Co-op must implement sweeping reforms or it will fail again: review report

A nine-month review the Co-op Group and Co-op Bank by former Treasury mandarin Sir Christopher Kelly exposed a number of leadership and management shortcomings that left the huge business struggling for survival.

The report revealed that there were serious flaws in the Co-op's democratic structure and those who were in charge lacked skills needed to run such a large business. It accused directors and executives of failing to take risk management seriously.

Speaking about the findings, Kelly said, "The board lacked in sufficient numbers members with the experience and capabilities to carry out its functions."

He added that the Co-op overestimated its size and abilities, and tried to grow too rapidly that created devastating consequences.

The report also revealed that the directors were unable to properly understand the business, until the crisis struck the business. Executives appointed to run the business had too little experience because the Co-op Group's board members were elected based on members' concerns and not on their abilities and experience.

In addition, no written document precisely explained the link between the Co-op Group and Co-op Bank, which left both sides uncertain on how to behave.

All those shortcomings required the Co-op Bank to opt for a £1.5 billion emergency fundraising that allowed US hedge funds capture a majority stake in the business.

The 152-page report, which cost the national exchequer £4.4 million, also warned that the business must implement sweeping reforms or it might fail again.