Crisis at Co-op: The debacle over Euan Sutherland’s pay only confirms that he was not the right person to be running the mutual

Sad to say, Euan Sutherland’s resignation as Co-operative Group chief executive can only be welcomed. The mutual’s board was at first anxious that he should stay and had agreed to restructure the group so that Mr Sutherland – who used to run the Kingfisher subsidiary B&Q – could manage it along more conventional lines. But in the event they decided he should go and that the required changes will be made by his successor.

The immediate backdrop to all this was, of course, the recent revelation that Sutherland was due to be paid £3.6m this year – comprising £1.5m in salary, a £1.5m retention payment, and cash to buy him out of his Kingfisher incentive schemes. Furthermore, under new remuneration proposals that were designed to mirror rewards at similarly-sized UK quoted companies, the other eight senior executives would also receive a combined £12m, or twice what the previous Co-op bosses earned.

There is something deeply wrong here, and deeply wrong with the comparison with Co-op’s corporate peers. The fundamental point about the mutual is that it is not any other major corporation; it is a historic organisation that was founded for the benefit of its members. Not to appreciate this, to feel instead that the Co-op should copy the Kingfishers of this world, is to fail to understand the institution’s roots, its purpose as a movement, and its fierce attachment to high ethical values.

Of late, the crisis at Co-op Bank – its abortive plan to buy 632 Lloyds Bank branches, and the disclosure of alleged drug taking by its chairman, the Reverend Paul Flowers – means that reputation has taken a considerable beating. Mr Sutherland, who joined last May, had described the past 12 months as “perhaps the worst year” in the Co-op’s history, one in which it became clear the organisation had “lost its way”. He also said that under its present structure it was “ungovernable”. Just how difficult the task the new CEO faces will be confirmed again, when annual losses of £2bn are reported later this month.

Mr Sutherland’s appointment was hailed as an opportunity to right those wrongs. That does not mean, however, abandoning cherished principles and adopting the standard, PLC approach. That Mr Sutherland did not appear to appreciate that became a cause for concern. Hardly less alarming was his chosen method of defending his pay, on Facebook. Rather than set out a detailed exposition as to why he was worth such sums, he chose instead to shoot the messenger, the individual or individuals on the Co-op board who leaked his remuneration details. Not only did such an approach not augur well for boardroom harmony, it both failed to address the central issue and was also more broadly ill-judged: chief executives of major institutions do not air their dirty linen on Facebook.

The only conclusion from this whole sorry episode was that Mr Sutherland was not the right man for the job, that he was struggling with a rambling, unwieldy body from which he was emotionally and intellectually detached. It would have been far better for Mr Sutherland to receive the same pay as his opposite number at John Lewis, the nearest the Co-op has to a peer. But then £1.3m was far short of £3.6m. The board must not make the same mistake twice.