Simon Read: Should our mutual friends really be paid so much more money each year than the Prime Minister?
Simon Read is Personal Finance Editor at The Independent. He edits the Saturday Your Money section and writes the Daily Money column and Wednesday’s Midweek Money section in i newspaper. He also writes for the news and business pages of the Independent and i newspaper and is a regular money commentator on TV station London Live. He has won numerous awards including Consumer Finance Journalist of the Year.
Saturday 10 May 2014
Reader Robin Waite writes in from Leeds with a request. "Can you give some publicity to the Skipton Building Society?" he asks. But not to praise it. Far from it. In fact Robin is angry at the pay increases enjoyed by chief executive David Cutter.
"His total remuneration soared from £617,000 in 2012 to £751,000 in 2013," Robin points out. That's an increase of 21.8 per cent. "But on top of that," Robin continues, "he was awarded a further basic salary increase of 8.1 per cent in 2014."
His angered is centred around the fact that the Skipton is a mutual, which means it is in business for the benefit of its members, not just to boost the pay packets of its bosses.
"What about the many savers and pensioners who find that the maximum rate of interest that they can get on a standard deposit account is just 1 per cent gross?" Robin reasonably asks. "That's an all-time low and well below the rates of inflation."
"How on earth can this practice be called a mutual when we see so much greed at the top," he wants to know.
It's a fair question. Are building society bosses paid too much? The spotlight was shone on the Saffron last month after it was revealed that its chief executive Jon Hall had his total pay package boosted by 33 per cent to £323,000 last year. Meanwhile over the same period, the Saffron made 84 cuts to savings rates.
But it's not just savers fed up with paltry returns who are angry. Anyone experiencing a pay freeze or laughable rises of between 1 per cent-2 per cent will look on with a mixture of envy and amazement that the top people at building societies can justify such increases.
Meanwhile others will question the wisdom of rewarding the bosses of so-called mutual building societies with massive pay increases on top of their already fat wage packets. Sure we need strong expert leaders to run our mutual societies, but do they need to be paid so much?
Next month it will be the turn of Graham Beale, the chief executive of the Nationwide, to reveal his latest pay increase. Do you want to know how much he was paid last year for his efforts? Hang on to your hats – it was a tasty £2.2m!
Is he worth it? The building society thinks so. "At Nationwide there is a fundamental link between performance and remuneration," the mutual told me. "We pay for performance – we recognise achievement and don't reward failure."
It points to the fact that under Mr Beale's leadership, Nationwide's market share of current accounts has grown and that members voted by 92 per cent to approve the directors' remuneration.
Does that make his salary package seem reasonable? Not to me. I understand the concept of the bigger the society the more responsibility. But I would take issue with the need for Saffron's Mr Hall to earn twice as much as the Prime Minister, let along Skipton's Mr Cutter trousering three quarters of a million. Is being boss of the Skipton worth a salary twice that of the Saffron? For that matter, is the Nationwide chief worth his three times the salary of the Skipton or six times the wage of the Saffron? To put it bluntly, Graham Beale earns roughly 12 times as much as what we think the Prime Minister is worth.
Fair? What do you think? Before we leave the subject let me point out that Paul Ellis, the chief executive of the ethical Ecology building society, earned just £84,000 last year and enjoyed a pay increase of 1.2 per cent. It's a comparatively small building society but it should be applauded for keeping bosses' pay under control.
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