Savers tell UK’s biggest mutual to curb directors’ pay
Nationwide told to cap executive rewards while savers suffer low interest rates
If they were ‘on our side’, there would not be bonuses or pay rises of 30 per cent: it would be more like three per cent
Alan Debenham, secretary, Building Societies Members Association
Savers are pressuring the Nationwide building society to show restraint over executive pay by curbing directors’ salary increases and bonuses.
The Building Societies Members Association (BSMA) argues that Nationwide, the UK’s biggest building society, and other customer-owned mutuals should also have binding annual votes on executive pay, in line with government plans for shareholder-owned companies.
Following the recent surge in investor opposition to high company pay deals – the so-called “shareholder spring” – the BSMA says that societies should not give “excessive and outlandish” rewards to executives, particularly when savers are seeing stunted growth due to very low interest rates.
Nationwide, which has the highest paid directors of any building society, is gearing up to publish its boardroom pay for the 2011/12 financial year, ahead of its annual meeting in July.
About 15 million Nationwide savers and borrowers, who make up the society’s membership, will be able to vote on its directors’ remuneration report in coming weeks.
The society has already confirmed its top executives were awarded increases of about 30 per cent in their base salaries in 2011/12, taking chief executive Graham Beale’s annual basic pay to £825,000.
In the previous 2010/11 year, Beale’s total remuneration was £1,884,000, while finance director Mark Rennison also earned more than £1m.
Alan Debenham, BSMA secretary, said: “We are hoping Nationwide will lead the way in terms of us ‘all being in it together’. Most building society members are receiving pay freezes or cuts.”
The society’s slogan is, “On your side”, and Debenham added, “If they were ‘on our side’, there would not be bonuses or pay rises of 30 per cent: it would be more like three per cent.”
The BSMA is preparing to urge Nationwide members to vote against the society’s remuneration report, following the high salary increases already announced for 2011/12. Debenham argues that the society should also limit executive bonuses to no more than 30 per cent of salary. In previous years, bonus payments have exceeded directors’ salaries.
Alan Oliver, Nationwide’s head of external affairs, said that while base pay for the society’s executives had risen in the past year, bonuses would be lower as a per-centage of overall remuneration. He added that the society was only a “median payer” among large retail financial businesses and Nationwide had a successful 2011/12, posting a 10 per cent increase in underlying profits, to £304m, and a 44 per cent increase in residential-mortgage lending.
“By any objective analysis, it was a year of considerable achievement,” said Oliver. He declined to comment on whether the society was expecting a strong vote against executive rewards this year, but said: “The annual meeting is an opportunity for members to tell us [what they think].”
He would not say whether Nationwide would, in future, make its pay-vote binding Currently, executive pay-votes in the UK – for societies and shareholder-owned companies – are only advisory. He said that the society had previously followed best practice on corporate governance.
In May’s Queen’s speech outlining planned legislation, the government said that it would make such votes binding at shareholder-owned companies, but mutuals were not mentioned. Growing opposition to high executive rewards has seen several companies effectively lose their pay-votes this year.
However, the BSMA’s Debenham complained that building societies use voting “tricks” to make it harder for members to mount a challenge.
For example, Nationwide and others prominently display a so-called ‘quick vote’ or ‘fast vote’ option on their voting forms. Members who select this hand their votes to the society’s chairman, who then uses them to support the board. The BSMA argues that thousands of members are misled into unintentionally backing society boards.
Electoral Reform Services, partly owned by the Electoral Reform Society, runs polls for about half the remaining 50 societies, and says that the “vast majority” offer their members ‘quick votes’. Its manager of corporate services, Elliot Roberts, said: “We do not have any issues with it,” although he added that changes had been made to some voting forms to clarify how the mechanism worked.
The Building Societies Association, the industry body, said that most pay-votes are passed with majorities of about 90 per cent or more.
Most societies have had their annual meetings for the 2011 financial year, but Nationwide’s is later because its accounting year ends in April.
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