Myners Review of Mutuals
December 2004 – Paul Myners, chairman of Marks & Spencers, former chairman of Gartmore, chairman of the Tate galleries and non-exec director of many other companies, has now published his report on corporate governance of life mutuals with a few words on building societies.
Our Comment – As was expected the corporate governance of building societies has been glossed over. The report can be accessed on on HM Treasury website at www.hm-treasury.gov.uk/myners.
Kent Reliance Building Society
December 2004 – 7 of 11 branches sold off. Buy to let mortgage portfolio purchased from Skipton. Back office jobs exported to India but the society says it remains committed to local initiatives and charities!
Nationwide Building Society
November 2004 – Nationwide has announced the appointment of two new non-exec. directors Derek Ross and Geoffrey Howe.
Our Comment – Geoffrey Howe is ex-chairman of Railtrack – should members be pleased to have him?
Nationwide Building Society
November 2004 – Richard Handover the much criticised chairman and former chief executive of loss making WH Smith is to be replaced. Mr Handover is also a non-executive director of Nationwide BS.
Our Comment – Enough said.
Savings Accounts – Bonuses
November 2004 – A survey by Investec Private Bank reports that almost 50% of the best paying savings accounts fall below 5% after 6 months or less due to introductory bonuses. Building societies have long been criticised for using introductory bonuses to propel accounts into best buy tables. The high rates attract savers but they have a very short lifespan and savers are left with poor paying rates once the bonus period has ended.
The survey also shows that 20% of savings accounts pay less than 3% on balances even though the base rate is at 4.75%. The real rate of return is the amount left after deducting tax and inflation. With the low rates on many savings accounts that can result in a negative figure.
BSA response to the Myners Review
October 2004 – It is not often that we agree with the BSA, but there is one part of its response that we entirely agree with:
“A number of commentators have found that a central consideration of boards and senior operatives which opt for demutualisation is their own well-being. Typically salaries and fees in institutions that have demutualised are higher than in the predecessor organisation. Share option packages paid in the plc sector are lucrative, and add to the personal incentive of directors and senior management to convert.”
Unfortunately the BSA did not speak out like this about the directors of the Bradford and Bingley when they were proposing to convert. The B&B continued as a member of the BSA until the day of conversion and its directors were welcome at BSA meetings.
Click here to view the BSA submission to the Myners Review.
BSMA response to the Myners Review
October 2004 – Click here to view the BSMA submission to the Myners Review.
Portman Building Society Branch Closures
October 2004 – The Portman is to close three part-time branches. Opening hours at another 16 branches are to change from part-time to full-time but will be closed completely if not profitable after 12 months.
Nationwide Building Society
October 2004 – At the end of September the Chief Executive of Jarvis, Kevin Hyde, resigned less than a year after taking over at the firm forever linked with the Potters Bar train crash. His resignation came as the company was warned of an impending shareholder revolt over bonuses paid to him and five former directors.
At the same time non-executive director Jonathan Agnew left, also after less than a year with the company. At the time of his appointment Jarvis had stressed his “management, financial and corporate governance experience”. Mr Agnew is, of course, chairman of the Nationwide Building Society (and also of Beazley house builders). Should we be pleased that he is now able to devote more of his time to the Society?
Myners Review of Mutual Societies
July 2004 – The review on corporate governance announced by the government which is to include all mutual societies as well as life offices following the Penrose report on Equitable Life has been formally announced. It is to be chaired by Paul Myners (chairman of Marks & Spencers, former chairman of Gartmore, chairman of the Tate galleries and non-exec director of many other companies).
Our Comment – We encourage all mutual society members to make a submission to the review body. Details for response can be found on HM Treasury website at www.hm-treasury.gov.uk/myners (pdf file).
Nationwide Building Society AGM
July 2004 – The results of the Nationwide BS elections show that Alan Debenham received approximately 40% of voting members support. This is an extremely good result achieved despite all the efforts of the board. Not surprisingly Richard Handover (chairman of poor performing WH Smith’s and director of Royal Mail) received the second lowest number of votes.
If you wish to view the webcam recording of the AGM please click here.
Nationwide Building Society – Another Fat Cat Year
June 2004 – Nationwide’s annual summary financial statement reveals boardroom pay increases of up to 73%. The chief executive’s pay has now reached £1,000,000. Another director retired with £1,440,000 from the till and even Richard Handover (chairman of poor performing W H Smiths) received a 23% pay increase. The increases consisted mainly of bonuses which outstripped basic levels and pushed the cost of the boardroom to £4,000,000.
Our Comment – Didn’t they do well? Members are not allowed to know why such excessive payments were made by this “mutual society”.
Fat Cat Pay Protests at the Darlington Building Society
May 2004 – The Investor’s Association reports on the silencing of a member at the Darlington AGM when enquiring about Fat Cat pay increases for the board. Dr Ian Ross, of Barnard Castle, Co Durham, says that Darlington Building Society is moving away from its roots as a body run for the benefit of its 86,000 members. He alleges it is increasingly run for the benefit of the board directors. Click Here to see the full report.
Societies are Still not Passing on Interest Rate Increases to Savers
May 2004 – A Daily Mail report reveals how many banks and building societies are not passing on the full amount of bank base rate increases to savers. In particular Nationwide and Britannia. Click Here to see the full report.
Myners Review of Mutual Societies
April 2004 – Following the Penrose report on Equitable Life the government has commissioned a review of mutual life insurers. The review is to be chaired by Paul Myners (acting chairman of Marks & Spencers, former chairman of Gartmore and chairman-elect of the Tate galleries). Paul Myners will also be reviewing the whole mutual industry. Click here here for HM Treasury Press Release.
Moment of Truth
March 2004 – Click here to view Mail on Sunday report on proposed demutualisation of Standard Life. The report suggests that members should vote against the re-election of the directors who have been responsible for the situation that Standard Life is in and against the fat cat pay increases that they have awarded themselves.
Fattest of the Fat Cats
March 2004 – Click here to view report in Mail on Sunday which reveals how corporate governance at mutuals has fallen well below standards of companies. The report finds that directors of mutuals continue to award themselves “fat-cat packages that would no longer be on the table for top executives at quoted companies owned by shareholders”.
Shoddy Deal for Savers
March 2004 – Click here to view Daily Mail report which shows that most building societies are failing to pass on the full increase in the bank rate to savers.
A Matter of Mutual Respect
February 2004 – Click here to view Mail on Sunday on poor corporate governance standards, lack of accountability and pay increases for directors of mutual societies.
More Nation wide boys
February 2004 – Another member has a tough time with Nationwide through mis-selling of high risk products according to another article in the Guardian. Amanda Leak is to receive £10,000 but only after the intervention of the Ombudsman and following yet another challenge by the Nationwide against the Ombudsman’s primary adjudication.
Nation wide boys
January 2004 – “Nation wide boys” is the title of an article in the Money section of the Guardian on 17th May 2003 about a pensioner’s fight with the Nationwide BS over inappropriate financial advice. The report states that in 2000 a 70 year old pensioner Ann Bilsby wanted to place £30,000 in a safe account for income to boost her pension but Nationwide advised her to invest in its Nationwide Growth Trust, a risky mix of equities, with a growth fund of only 1%. The plan is said to have included a capital withdrawal plan which resulted in her losing 50% of her savings within two years and being charged a fee for paying her back her own capital.
The Guardian was backed by the comedian Mark Thomas in a “Justice for Ann” campaign which prompted readers of the Guardian to write and complain to the chief executive Phillip Williamson. Still the Nationwide BS would not budge.
The Guardian now reports that after a nine month campaign and a year of worry to the pensioner the Financial Ombudsman Service found in favour of Mrs Bilsby and eventually Nationwide grudgingly agreed to refund her £15,000 plus interest but would still not admit liability.
Mrs Bilsby had been a loyal member of the building society “that likes to be different” for 40 years but they could not even say sorry. Mrs Bilsby has now decided that the claim “it pays to decide Nationwide” is not necessarily true (unless you are a director).
The Guardian also reports another similar case of poor advice for a member of 14 years where the Nationwide is fighting the Ombudsman’s recommendation.
Our Comment – So much for loyalty from members. Is it not time for some loyalty to members? See the “Cost of Loyalty” below. Another Nationwide claim is “Members not shareholders are our focus so you can trust us to be open, honest and fair”!
Nationwide Building Society
January 2004 – Richard Handover a non-executive director at Nationwide continues to receive adverse publicity in the press over the declining fortunes of shareholders in W H Smith compared with the increasing fortunes of Mr Handover and the new chief executive.