I don’t expect we’ll see any of the chairmen of Britain’s six biggest building societies on video, scoring crystal meth from shifty looking blokes in cars, as Paul Flowers, the former chairman of Co-op Bank, was filmed doing. As skeletons in closets go, this one is king sized.
All the same, the chairmen of Britain’s big building societies are a motley bunch indeed.
To be fair, we can probably exclude Nationwide from that list. In Geoffrey Howe, the sector’s one big gun has in post a City veteran who is clearly capable of doing the job – but just as capable of putting his foot in his mouth about the grotesque sums paid to the society’s execs. (Apparently ordinary people just don’t understand the need to keep rock star executives in the manner to which they have become accustomed.)
But elsewhere you have a former local council/airport boss (Yorkshire) and an engineer who left London taxi maker Manganese Bronze amid some unhappiness over the delivery of its strategy (Coventry).
But it gets better. I suppose running a doorstep lender is a tick in the box when it comes to banking experience. But it’s interesting that Leeds’ Robin Ashton makes no mention of Provident Financial in his biog on the society’s website. His tenure at the top there was a less than happy one. Regrettably, Provvie, the Wonga.com of its day, is still with us.
Then there’s Mike Ellis, at Skipton Building Society. Another man with banking experience, in his case as finance director of a certain HBOS. The same HBOS that was rescued by Lloyds. Which then, as a direct result, had to go cap in hand to the taxpayer for a multibillion pound bailout.
Do you have money on deposit at any of the above? Still feel comfortable about that?
Of the five after Nationwide, only the smallest, Principality Building Society in Wales, has a chairman – Dyfrig John – with a solid record in banking.
The best of it is, if the “worthies” listed above first served as non-executive directors they would not have been re-interviewed by the Financial Services Authority before moving to the head of the boardroom table. That should concern us.
Co-op’s problems have laid bare some of the problems with mutuality as a model for the ownership of a business. The concept sounds marvellous: member-owned institutions in theory ought to do better for their customers than companies whose first duty is to provide returns for their shareholders.
However, as Co-op has demonstrated, hire the wrong people to run them, or the wrong non-executives to scrutinise those people, and high-minded ideals can quickly turn to ashes. Problems can go on accumulating quietly, only becoming evident when they have turned into out-and-out crises.
As long as PLCs don’t rip off their customers or call on the taxpayer, their shareholders deserve what they get if they fail to keep an eye on the boardroom.
But building societies are different. It is extremely difficult for ordinary members – savers and borrowers – to get a handle on what’s going on. Even if they have suspicions, getting their voices heard is extraordinarily difficult.
They are reliant on regulators – and, as we now know to our cost, regulators were asleep at the wheel during the financial crisis.
They need to wake up. Re-interviewing the above to assess their suitability to serve in the crucial role of chairman would be a start.
PS: Lest you think the 57-branch Principality is a paragon of virtue, it paid its outgoing chief executive, Peter Griffiths, an astonishing £414,000 for just nine months’ work in 2012. Then topped it up with a pay-off of £252,000 “in lieu of the balance of his contractual notice period”. Despite the fact that he resigned. With a banker as chairman, should we be all that surprised?
A good idea that executive pay committees will ignore
Look out: the National Association of Pension Funds is coming for you! Yes, the NAPF has decided (belatedly) to take a tougher stance on the issue of executive remuneration and has published new guidance for its members and the firms in which they invest.
It’s all basically sensible stuff (so why only now?); with a red line drawn through certain genuinely scandalous practices. These include weak performance targets, or the habit of some remuneration committees of changing them if they are not met. Also coming under fire are ex gratia payments, one-off bonuses and other similarly dubious practices.
Admirably, the NAPF has also told companies it wants to see an end to golden hellos, at least unconditional ones, and would like an explanation if executives are to be given rises in basic pay in excess of those offered to their workforces.
The trouble is, remuneration committees and the executives they gild with riches are unlikely to be overly concerned. The NAPF’s heart is in the right place, but enduring a finger wagging from it is much like being slapped with a wet lettuce.
The overall value of packages at the top of the FTSE 100 continues to rise at an astonishing rate, as the latest research from Income Data Services makes clear: a median rise of some 14 per cent. Shareholders’ interests are not well served by this, despite the corporate bluster claiming otherwise.
The trouble is, it is all very well publishing guidance. But it doesn’t matter all that much unless that guidance is translated into action. Unfortunately, after last year’s “shareholder spring” the City has resumed its slumber, falling back on the same tired and largely self justificatory arguments for ever more outlandish settlements.