The Co-operative Group has been warned it will collapse unless drastic steps are taken to overhaul a "massive failure" of governance.
Former City minister Lord Myners made the warning in a damning interim review of the group's operations.
Lord Myners rounded on the Co-op's board because of oversight failings and inadequate experience for such a large organisation.
He was "deeply troubled by the disdain and lack of respect for the executive team" held by some board members.
Euan Sutherland has left the Co-op Lord Myners added that some members, elevated from within the Co-op, had "simply not been up to their task".
He said: "The Co-operative Group suffers from acute systemic weaknesses in its governance framework that over many years have gravely damaged the organisation."
"Unless the group takes urgent steps to reform its governance so that it generates sustainable economic value, it will run out of capital to support its business."
Lord Myners was commissioned by the Co-op to conduct the governance review.
He decided to publish his findings earlier than expected after the shock resignation of chief executive Euan Sutherland.
Mr Sutherland quit on March 10 and said the Co-op was "ungovernable" with some board members thwarting reform attempts.
Lord Myners, who is also a new board member at the Co-op, said it was only due to Mr Sutherland and his executive team that the group remained viable.
His report revealed a board that was lethargic to change and potentially hostile to operational management.
He said: "There is a phrase frequently used in Co-operative Group circles that the executive should be 'on tap but not on top'"
Following Mr Sutherland's resignation on Monday the Co-op board agreed to the main recommendation by Lord Myners' review that it should be abolished in favour of a new "plc" style board, responsible for taking commercial decisions.
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