Tuesday, 11 March 2014

Ethical shopping. How much longer will it be around?

Just back from our local Co-op supermarket, with a few bits and pieces we needed in the house.

The Co-op. It used to make you feel good to shop there
Shopping at the Co-op still feels like the right thing to do. The 170-year old mutual society, still – just – run by its members for its members, has been the ethical alternative for so long that it’s hard not to think of it that way any more. And maybe, indeed, it can win that position back yet, though at the moment the omens aren’t good.

The public became aware of the 
Co-op’s downhill plunge in the summer of 2013 when it became clear that its banking arm had over-extended itself, leaving it with a shortfall of £1.5 billion. That made it sound exactly like all the other banks, which had gambled too hard and failed. 

It was boxed into a position in which the only solution to its difficulties was to turn to hedge funds for the additional finance, which was duly provided, but only at the cost of the Co-op becoming a minority shareholder in its own bank.

Not long before this happened, the Co-op’s chairman Paul Flowers resigned. He might have had to go anyway, because of the scandal over the bank, but his departure was hastened by his being filmed spending £300 on buying cocaine and methamphetamine. Flowers was a Methodist Minister at the time, and a former Labour Councillor, so the embarrassment he caused extended well beyond the confines of the Co-op alone.

So the Co-op had moved into that special status that’s known as ‘troubled’ in the business world. Things weren’t going well. And as the decline continued, the movement decided that it had no option other than to recruit new top executives.

Just this weekend, it emerged that its Chief Executive was being offered a package for 2013 worth £3.66 million. His predecessor received £1,3 million, a figure that presumably seemed far too little to struggle by on for a self-respecting business leader.

Serious increases were being handed out across the whole senior executive team. Six were on income of between £500,000 and £650,000; equivalent executives in the past had been on between £200,000 and £400,000.

When quizzed about these salaries, the Co-op responded that they were based on comparisons with other large companies. In other words, because other companies pay ludicrously inflated salaries to their top staff, so should the Co-op.

It’s ironic that they’re doing that just as their ethical credentials are becoming distinctly tarnished. But is that even a coincidence?

Interestingly, today Euan Sutherland, the Chief Executive due to receive the remuneration package that caused the scandal, resigned from his post. It seems it was the leaks concerning his pay that prompted him to go – he declared on Facebook that “an individual or individuals” were working to undermine him.

Euan Sutherland
Just the right smooth image for a Chief Executive
Though not for the Co-op, any more
More telling still was the sentiment expressed in his resignation letter. “Until the group adopts professional and commercial governance,” he said, “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 other words, as well as paying the kinds of salaries that are the norm in the City, the Co-op, in his view, ought to be run in exactly the same way as any other corporation.

Well, it’s made a mess of its banking arm. It’s having trouble coming to terms with its old democratic structure. And one of the great reforms that Sutherland had been trying to push through was the sacking of 5000 staff.

Sounds like he, and those on the board who supported him, were already well down the way to making the Co-op just another company like any of the others.

I’ll still keep going there. But I wonder how much longer it’ll feel any different from shopping at any other supermarket?

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