City & Business: When it's time to stand by your man

Have you noticed that there is never a National Westminster Bank non-executive director around when you need one? These custodians of broader shareholder interest have been noticeable only by their absence during the last few traumatic weeks. The media has informed the world that the bank's strategy has been challenged, its chief executive is under threat and the very independence of this proud institution is in doubt. These assertions are serious, damaging and generally incorrect. Surely then it is time for the non-executives to stand up and put the record straight?

Not so says the bank. That is not the job of the non-executive. I must disagree. Custom and practice may dictate that the non-executive directors are only supposed to speak up when things are going wrong. I believe that it is equally important for them to be as vocal when the outside world is being led to believe that things are going wrong but are in reality going right.

Shareholders are much less concerned about the NatWest strategy than the media. They are also much more supportive of chief executive Derek Wanless. Staff and customers do not know that. Nor indeed do potential employees. I know someone who has turned down a job because of all the problems reported in the press.

The non-executives must see it as their responsibility to support the executive. A ringing endorsement of Derek Wanless and his strategy by the non-executives would put on the record a powerful demonstration of independent support.

Certainly, the bank's executives will use the interim results announcement next week as an opportunity to redress the balance - but then they would wouldn't they. How much more forceful the words of encouragement would be if they came from the non-executives away from a set piece event.

So far, however, they remain silent. It is unfortunately a silence which is stony rather than golden.

Our mutual friends

Last week's resounding rejection by Nationwide members of rebel board candidates was widely interpreted as an endorsement of mutuality. I would prefer to see it as a refreshing shift away from self interest towards a broader responsibility. The building society movement has its roots in the principle that a collective social responsibility recognising the mutual interests of capital and labour was a desirable objective. It was encouraging then to see that a lot of people still recognise the importance of that principle.

In the run up to the vote I was growing weary of the greedy bungees to be who openly boasted of their skill in building up a portfolio of accounts. For them a pounds 2,000 plus windfall represented nothing more than an excellent return on their shrewd investment. The "greed is good" culture still thrives in the nineties it seems.

Thankfully, the Nationwide members proved to be more thoughtful and long- sighted than their carpet- bagging cousins. They shunned the quick profit, preferring to conduct the society's affairs in a manner which is more in tune with the movement's history.

If the Nationwide is to abandon mutuality then the members have made it clear it will be on their terms. They are not prepared to be bullied or bribed into something which has implications which go way beyond the size of the bung.

In time there may well be a case for demutualisation but for the time being that is not proven. That is not to say that the Nationwide board can sit back complacently and bask in the glory of its victory. Far from it. It is now under an even greater obligation to behave with the same responsibility demonstrated by the membership.

They do not have a mandate to remain forever mutual. Rather they have been given a clear instruction to act in keeping with the spirit of the building society movement. Mutuality, does not of itself preserve a spirit which requires constant nurturing and constant updating to reflect changing times. It is, however, a spirit which needs to be preserved. The Nationwide membership have done us all a great service. We must try and build on their example.

I'll drink to that

Over years the water companies have not always enjoyed overwhelming public support. Given the arrogance and incompetence which some have demonstrated this is hardly surprising. Sometimes, however, it is almost possible to sympathise with those businesses which have made a determined effort to rehabilitate themselves.

A case in point is Thames Water which has been regularly pilloried for its water leakage levels. Last week it was able to report to a House of Commons select committee that leakage from its pipes had fallen from 30 per cent to 20 per cent. It has rescued enough water since January to supply a quarter of London. A creditable performance? Not with everyone it appears. When leaving the house the Thames delegation was accosted by an environmentalist who said that by stopping all these leaks the company was putting at threat hundreds of trees which had been drinking at the leakage well.

The point is that when it comes to water leakage there is always a cost which is sometimes more intangible but greater than the obvious benefits - an important issue in the context of the forthcoming debate between the industry and the government over formal targets for leakage rates. Nil leakage may be a worthy target but it is also impractical in most cases.

The good news for Thames shareholders is that the company has demonstrated that it is capable of dealing effectively with the leakage problem. It will able to negotiate with the government with confidence later in the year. This is to be expected from a company which has made a remarkable come back from the dark days 18 months ago when it lost a chief executive and its way internationally. This week's AGM will provide the perfect platform to remind investors of what good shape it is in.

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