Co-op boss cuts own pay by 60%
Richard Pennycook asked for his pay to be reduced after steering The Co-operative Group to ‘calmer waters’Jermaine Haughton
After undertaking a difficult revival of his company’s fortunes, the boss of the Co-operative Group has taken the bold step by demanding and getting his own salary slashed.
Motivated by an increase in sales, chief executive Richard Pennycook has asked the corporation’s board to slash his pay from £1.25 million to £750,000, as the Group marks a significant turnaround in its fortunes.
Chairman Allan Leighton has also said he will waive his £250,000 annual pay and donate it to the Co-operative Community Investment Foundation.
The company’s financial reports for 2015 show a 1.6% rise in like-for-like sales across its 2,800 food stores, with underlying profits in the food business improving by 3.3% to £250 million. The Co-operative Group also recorded a 9.9% jump in sales for its funeral business, and bolstered underlying profits by 18% to £78 million over the period.
Independent experts and grocery analysis body Kantar revealed that the Co-op's sales rose at their fastest rate since it snapped up Somerfields in 2011, climbing 3.9% in the 12 weeks to March 27.
Speaking to BBC Radio 4's Today programme, Pennycook explained his decision was “appropriate” considering the strong sales and cost-cutting measures that have prompted the Co-op’s improved financial performance.
"We've been through a difficult period which was very intense and I hope members would regard my remuneration as having been appropriate for that time,” he said. “But we're now in calmer waters, we're a different sort of organisation owned by its members."
The debate regarding the disparity in pay between senior executives and low-level workers has stirred tempers in recent years, and has provided a difficult proposition for boards aiming to keep their workforce happy and engaged, while also hiring the best bosses to lead their firms to success.
The salary cut by Pennycook, which will total more than 60% including bonuses, will provide much needed positive publicity for the firm after a series of controversies, and will galvanise the corporation’s 70,000 UK staff, who the chief executive praised for their dedication.
While Pennycock and co. have been able to restore some stability to the Co-op Group through sharp cost-cutting, their latest financial results for 2015 show that challenges are set to continue.
The firm said pre-tax profits hit £23 million, down from £124 million in 2014 when it was boosted by a £121 million one-off disposal. Furthermore Group revenues fell slightly to £9.3 billion, down from £9.4 billion in 2014, while group underlying pre-tax profits rose to £81 million, up from £73 million.
Pennycook said: "This has been a year of further progress at the Co-op as we have invested to drive the growth of our businesses. Underlying profits have increased but our priority this year has been on putting the building blocks in place for the long term.
“We are, however, only one year into our rebuild and whether it is driving further growth in our businesses, improving member engagement or getting back to our campaigning roots, there is still much to achieve."