* Paul Myners quits as senior independent director
* Departure follows that of CEO Euan Sutherland last month
* Co-op Bank to unveil 2013 losses on Friday
* Group considering whether to pump more funds into bank
(Adds Myners statement)
By Kate Holton and Matt Scuffham
LONDON, April 10 A former government minister
appointed only four months ago to revive Britain's Co-operative
Group quit on Thursday, becoming the second
experienced executive to walk away and throwing into fresh doubt
the future of the 170-year-old mutual.
Paul Myners, in his role as senior independent director, had
warned in March that the customer-owned group, whose activities
range from supermarkets to farms, faced extinction unless it
reformed to become more commercially driven.
The Co-op said Myners would depart after the group's annual
meeting on May 17, at which point his proposals for reform would
be put to members for a vote.
Myners said in a statement: "I am confident that there is a
good future for The Co-operative Group if it commits to doing
the right things on governance and leadership." He said he was
pleased members would get to vote on his proposals but made no
With the group in turmoil after a series of scandals, Myners
had accepted a token salary of 1 pound in December to review its
operations. His exit comes after Chief Executive Euan Sutherland
last month quit from what he described as an "ungovernable"
organisation after only 10 months in the role.
Observers said the loss of Myners, formerly a minister in
the British Treasury with decades of experience in major
companies, showed he had lost his battle with the group's
members to rebuild it more in line with a public company.
"The resignation of a senior director and CEO within weeks
of each is part of the ongoing 'omnishambles' at the Co-op
group," Professor Andre Spicer of Cass Business School said, in
a reference to a catchphrase from a satirical British TV
The Co-op, owned by its 7.2 million members and which
retains a minority stake in the scandal-hit Co-op Bank, was hit
by one problem after another last year. Its full-year results
due to be published next week are expected to show a loss of
around 2 billion pounds for a group which touts itself as an
ethical alternative to profit-driven rivals.
Co-op Bank's former chairman Paul Flowers was arrested as
part of an investigation into the supply of illegal drugs and
the ex-Methodist minister was also revealed to have been given
the job despite having no senior-level banking experience.
His departure in June came shortly after regulators found a
1.5 billion pound ($2.5 billion) capital hole at the banking
unit, forcing it into the arms of its creditors and denying the
Co-op Group control of the lender.
Jesse Norman, a legislator who belongs to the Conservatives
who form the senior party in Britain's ruling coalition, said on
Twitter: "They really seem to be in a tragic mess".
Chairwoman Ursula Lidbetter said in a statement the
organisation was committed to reforming its governance.
Just days after Sutherland's abrupt departure, Myners had
warned that the Co-op was on course for collapse if it did not
reform its unwieldy structure. He urged the company to create a
smaller board with the skills to hold executives to account.
The board is made up of members from its regional boards and
independent Co-operative Societies and is entirely
non-executive, meaning no director is involved in day-to-day
Myners warned then that he was also "deeply troubled by the
disdain and lack of respect" for the executive team he had
witnessed from some members of the board.
Separately the Institute of Directors (IoD), a business
pressure group, warned that not only did the Co-op's current
model not work, it threatened its very existence.
Co-op Bank will publish its 2013 results on Friday. The
bank, which fell under the control of a group of hedge funds
after the capital shortfall was exposed, is expected to post a
pretax loss of between 1.2 billion pounds and 1.3 billion.
Co-op Bank said in March it needed to raise another 400
million pounds to cover the costs of past misconduct, including
compensation for mis-sold loan insurance and repayments to
mortgage customers who were overcharged.
Co-op Group, which saw its stake in the bank fall to 30
percent following last year's restructuring, is considering
whether to take part in the latest fundraising.
The group, which has agreed to pump another 263 million
pounds into the bank this year as part of the original bailout,
would need to stump up a further 120 million in order to
maintain its 30 percent stake.
Co-op Bank's remaining shareholders, which include hedge
funds such as Perry Capital, Beach Point Capital and Silver
Point Capital, will also need to stump up more cash. Banking
industry sources say they have little choice but to do so or
risk losing the 1.2 billion pounds they have already put in.
Faced with such an uncertain future, Co-op Group has
announced plans to sell its farms business and is considering a
sale of its pharmacy chain in order to raise the required funds.
Banking industry sources say the pharmacy business could fetch
between 450 million pounds and 500 million.
(Editing by Tom Pfeiffer and David Holmes)