Surprised the Co-op Bank is failing?

Flickety, you make good points.

I e been a 'Cooperator' for years but know nothing about its financial status. The great ideals and principles on which it was founded ave got lost over the years. It's very sad that god financial minds have not joined the movement and applied their skills in a more worthwhile way than making oodles of profit for other financial institutions.

I think a lot of us, and I include myself, have had a rather rosy ethical and principled view of the Co-op. Because it is a 'good' organisation, democratic and principled, we didn't actually ever think about essential items like good professional management.

Light dawned when i saw a diagram of the structure (see link) . A (rather weird) form of voting is not a good way to recruit board members if they are required to do a job that needs knowledge of business have the ability to make strategic decisions about how to run a complex group of companies.
Lord Myners is obviously disgusted that they have presided over this carnage and not resigned.
www.bbc.co.uk/news/business-27302820

In other words you get on the board of the Co-op by being a local activist regardless of whether you actually have any commercial competence. Lord Myners said yesterday there were people on the Co-op Bank and Co-op business who didn't know the difference between a debit and a credit. I find that rather frightening. No wonder the company lost 2.5 billion pounds last year. Lord Myners compared this with the dividend paid to members 50 years ago, which in current value was worth £1 billion, now no dividend is paid.

As a matter of curiousity I have had a look at the way John Lewis manages its corporate governance. Their website describes it as follows:

'At the top level, the Partnership has three governing authorities: the Partnership Council, the Partnership Board, and the Chairman.

The Partnership Council is unique in corporate governance: directly elected by Partners, it holds the Chairman to account and appoints five directors to the Partnership Board. The Chairman appoints five executives to the Board: the Managing Director of John Lewis and Waitrose, the Finance Director, and the Director of Personnel. The Partners' Counsellor is automatically a member of the Board. The Board also has three external non-executive Directors.'

Replace 'partners' (employees) with 'members' and it is a model the Co-op could well follow, and to be honest, if I had ever given it any thought it is probably similar to how I assumed the Co-op worked, a board that was a mix of members and professionals.

It is obviously a very good and profitable way of running a very efficient company with a public conscience.

It would be a great shame to see the Co-Op disappear. Somebody should get a grip, and not repeat the dreadful Flowers business!

The media always seem to refer to these Bank holidays as 'bank holiday weekends' but I suppose they are technically weekends with a bank holiday attached! Or two in the case of Easter and Christmas - or none for a lot of people who have to work.

I was surprised the bank failed but, if they can't do their sums properly, I shouldn't be surprised. However, I'm now glad I didn't invested my meagre savings with them, I may have got an even worse rate of interest.

The problem is that the Myners report pulls no punches about the problems of the Co-op, but those now running it see no reason why they should get off the lucrative gravy train, until under their management it is totally derailed.

The irony is, if that happens, it will be the unaccountability of Co-op board members to the ordinary member that lies at the root of the trouble.

I think it is a salutary lesson to those of us who support co-operation and see it as more high minded than ordinary companies to realise that it can go equally wrong for the same reason; greed and self interest put before the common good.

The Co-Op Bank, which let's face it is put on a pedestal by some, has been an Old Boy's Club for Labour for years. Why wouldn't it be if you look at how it was founded.

At last Myners has put a robust analysis forward. It has been accepted because of his obvious connections to Labour and I think he deserves a hell of lot of credit for for his honesty and non partisan appraisal . He certainly did not have an easy ride getting to his conclusion because of the Co-Op Board's reticence to assist him. A reticence that in turn proved too much for Flowers successor Euan Sutherland and other management figures, causing even more mayhem at the head of the Co-Op Bank.

The arrest of Paul Flowers, thank goodness, set the ball rolling in the eye of public as to the Co-Op Banks running and subsequent loss of funds. He was a hapless, egotistical man with no clue of financial management and worst of all no clue about the finances of the Co-Op Bank, of which he was in charge of. At his session before the Treasury Select Committee even the Labour MP's looked on in disbelief at his performance.

Flowers was very competent at one thing, being a narcasist who gained his position not through his financial knowledge but by his political connection's, in this case, the Labour Party. The Labour Party connection is rarely spoken of, why? Not only does Flowers need looking into so do the Institutions that were either inept or turned a blind eye, namely the Co-Op Bank who elected him and the Labour Party which readily banked his donations and had favourable interest rates compared to ordinary Co-Op borrower's. It is reported the Labour Party are moving away from the Co-Op to another bank that is owned by the Unions and 25% still the Co-Op bank, at the moment.

He was so well thought of Ed Miliband appointed him to Labour's Financial and Industrial Advisory Board. He was also at one time or another a member of The Advertising Standards Authority, Vice Chairman of the Citizens' Advice Bureaux, Chairman of the Manchester Camerata, Chairman of the Drug Abuse Charity Lifeline and a trustee of the Terrence Higgins Trust. His appointment as Chairman to the Co'Op Bank was given to him by the Remuneration and Appointment's Committee, which is composed mostly of former Labour politicians and Co Op veterans.

The lending division is now being, hopefully, run on a sound basis through a hedge fund. I feel very sorry for the demise of the Co-Op Bank and it's members who held such faith in their bank of choice. I do think however there is a case that they should look to where the fault lies a little harder and I hope that they will not turn against the bank because it no longer holds the values they 'thought' they were supporting, a bit too much to ask for some I would think.

If out of all the bad the Co-Op Bank and it's associated arm's evaluate their positions and move forward with honesty and understands the need to have financially sound management I for one wish it well.

'The seeds of the co-operative movement were laid in Sheerness in 1816 when a small group of dockyard employees, disenchanted with the high prices and sharp practices of the local purveyors of provisions, banded together to supply for themselves some of the essentials of everyday living. They formed themselves into a trading organisation, or society, clearly defining its objective' - these fine words from Wikipedia go on to describe the present-day Co-Operative Group, a massive UK business in many sectors, with 100,000 plus employees and a long and acclaimed record of public service.

However, this is a good time to bring it up to date and subject it to some sensible commercial reorganisation, in the course of which its close relationship with the Labour Party would be challenged. It is essential that the likes of the drug-abusing incompetent buffoon Flowers never get their hands on its management again. It's fair to say, of course, that this government's track record in bringing errant bankers and businesses to heel is not good. Lets hope they do better with the Co-Op. We really don't want to loose it.

Papaoscar

I agree.

The problems lie not just with the bank but with what used to be known as the Co-operative Wholesale Society, who own the bank and the farms and other businesses they are involved in. Myners pointed out that in the last 5 years they have lost half of the net worth of a business built up over 150 years. Its share of the food market has fallen from over 30% in the 1950s to 5% now.

Can you imagine a normal commercial company, say Tesco or Unilever or Shell losing half its value in 5 years and all the board directors remaining in place and refusing to resign? They would have been voted out by enraged shareholders.

Flickety

Again, at the risk of becoming boring, I agree.

but wouldn't the bank survive if every member banked £5?

Not risking it!

I doubt it, it is £1.5billion short. It will not go under, there are investors prepared to find the needful, but control of the bank will pass out of Co-op hands.