No on can doubt that Nationwide Building Society ticks many boxes when it comes to doing things right by the customer. But it is not a perfect financial services business. Far from it, especially when it comes to the thorny issue of executive pay – that is, bloated rewards.
While the society’s commitment to customer service par excellence stands it apart from many competitors, as does its faith in a robust branch network and support of communities where it has a presence, these positives are blemished by what goes on in the boardroom.
Its business approach is admirably customer-centric but when it comes to remuneration for the bosses, Nationwide behaves like a public listed company. Largesse rules the roost of this Swindon-based financial business.
Largesse rules the roost: When it comes to remuneration for the bosses, Nationwide behaves like a public listed company, says Jeff Prestridge
Its report and accounts, released last week, confirm this. In the year to this April, its four (male) executive directors received remuneration totalling nearly £6.6 million.
Although only a 2.4 per cent increase overall on the year before, it compares to average remuneration for the society’s near 18,500 employees of just over £44,000 (a figure that few customer-facing staff would recognise).
For the record, executives Joe Garner (chief executive), Tony Prestedge, Mark Rennison and Chris Rhodes received respectively £2,317,000, £1,410,000, £1,531,000 and £1,319,000.
Nationwide argues that these packages are ‘below market’ for top executive pay. In addition, it says that it does not offer executives the bounty from lucrative LTIPs – long term incentive plans – although it is happy to hand Garner £903,000 in performance-related pay.
It is also a fact that last year a number of building society executives received bigger percentage increases in their overall remuneration than Nationwide’s gang of four – a fact we highlighted two months ago when we exclusively examined the 2017 remuneration of society bosses.
For example, Skipton boss David Cutter received a 9.9 per cent increase, taking his overall package to £1,012,000.
Exclusive: How The Mail on Sunday revealed the pay of building society bosses in April
Yet, I am sure that at a time of derisory savings rates, many of the society’s 15 million ‘members’ will feel that the executives are getting too big a slice of the cake.
Executives first, members second. Angry customers have two choices. They can vote with their feet and take their money elsewhere although I would not countenance such a strategy.
As a report from consultancy group Brand Finance confirmed last week, Nationwide currently has the most compelling brand in UK banking – outperforming traditional banks such as Royal Bank of Scotland (bottom of the pile and just voted the least trusted financial services company in the UK by personal finance magazine Moneywise).
Jumping ship does not make sense.
Alternatively, they can stick but vote against the directors’ remuneration report ahead of the society’s annual general meeting in next month.
Indeed, Nationwide customers eligible to vote will be receiving the necessary tools in the next few days when their ‘AGM’ voting packs come crashing through their letterboxes.
Although a vote against the gang of four’s mind-blowing remuneration will not result in them returning a slice of their gains, it would send a strong signal to those non-executive directors that preside over the executives’ pay that enough is enough.
Executive largesse should not be a given.
My bedtime reading for the past couple of nights has been John Newlands’ excellent history of investment trust Dunedin Income Growth. Although the trust is not the oldest – that accolade goes to 150-year-old Foreign & Colonial – it was the first to be formed in Scotland (Dundee) and has been going about its business for the best part of 145 years.
Initially launched to invest in the great emerging market of the day – the United States – the trust has survived everything thrown at it: world wars, depressions and stock market crashes aplenty.
Set up by Robert Fleming – a name synonymous with the City and banking – the trust is now managed by Aberdeen Standard Investments. These days its investment focus is the UK rather than the US. For those who want an insight into the continued allure of investment trusts, I recommend it.
Generously, Aberdeen is offering readers of The Mail on Sunday free copies. So, if you fancy one, send an email or write to me at 2 Derry Street, London W8 5TS and I will do the rest.