The Co-operative Group: A noble business failure?

March 12, 2014

The Co-operative Group has its place in the social and political history of modern Britain. Yet it is in deep crisis as its departing leader Euan Sutherland declares it ‘ungovernable’

On March 11th 2014 the following statement appeared on the website of The Co-operative Group

The Co-operative Group announces that Euan Sutherland has resigned as Group Chief Executive with immediate effect. Richard Pennycook, Chief Financial Officer, has been appointed as Interim Group Chief Executive.

The statement then quoted its former CEO’s damning indictment of its professionalism and governance:

“It is with great sadness that I have resigned as Chief Executive. 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.

“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.

“I will not accept the retention payments and long term incentive payments previously agreed for the delivery and protection of value in the Group and the Bank, even though this was successfully delivered. “I would like to thank all of the Co-op’s hard working colleagues for the support they have given me during my time. I wish them all well. The Co-operative has some wonderful people who deserve a great future.”

Concealing more than it says

Even without further background knowledge by the reader, the news item is of interest to any student of leadership. [Hint to tutors. Try redacting the name of the company and offer the resignation statement for class discussion.]

The resignation statement may be read as a farewell message, concealing more than it says. Why did the CEO fail to achieve the ‘fundamental modernisation’ he believed necessary? What does a revitalised membership imply? How do we interpret the statement that ‘The Co-operative has some wonderful people who deserve a great future.’

A missing story

As editor of LWD I am disappointed that after 1000 posts I have not reported one that dealt directly with the important history and current financial problems of the Co-operative Society. Even a juicy scandal earlier this year did not warrant a mention, although it led to the departure of Euan Sutherland’s predecessor. The story is one which includes one of the most powerful forces towards an alternative capitalism merging socialist ideals with self-help and corporate effectiveness.

What do you think?

I will offer more of the story as an addition to this post. In the meanwhile, I would be particularly interested in receiving the views of LWD subscribers who are unfamiliar with the history of the group, and their assessment of the situation as indicated in Euan Sutherland’s resignation statement.


Medvedev’s Power Play: A Historical Analysis

November 16, 2008
Dmitri Medvedev

Dmitri Medvedev

On the day Barack Obama won his historic election victory in America, President Medvedev offered two ideas in his State of the Nation address. One was the possibility of redeployment of missiles. The other was a reform which would lead to a President having two six year terms in office. The West, perhaps naturally, seemed more concerned with the former issue. We concentrate here on the proposed constitutional one

The Australian historical scholar Jeff Schubert is now domiciled in Russia, and brings to bear his expertise on the current political situation. He discussed the constitutional change with Leaders we deserve

Psychologically, Medvedev may now be where George W Bush was after the terrorist attaks of September 11, 2001, he argues. Some of Bush’s fears about what might happen next were justified, but his responses, included the military action against Iraq were thoroughly misguided. Schubert considers that some of Medvedev’s fears may be similarly justified, including in his view the activities of the US military so close to Russia’s borders, the deleterious effect of corruption, and the unruly state of some of Russia’s regions.

However, he also argues that Medvedev is looking at the wrong solution in proposing that it be possible for one man to remain at the peak of Russian power for 12 years. It will almost certainly have the consequences of extended periods in power for which there are historical precedents. The thinking processes of the person in power become distorted over time, as do the thinking processes of those around him (or her). Albert Speer, Adolf Hitler’s ‘friend’, architect, Armaments Minister, and for a while the second most powerful man in Nazi Germany, summed it up nicely:

“There is a special trap for every holder of power, whether the director of a company, the head of a state, or the ruler of a dictatorship. His favour is so desirable to his subordinates that they will sue for it by every means possible. Servility becomes endemic among his entourage, who compete among themselves in their show of devotion. This in turn exercises a sway upon the ruler, who becomes corrupted in his turn.”

Louis de Bourreinne, who was Napoleon Bonaparte’s first secretary, called this “corruption” of the thinking processes “a sort of cerebral congestion”.

Even in the US, with its traditions and governmental structure, 12 years for a president would be a negative. Twelve years for a president would also mean 12 years for many other officials who themselves are less important “holders of power”.

Russia’s traditions, political structures – such as the limits on political parties and appointed regional governors – and the perverted distribution of wealth, make 12 years potentially very dangerous.

Speer also wrote that “the key to the quality of the man in power is how he reacts to this situation.”

But can a historical example be expected to fit present day circumstances? Schubert agrees that not all people react in exactly the same way. He contrasted Kemal Ataturk, was much more restrained in his use of power, with Josef Stalin. Even so, he says, Ataturk’s regime had many psychological characteristics that were similar to Stalin’s. Ultimately there was only one source of power, and this was the man at the top.

Notwithstanding the law,. In 1937 President Ataturk sacked Ismet Inonu as prime minister and replaced him with Celal Bayer. Legally, the Ataurk was entitled to appoint the prime minister, but as president he had few direct executive responsibilities. Nevertheless, when someone commended that Bayer has skillfully handled an issue, Ataturk retorted: “The government is in my hands, my hands.”

Turning to today’s Russia he observes that Medvedev ‘likes to speak of the need to strengthen the rule of law, and that ‘he is no-doubt sincere.

…It’s just that Ataturk was in power for so long that his basically authoritarian psychology and the changing needs of the country were moving in opposite directions, and he became a negative rather than positive factor in the country’s development. The legal system, that he played such a dominant role in forming, remained his well-intentioned toy, to be prevented from spinning when he wished.”

He believes that Medvedev is relatively liberal in his outlook, but that his thinking would be “corrupted” by 10 years in power (assuming his present term of 4 years was to be followed by another of 6 years).

The much discussed return to power of Vladimir Putin would become predictably less restrained if he were to return to the presidency. Eight years as president, 4 years as the major power behind his successor, plus a further 12 years as president would bring the total to 24 years. He could be president until 2024 when he would be 72 years of age.

Schubert also notes historical issues of the aging leader, although could have been talking of a contemporary case such as that of Robert Mugabe:

Count Ciano, noted in his diary in 1941 (when Mussolini was 57) that the aging dictatorial CEO can be somewhat sensitive about age: “The Duce (Mussolini) is exasperated by the publication in the magazine Minerva, published in Turin, of a motto by some Greek philosopher or other.” The motto read:

“No greater misfortune can befall a country than to be governed by an OLD tyrant.”

‘Old tyrant’ is not only about age, Schubert points out.

It is about a declining ability to match the desire to hold power with the desire to work, listen and to be engaged ..While Ataturk believed that government was in his “hands”, he was also quite disengaged from those whom he governed. One of his admirers, Falih Rifki Atay remarked: “Ataturk! Before you became President you were always in touch with the people. For years now, it is only us at your dinner table who listen to you. The people haven’t heard your voice. You only read the government’s report at the Assembly openings. This is your only communication.

The results of being too long in power were also summed up by Chen Yuan, an early colleague of Mao Zedong, who said:

“Had Mao died in 1956, his achievements would have been immortal. Had he died in 1966, he would still have been a great man. But he died in 1976. Alas, what can one say?”

Schubert considers that Medvedev runs the risk of allowing similar words to be relevant to Russia’s future.

Is this historical analysis sufficiently tightly argued to apply to today’s political situation? Is there something intrinsically worse over a six or seven year rather than a four year cycle of office? As a French Colleague pointed out, Francois Mitterand was in power for two “septenats” (seven years in office) in the 80-90s, and the arrangement was accompanied by corruption, scandals, and the arrangement was subsequently dropped. On the other hand, the famous case of Margaret Thatcher suggests that it was the second term in office which produced a deterioration of her famed sense of purpose and strategic grip on power. Here it was the double term, (and perhaps from Schubert’s analysis, the aging effect, that was at work, rather than the length of the term.

Alternative capitalisms

Another contextual point is that business schools are having to rethink the entire notion of capitalism to address the problems of the 21st century. There is talk of alternative capitalisms, as suggested Professor Richard Whitley on Manchester Business School. The system built around the family firm in Korea and the other Asian economic little tigers has received attention in the 1980s. Now it is the systems emerging in China and India. We may be forced into a more differentiated view of capitalism. In which case the Russian case may have even more surprises ahead for economic as well as for political commentators.