop there, with fundamental modernisation needed to safeguard the future for our 90,000 colleagues and millions of members.
"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: "I have given my all to the business and had hoped to be able to lead its revival.
"However, I now feel that, 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."
In a Facebook post on Sunday, he expressed frustration that the story about his pay deal appeared to have come "from our group boardroom".
He added: "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."
But Labour and Co-operative Party MP Meg Hillier criticised Mr Sutherland's outburst, telling BBC Radio 4's Today programme it was a case of ''throwing your toys out of the pram''.
Fellow Labour and Co-op Party MP Gareth Thomas said it was "right that he has resigned" if Mr Sutherland felt he could not be a successful chief executive at the group.
He added: "The Co-operative is going through a tough and turbulent time and what is now important is that a chief executive is recruited who has a vision for coupling the best of the Co-op's past with a clear vision for the future."
Co-op chairman 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."
Mr Pennycook, who was previously finance director at supermarket chain Morrisons, will lead the group while it searches for a permanent successor.
He said: "Our businesses continue to perform in line with the clear commercial plans put in place under Euan's leadership and I and the team will plot a steady course in the coming months."
It is not clear if Mr Pennycook will follow Mr Sutherland's lead and waive his entitlement to a £900,000 retention payment and the Co-op declined to reveal what he will earn as interim chief executive.
Revelations over the bumper pay deals caused outrage at the weekend, with the Co-op reportedly set to announce losses of £2 billion later this month, having seen its banking arm fall under the control of bondholders.
The group is facing large-scale job cuts after a disastrous year in which its banking arm needed to be rescued.
It is now facing an overhaul as well as a series of investigations into what went wrong, as well as continuing questions over the appointment of disgraced bank chairman Paul Flowers despite a lack of knowledge of the sector.
He was later exposed in a newspaper drugs sting.