Although mutuality is a force for good in financial services, it is not a given.
Member-owned businesses are not guaranteed to succeed, nor provide customers with the products and quality of service they deserve. Far from it.
No organisation has besmirched the mutual badge more than Equitable Life which was run into the ground in the late 1990s as a result of mismanagement – and insipid regulation. Customers saw their investments savaged in order to keep the business afloat.
Nationwide Building Society’s stance on directors’ remuneration sticks in the craw of some customers, sayd Jeff Prestridge
In recent years the punctured Equitable dinghy has been successfully reflated, a result of shrewd stewardship under the watchful eye of chief executive Chris Wiscarson. He has cut costs to the bone and sold off what he could. It has been a successful strategy, culminating in Equitable’s proposed sale to insurer Reliance Life.
For some 263,000 policyholders – those holding so called with-profits plans – there will be icing on the cake with the prospect of a 60 to 70 per cent uplift in the value of their plans once the takeover is finalised. This is likely to be towards the end of next year.
While such a financially happy outcome is great news for policyholders, it will do nothing for those who have jumped off the Equitable boat – and, of course, those who died along the way.
Compared to Equitable, Nationwide Building Society’s history as a mutual has been far smoother. It has had its horrible moments, most notably in 1994 when it embarrassingly sold its loss-making estate agency arm for £1. But it has since cemented its position as the most customer-friendly brand in UK banking.
Yet, as we report this week, the society’s stance on directors’ remuneration sticks in the craw of some customers. They believe that the rewards given to the society’s executive directors are excessive and are unbecoming of an organisation owned by its members.
Nationwide’s members now have the opportunity to vote again on directors’ remuneration ahead of next month’s annual general meeting
Last year, some 40,000 members – out of an eligible total of eight million – voted against the directors’ remuneration report at the society’s annual general meeting.
Some would say this was a subdued protest vote, representing just under 7 per cent of votes cast, although I am sure many who voted in support of the report did so only because they opted for the ‘quick vote’ – surrendering their votes to the society’s chairman who naturally cast them in favour.
Nationwide’s members now have the opportunity to vote again on directors’ remuneration ahead of next month’s annual general meeting. The society claims its four executives are worthy of the £6.6 million of spoils that they received in the year to April 5. Others such as Alan Debenham, secretary of the Building Societies Members Association and long-time Nationwide customer, disagree.
If you are a member, I implore you not to waste this year’s vote. So, if you are content with the way the keeper of your savings or mortgage is being run, and believe its executives are worth every dime they receive, vote quick. But if you think the executives are overpaid at a time of austerity and uncertainty, opt for the standard vote and vote against resolution two. Do not sit on your hands.
With mutuality very much in mind, an all-party parliamentary group has just been formed to look into the lack of diversity in the financial services industry.
The Group for Challenger Banks and Building Societies, chaired by Conservative MP Kemi Badenoch, believes that regulation of the City is too centred on the long-established banks. As a result it does not satisfactorily take into account alternative models such as building societies or accommodate new start-up banks.
The result, says Badenoch, is a perpetuation of the status quo, inhibiting building societies from flourishing while making it difficult for new challenger banks to get off the ground.
It means that compared to the US and elsewhere in Europe, the UK’s financial services industry lacks institutional diversity and sufficient consumer choice. The group’s first task is to launch an inquiry to see whether financial regulations can be adapted to encourage, not discourage, competition.
Although the group is fledgling, it will shine the spotlight on important issues. For that, we – as consumers – should be grateful. The vibrancy of the financial sector depends upon choice, not continued dominance by a few banks which have done little to convince us that they put customers first.
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