Published by Huffington Post and Now Then Magazine
Between the Cooperative Bank’s stock-market listing and Nationwide’s obscene executive pay, even the alternatives are no longer alternative: time to fight back.
This weekend I got up in the middle of night and plastered my own branch of Nationwide with posters bearing the simple message “£3m for CEO? Vote NO @AGM”. Then I started a petition against them via 38degrees. This is why.
As a post-funding PhD student I live on £7500 a year. The minimum wage is around £12000 a year. This year’s financial summary (pdf) reveals that Nationwide CEO Graham Beale made £2.26 million.
That means that Beale (right) earns in just over a day what I spend in a year. For two days chiefly executive-officiating he gets what I imagine one of his staff will get for a year spent cleaning toilets. His package is worth 190 minimum wages, which is about 300 times what I live on. If things go well next year, he could be up 28% to £2.9 million.
When asked last year if he was comfortable with his pay, he said, “I’m not going to answer that question, but I will say that we need the right people at Nationwide.” If this is your best answer, Graham, then frankly you’re not the right people.
But he was not alone. The other four executive directors received an average of £1.4 million each. Chairman Geoffrey Howe’s part-time role netted him £300,000. If it sounds like more of the usual banking-bonus bonanza, that’s because it is. Sickening enough when it’s Barclays or RBS, but Nationwide isn’t even a bank!
The problem is that Nationwide’s top management seem to think that it is a bank, adopting all the self-serving sleight of hand and nauseating self-justification of the bankers they see as their peers.
The first line of defence is performance. Admittedly, a 56% rise in underlying profit looks impressive, but let’s not forget that it’s simply relative to last year, when directors gave themselves healthy raises despite a huge fall in profits. Bear in mind also that with so much ill-will towards banks, since 2009 they have been shooting fish in a barrel; custom is theirs to lose.
But just like the bankers, they prefer to see any success as evidence of their preternatural skill and indispensability. In 2011 chairman Howe (left) defended his £300k side project by saying Nationwide “would cease to exist” if its directors were paid too little. CEO Beale, meanwhile, has given himself an almighty pat on the back with a pay rise of around 45% since 2009.
Putting to one side David Mitchell’s good point well-made about the perversity of getting bonuses for (almost) doing your job to a normal standard, performance-related pay doesn’t even work. A recent meta-analysis (a statistical analysis of results from other research) of 44 UK-focused studies concluded: “we ﬁnd no practically relevant pay-performance link when the entire research record is considered.”
With that studied style of technical innocence we have seen so often in recent years, Beale deflects the justifiable anger of customers (like Wendy, right) by farming out responsibility to someone else. As usual, pay is set by a fancy sounding Remuneration Committee. And as usual it’s made up of a few of the CEO’s mates sat at the other end of the boardroom table.
“But we get an independent consultant to tell us the market median!”, he cries. The consultant is Hay, whose own profitable role advising on executive packages means it is anything but independent. On the contrary, their faith in the imaginary pay-performance link (pdf, p.18) is as firm as their grasp of grammar is weak: “Executive reward plays a vital role in driving performance, now and in the future”. And why are you comparing your mutual to a market of private, profit-making banks renowned for their toxic corporate culture?
Perhaps the auditor will step in? Not likely when it’s PwC, one of the Big Four accountancy firms which the Competition Commission recently judged to be too close to the companies they audit.
Essentially, the board sets itself some targets which are linked to large bonuses, gets them rubber-stamped by interested parties, and then looks on aghast as the bonuses are triggered.
In thus acting like a bank, they forget their unique role in the financial sector at the time when they should be most mindful of it. As its website boasts, “Nationwide has mutual status, which means that we are owned by and run for the benefit of our members”, rather than for profit. Mutuals and co-ops should be keeping the banks honest, showing them that social justice and financial stability go hand in hand.
Imagine an alternate reality where Nationwide directors cut their pay in half and used the difference to bump up the salaries of their lowest-paid workers, to swell the coffers of Nationwide’s charity arm, or simply to lower their charges to customers. Imagine they marketed themselves aggressively as the bonus busters, the financial institution that is still lending, the fair but effective alternative to the crooked banks. Not only would it strike a chord with the public, the sound of customers talking with their feet would send a shiver down the spine of the banking giants.
So what can we do about it? Most of all, bear in mind that between Nationwide and its subsidiaries Dunfermline, Derbyshire, and Cheshire, there are seven million of us; that’s a lot of noise.
There’s the usual stuff, like writing a letter, attending a local “talkback event“, or suggesting executive pay as a “talking point” on their website. Or you could go guerrilla, download my posters (left, 1 & 2), and stick them all over your own local branch. Or just stick these ones (A & B) in your window; there are so many members that some are bound to see it.
But the main thing is that with Nationwide being a mutual, we have a direct say in these matters at the AGM: one member, one vote. If you’ve voted already, you can change your mind and request a new voting pack on 0800 30 20 15. If you haven’t you can vote online (making sure to choose “Standard Vote”). Then vote NO on remuneration, and against re-electing the CEO and Chairman if they’ve lost your trust. Otherwise, you can turn up angry at Manchester’s Bridgewater Hall on July 24.
And whether you’re a member or not – for this affects us all – please sign the petition so that we can demand that the board eliminate bonuses and rein in their pay; the more you share it, the more members will vote and non-members will be able to have their say.
When even the good guys aren’t good guys anymore, we have to take matters into our own hands.