Co-op boss volunteers for 60 per cent pay cut

Richard Pennycook, chief executive of the Co-operative, has requested that the group’s board members slash his pay by 60 per cent.

According to reports, Mr Pennycock has said the move, which will see his basic salary cut from £1.25m to £750,000 was “the right thing to do”.

His maximum annual incentive plan will be reduced from 100 per cent of base salary to 40 per cent, while the maximum for his long-term incentive plan will be reduced from 100 per cent to 50 per cent.

In 2014, when he took over the Co-op branding the £2.5bn losses at the company a “disaster” he received a total of £2.5m remuneration.

However, his pay for last year was due to rise to £3m because of a larger annual bonus.

Under the new model the maximum Pennycock could be paid is £1.5m, with a minimum of £839,000.

Pennycook took over from Euan Sutherland, who quit following revelations of his pay package.

The group executive committee has also voluntarily reduced their pension contributions from 16 per cent of salary to 10 per cent, in order to bring them into line with less senior colleagues.

A year prior to Mr Pennycook’s arrival, the Co-op was rocked by news that its bank had a £1.5bn hole in its capital. That was rescued by a group of investors and the Group retains a small stake in the bank.

The Co-operative Group, which comprises 2,800 food stores, 1,000 funeral homes and financial services, said it had made progress this year, with sales at both its food and funeral home businesses growing.

Profit was £23m for the year, down from £124m last year, when the figure was boosted by a one-off gain of £121m from selling parts of its business.

Sales in its 2,800 food stores grew 1.6 per cent, to give a £250m profit.

At its funeral homes, which is the largest chain in country, profits were £78m and sales rose by 9.9 per cent.

Group underlying profit before tax was £81m, up from £73m last year.

Simon Walker, director general of the Institute of Directors, called Mr Pennycook’s decision “refreshing”.

He said: “The Co-operative Group has had a very difficult couple of years, culminating in a radical restructuring of the business. During this time Mr Pennycook has had to work hard to get the Co-op back on track. His pay reflected this additional work. Now this his finished, he has taken it upon himself to ensure that his salary reflects the work that will be required of him going forward. This is refreshing and should be seen as a lesson for other businesses.

“The IoD has said repeatedly that a CEO’s pay should be transparent and linked to performance. The proactive steps taken today by Mr Pennycook and the Co-op’s board should be a wake-up call to other companies. Being open, honest and transparent about the salaries of senior executives can go a long way to restoring public trust in British businesses.

“It remains the case that, for shareholders, the salaries of some CEOs seem unjustified. As we enter AGM season, I hope that today’s news acts as an example for boards to reflect on the level of CEO pay, and that steps are taken to adjust salaries and bonuses when performance disappoints, or the role, scope or responsibilities of the job change. This isn’t just good corporate governance, it also makes good business sense.”