My meetings with Paul Flowers
Paul Flowers is an acquaintance of mine and a journalistic source. I’ve met him twice, both times for lunch, but I also did an hour long pre-lunch interview with him for a detailed profile in the leading sector magazine, Co-operative News.
The first lunch involved me flying over to Manchester – I think at my own expense, but certainly not on Paul’s expense account. He was keen to talk to me about two things. One was his feeling that he had been badly treated and misquoted in a profile with a Co-op News colleague. He was also keen to persuade me in favour of Project Verde, the ultimately abandoned proposed deal to buy 630 branches from Lloyds.
I had been consistently sceptical about Project Verde, fearing that a deal of this size was too big for Co-op and ran the risk of destroying it. I feared it represented a gamble on the Bank’s future in order to achieve substantial growth. I was eventually persuaded to support Project Verde – and in retrospect it was actually the previous deal to acquire Britannia and the history of mis-selling PPI that were the main factors in the near collapse of the Bank, not the failed Verde bid.
Ironically, one of the other talking points over our lunches and in the interview was the investment by the Bank in its IT platform. I say ironically as Paul was as bullish about the IT procurement as he was about the Lloyds deal – and equally wrong, we can say with hindsight.
Paul told me that the IT system being procured by the Co-op Bank would be the best of any UK bank and be the basis for substantial cross-selling. Instead, we have had massive write-downs on IT costs. This seems to me to have been the result mostly of repeated changes in growth strategy, which were inconsistent and led to a situation where the business growth strategy was mis-matched with the very expensive IT systems that were being procured.
I hope that the various inquiries into the failures at the Bank will focus heavily on the issue of these IT failures and the about turns on business strategy.
My impression of Paul was that he was both very affable and very plausible. He told me that he was stepping down at Bradford City Council in order to concentrate on his dual roles as chair of the Bank and vice chair of the Co-operative Group. That was certainly very plausible.
Flowers was keen to expand the Bank above and beyond the Britannia and Lloyds deals. I provided an introduction with another financial services business that at the time Paul wanted the Bank to acquire. Happily that deal did not take place, but I did have concerns at the scale of expansion being envisaged and the fact that this seemed over ambitious.
We didn’t discuss the financial situation of the Bank – there was no reason to as the write-downs had not taken place and there was no public discussion of any weaknesses. He said nothing to me to suggest that he was incapable in his role as Chairman. He was, after all, there to challenge the professional bankers – and it was only clear from his performance at the Treasury select committee that he had failed to do this.
I had not heard any rumours about drugs, pornography or rent boys – though I did, some time later, hear rumours about the latter and about the size of expense claims.
My main concerns regarding leadership of the Bank were actually elsewhere. I had interviewed two chief executives of the Bank – David Anderson who led the Bank into its merger with Britannia and Neville Richardson who led the combined bank. I was confident that David had the right CEO skills and I thought he should have continued to lead the Bank after the merger. I was never happy about Neville taking on the job and I did not think he was the right person to do so.
I was also unhappy about Peter Marks’ leadership of the Group. I never met Marks, but on two occasions he managed to obtain copies of articles that I had written and instructed the editor that they must not be published. A leader who does not allow his judgement and strategy to be questioned is usually not a good leader.
The whole leadership culture of the Co-operative Bank and the Co-operative Group will need to be examined in the coming months.