Private Investor: Why building societies don't get my vote

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The Independent Online

I'm one of those people who really enjoys voting. Maybe fewer and fewer of my fellow-citizens can see the benefits of taking part in the democratic process, but my passion for putting crosses and numbers on ballot forms is unabated. I even vote in National Union of Journalists by- elections. That's how much it means to me.

Taking part in building- society elections holds a special appeal. Every year, I get a few mailings from these institutions and I usually take the time to look at the documentation. The other day, I received some post from the Stroud & Swindon Building Society, a tiddler even by the denuded standards of the sector. There were reasons to be cheerful in it. If you vote, the building society will send 10p to the St Rose's School Charity, which sounds like a deserving cause. It is also seeking to appoint a non-executive director from the ranks of the membership, although the sort of experience and qualifications that it specifies suggests that it is looking for another figure very much in its own image rather than a truly "Joe Public" character. Still, I suppose it's a step forward.

What is more retrograde is the sort of financial rewards that the directors of these smaller building societies pay themselves. Now, I know that they are all regulated by remuneration committees, and are admirably open in the publication of the figures, but they make for alarming reading. At the Stroud & Swindon, for example, I notice that the directors' pay bill in total fell last year to £848,000, from £905,000 in 2005. Admirable restraint, you might think. Except that the society only makes £6m profit (down from £7m the previous year). Why so much for the bosses?

Then there's the case of the Derbyshire Building Society. I'm not sure that its ballot paper is a model of democratic propriety. The so-called "quick vote" option is highlighted in bright orange, with a big arrow pointing at it, and, naturally, signs over your vote to the chairman of the meeting to use as he sees fit, which we can guess will be in the way the society's management would like it to be. That's not a "quick vote" but a non-vote, in my view.

If you're a member of the Derbyshire, and should you choose to exercise the choices on the ballot paper yourself, they are there for you, but outlined in a much paler, blue ink. And what are you voting for? The four executive directors of the Derbyshire made do with a total remuneration of £888,674 in 2006, up 41 per cent on 2005 (£626,763). Why such a big rise? I admit the profits are up, at £16m from £12m, but those directors' emoluments again look a pretty big percentage of those profits. And why does such a relatively small institution need seven non-executive directors? The Stroud & Swindon benefits from the wisdom and guidance of six non- executives, also more than enough, I'd have thought.

The point, I suppose, is that what remains of Britain's building-society sector needs to do a better job of marking itself out as genuinely different from the listed banks and, indeed, the larger building societies. The regional and local players rarely make it into the best-buys tables, and they don't, so far as I know, employ markedly different commercial practices to their larger counterparts. Apart from a few contributions to charities, what is the point of them? And what, indeed, is the point of them paying their directors what seem to be very generous levels of pay?

Ironically, these small societies may need to be leaner in the future, if they have any hope of competing with the big boys. They could start with trimming the size of their boards and their pay bills. That, or just let the directors rake it in until a larger society buys them, and it, in turn, is taken over by the Nationwide, which could, quite easily, be the only building society in the land in a decade or two's time (if it hasn't itself demutualised by then).

So, I shall be voting against most of the directors of the Stroud & Swindon and the Derbyshire building societies respectively, on the grounds that they're paying themselves too much, and, in the case of the Derbyshire, that the ballot paper is misleading. And I urge you to do the same, or, at the least, have a look at that tedious-looking missive from your own building society. It's likely to be much more interesting than it looks.

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