Coffee House

The corporate world is barely aware of the monster it has created

13 March 2014

10:12 AM

13 March 2014

10:12 AM

Strange goings-on at the crippled Co-op, where chief executive Euan Sutherland was reported to have tendered his resignation in anger at a leak of plans to pay him £3.6 million for his first year’s work — vastly more than his predecessor, and despite group losses of £2 billion resulting from a black hole in its bank. As a retailer trained in the ways of Currys and Kingfisher, Sutherland evidently feels the Co-op is too politicised to reform, and that elements within it are determined to undermine him.

The benign alternative form of capitalism that the Co-op represents is now on the edge of collapse; survival for a diminished retail and funeral business may come at the cost of closing down the bank. The causes of failure are certainly deeper and wider than the dissolute behaviour of its former chairman, Revd Paul Flowers. But this was clearly the wrong moment to throw salary-doubling ‘retention payments’ at Sutherland and his senior team to persuade them to accept the challenge.

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Distorted executive pay is a factor in almost every story of a company in trouble, yet the corporate world — obsessed by peer-group comparison — is barely aware of the monster it has created.

This is an extract from Martin Vander Weyer’s Any Other Business column in this week’s Spectator.

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  • andagain

    The benign alternative form of capitalism that the Co-op represents

    I don’t see how it is that different fromother partnerships, such as Goldman Sachs…

  • D Whiggery

    Well Mr CEO you have two choices:

    1. You can take a risk, join us and help to turn our company around. However, please be aware that our political masters, slaves as they are to public opinion, will only allow you to have a crappy bonus until we see the results of your work, by which time you’ll have probably moved on.

    OR

    2. You can go to another company that’s doing well, improve it’s performance slightly or at least maintain it and net yourself a big fat bonus from Day 1.

    Hmmmm

  • Makroon

    Whilst passing on the tittle-tattle that Sutherland resigned in pique at his salary being leaked, Martin thinks the lesson to be learnt is all about corporate remuneration.
    Listening to radio 5 yesterday, I was struck by a succession of callers who had worked for the Coop and were revolted by it’s nepotism, corruption and waste. That chimes exactly with my experience of a close family member who worked for the Coop as a manager for decades, until his health was broken.
    The Coop is a deeply flawed organisation, which should probably be wound up. That is the lesson.

    • Tom Tom

      Most companies are corrupt and British ones are incompetent because the British are temperamentally unsuited to running businesses other than as employees. The dearth of British-owned and managed Telecoms, Oil, Electronics, Engineering, Automotive companies speaks volumes

      • La Fold

        It saddens me to say it but in general you’re right. The British are terrible at managing medium to large companies.

  • James Strong

    Pay in the private sector should not be a matter of public policy.
    The only necessary aspect of public policy in relation to the private sector is
    NO BAILOUTS.
    Let talented, industrious, successful people enjoy the rewards of their efforts.
    Every bit as important, let them suffer the consequences of their failure.
    Then you’ll get better decisions; not perfect decisions, but better.

    • telemachus

      Nonsense
      The remuneration package has to reflect the company’s ethos part of which is a reflection of the environment/society in which it sits

      • James Strong

        Sure the pay package can reflect the company’s ethos.
        I say that’s for the company to decide.
        Not for outsiders, and most certainly not for the state.
        If people like you are offended by huge pay for CEOs then you can buy from competitors. If there are enough like you then the company will suffer.There’s still no place in that for public policy.
        It all works better if you don’t try to impose; instead let people stand or fall by their own decisions.

        • telemachus

          But in the Coop which is part of the Labour movement it is legitimate for the wider socialist fraternity to have its say
          Sutherland was a fool not to have recognised this from the outset
          He bleated Governance for leaving but in truth he was piqued that his pay had been leaked and feared he might be shamed into making it more reasonable

          • Nicholas chuzzlewit

            He has wisely departed before the petition for winding up is submitted – something I am really looking forward to. Yet another example of leftist sanctimony, incompetence and waste. The Co-op is a microcosm of the Labour Party which, lest we forget, is the party of lies, lying, liars, mediocrity and failure.

            • Tom Tom

              Well I am fascinated at RBS and wonder what the shareholder is doing there – it loses £46,000,000,000 and noone seems to feel any shame in claiming bonuses

              • Nicholas chuzzlewit

                I suspect few of the people claiming large bonuses today were working for RBS in 2008 and even if some of them were, I doubt if they think it was their fault. Personally, I find all this moaning about bonuses to be absolute cant and hypocrisy because few of the moaners would object were they the likely recipients of such largesse. That is the market and for all of its manifest unfairness and imperfections it is infinitely better than such lunacies as socialism.

            • telemachus

              But not electoral failure as you will glean next May

          • Holly

            As long as the Labour movement get their money, they are quite content to see it go down the pan.
            Those receiving the money will then moan about the ‘evil’ Tories, and their failure to take swifter action.

            The sooner it is put out of it’s misery the better.

        • Tom Tom

          I find the pay of the outgoing CEO of Heinz at $110 million to be excessive and so never buy Heinz products…….I am hoping to stop buying Royal Mail stamps because I think Moira is incompetent and overpaid and made a trash pile of Canada Post. I want to stop buying water from my private water company but am not sure who else will accept the sewage……wot, no competition on sewers !

          • Makroon

            I am sure a smart chap like you could easily arrange the installation (for a modest price), of a nice green digester.
            Or, if not, I am sure that Maris would jump at the chance to help you. Wink.

      • La Fold

        Nonsense.
        Wages and any bonuses paid out are the price of the labour of the individual that the company is willing to pay.
        As long as its not paid for out of the public purse then this is not a matter for public policy..

        • telemachus

          Not in an organisation with the principles of the Coop
          There is a spirit in such organisations which for effective running of such organisations must be respected
          Sutherland was a dope not to recognise that when he took it on

          • Makroon

            You evidently are unfamiliar with the Coop. Like the unions, it’s “principles” are mostly honoured in the breach.

    • Tom Tom

      The Coop has MEMBERS not Shareholders and they clearly did not approve

  • Diogenes

    That’s not why he resigned. That’s the face saving PR version to protect the Co-ops image.
    He resigned because the way the Co-op works the board takes all the decisions and the Chief Executive implements them. The decisions are idiotic because of the kind of people on the Co-ops board – Reverend Flowers ain’t the half of it – and also because committees never take good decisions about anything being too busy shifting blame and not shouldering any personal responsibility. So the freakish system of governance means the Chief Executive isn’t really in charge but still carries the can when the inevitable train wreck ensues. Anyone worth their salt would resign under those circs and no one who was any good would now be willing to take the job.
    In my opinion.

    You have to offer lots of money for a job like that owing to the fact that anyone who takes it will never work again because of the reputational damage due to the enormous aforementioned train wreck. You’re not paying them a salary. You’re paying them all the money they’ll need for the rest of their lives up front.

    • Mr Grumpy

      Did he not do any research before the interview, then? If I was in line to get £3.6 million for my next 12 months’ work I don’t think I’d lose too much sleep over the prospect of never working again.

      • HookesLaw

        Correct and of course he did. The ‘reason’ given by Diogenese is rubbish.

        I did not notice the labour party howling blue muirder when this man was appointed or demanding to know what his salary was (they must have known it was high and indeed was Miliband informed?)

      • Diogenes

        I don’t know why he took the job. I wasn’t there. People lie at interviews, interviewers and interviewees, or tell half truths. That’s how life works. Maybe he thought he’d be more than a mere powerless implementer of orders from beneath the booted heal of the very Reverend Flowers corporate buddies. I cannot possibly know the why of it, I cannot read minds,.
        My thinking is that senior business executives have a tendency to believe they can walk on water and he probably believed they would do what he suggested out of respect for his supreme genius and awesome majesty.

        With respect to pay I too could live quite happily on £3.6 mil for the next few decades. But I would imagine that the kind of people who become Cheif Executives probably have higher running costs than us regular human beings: posh cars, fancy clothes, big houses, expensive wives, exotic holidays. The gift of high self esteem is not given to most of us and it has expensive running costs associated with it.

    • Colonel Mustard

      Fred the Shred worked again. Not for long and the company went out of business shortly afterwards but he was taken on.

      If you are a CEO with a common purpose it seems you can survive any major scandal and quietly sidestep into a commensurate position.

      • BarkingAtTreehuggers

        RMJM is most emphatically not out of business – FtS was just wutless at what he does can could not add to the business.

  • Eyesee

    It is perhaps a bizarre phenomenon but I think it exists and at every level. Chase the cheque has resulted in the poorest levels of nursing this country has probably ever seen, managers of every stripe (but particularly in the public sector where results rarely matter and control is lax) are incompetent and executives use their power to demand succeed or fail bonuses.

  • Robert_Eve

    It’s very apt that the Co-op is in the funeral business.

  • revkevblue

    Are you all blind, and deaf? This Bank carried out a bail-in just as bad as Cyprus.
    They stole the life savings of pensioner, who did not realise that income bonds made them vulnerable to this EU policy.it was legalise bank robbery and the media have ignored it. The labour party should hang its head in shame.

  • Colonel Mustard

    See what I mean?

  • swatnan

    Lets hope the stand the Coop has taken against this Bonus Culture will be copied by all Businesses. You should just get paid for doing the job; and no more. And all top pay should be capped at £1m or less.

    • BigAl

      While the clamour to rid the bankers of their bonuses is admirable we will still need to find others to pay the tax to make up any shortfall. Pay high earners less = less tax take. The deficit is still close to $100Bn every year. Even if the bankers were taxed 100% we would still have a deficit.

    • HookesLaw

      Where would the income tax revenues come from then? Your stupidity grows by leaps and bounds.
      And The Co-op have not ‘made a stand’ – they were willing to pay until he resigned.

      • swatnan

        He offered his resignation … the Coop said no thanks to his terms …. and accepted his resignation … and he went. Good riddence.
        The next CEO had better forgo any bonuses and be a co-operator otherwise the same could happen again.

        • Nicholas chuzzlewit

          And for those reasons, will be utterly incompetent and unable to do the job.

          • swatnan

            Money isn’t everything … money can’t buy love, I mean real love, for the job.

            • Nicholas chuzzlewit

              Well thank you for the whimsical sentiment, meanwhile back on planet Earth………..

        • Makroon

          Like the Rev. Flowers you mean ? He was an ace co-operator.

      • Tom Tom

        There is always Corporation Tax, but I see your point – double pay all round to increase income tax yield and raise the minimum wage to £20/hr

    • Nicholas chuzzlewit

      Brilliant idea, that way all the talented management can move abroad and leave British business in the hands of talentless mediocrities. A bit like the Labour Party.

      • swatnan

        They can take their ‘talent’ and get stuffed. We’ed rather have committed dedicated people.
        Salereri was a bit hard on medicrities; they are the ones that make the world go round. And Labour has a great many talented people below the surfaceworking for the cause, and not for themselves.

        • Nicholas chuzzlewit

          Yes and you will get committed, dedicated people who are incompetent. Like I said, back on planet Earth we achieve success in business by employing talented, competent people to do a specific job and pay them accordingly.

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