A new boss at Nationwide

Britain’s most important member-owned business is, arguably, the Nationwide Building Society, one of the very few large building societies to have evaded the mania for demutualisation at the turn of the century. So we should be interested, I think, in who Nationwide has appointed as its new Chief Executive. He is, as today’s papers report, Joe Garner, who is currently running BT’s broadband and technical operation Openreach.

Garner’s background includes a stint as a senior executive at HSBC, as well as at Dixons Stores and Procter and Gamble. Does he understand mutuality? Well, perhaps we can take some comfort from the carefully prepared Nationwide press release where he is quoted as saying “The fact that as a mutual it is owned by its customers means that it is uniquely placed to lead and succeed in the next chapter of retail financial services in the UK. I look forward to listening and learning from members and employees alike…”

Do I need to remind you that Nationwide’s roots were in the cooperative movement (it was the Co-operative Permanent society before it became Nationwide) and for several years in the late twentieth century Nationwide’s member democracy was more active than that of most building societies, with member-nominated candidates even making it through the voting system on to the society’s Board of Directors a couple of times. More recently, Nationwide has settled down into filling vacant directorships through cooption and only subsequent member endorsement and it’s a long time since I remember a contested election. But at least Nationwide’s mutual rhetoric remains, which is more than can be said of some firms in the mutual sector.

Joe Garner is also a keen triathlete. This is irrelevant to how good he will be as a Chief Executive, but somehow gives me irrational encouragement.

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Here’s how member democracy works at the Nationwide

I have just been invited to take my part in the Nationwide Building Society’s democratic process. Or in other words, the voting paper for the 2014 AGM has arrived in the post.

I will vote, of course, but I can’t say I’m very excited by the prospect. The way member control operates in the Nationwide (as in so many other larger building societies) is not an attractive one. We are invited to endorse – or otherwise – the board members already in place. There are no alternative candidates to select.

The board is, in short, a self-perpetuating one. In years where board vacancies occur new directors are co-opted and only subsequently presented to the membership for endorsement. This may well produce a board with some of the right professional competencies, but it doesn’t suggest an organisation where members’ voices can really be listened to.

Actually, Nationwide is interesting because there was a time back in the 1990s when independent candidates regularly stood against board nominees and were actually elected to the board on (from memory) three occasions. I remember covering the news when the first independent, Sheila Heywood, was successful in her election. Some of this interest by activists in the Nationwide was historical, coming from the fact that Nationwide was originally the cooperative movement’s building society.

Recent times have seen attempts at direct member candidacy in building society elections wither away (leaving aside for a moment the Ecology). It’s a pity. It’s also directly relevant to the debate at the Co-operative Group on future governance arrangements since Lord Myners’ recommendations propose a very similar arrangement for board elections as building societies.

In the meantime, back to my voting paper. I see that Nationwide’s chief executive Graham Beale has target remuneration of £2.31m for 2014/15, with a possible maximum of £2.74m. Curiously, these amounts are given by Nationwide in the booklet to members as £2,312K and £2,749K – is this because somehow that way they seem less gigantic?

Ethical banking: so what else is there?

It’s the morning after the day before… and, particularly in the light of those posts appearing from unhappy Co-op Bank customers pledging to move their accounts, it seems natural today to ask what we have left in terms of cooperative and values-driven banking in Britain.

The short answer is that cooperative banking in Britain, unlike many other European countries, has effectively meant just the Co-operative Bank, originally established in 1872 to serve the 1000+ local consumer co-operative societies.  Elsewhere in Europe co-operative banking grew not from consumer co-operation but from what we would now describe as locally based credit unions. If you’re interested, you’ll find a piece I wrote in the summer for The Guardian on European coop banking sector (and there are some very big banks involved) here.

What Britain did have (at least until the wave of demutualisations following the Thatcher-era Building Societies Act) was a thriving mutual savings and mortgage loans sector.  The largest remaining mutual mortgage lender by a very long way is the Nationwide Building Society, of course.  As a footnote, the Nationwide was originally directly associated with the cooperative movement (it changed its name from the Co-operative Permanent in 1970).  As a result of Co-operatives UK’s wooing of the mutual sector,  the Nationwide has recent chosen to become a Co-ops UK member.

Triodos Bank has been an innovative player in Britain in relation to ethical investment for almost twenty years, since the parent Dutch bank took over a small Rudolf Steiner-inspired UK bank in 1995.  Triodos’s own roots are in the Steiner movement (or anthroposophy, if you prefer), although the bank dropped its formal links with the Steiner movement in 1999.  It is not cooperatively structured, and indeed its internal structure is complicated (I last wrote about Triodos in detail for The Observer in 2004).  Its shares are held entirely by a Foundation with the mission of protecting the original principles of the bank, but a form of quasi-equity (so-called ‘depository receipts’) is made available to both individuals and institutions.  Incidentally, a Dutch cooperative bank is the largest institutional shareholder in Triodos, with a 6.6% holding of depository receipts. Peter Blom, a Dutch banker, has been in charge since 1989 and there’s an interesting video interview with him where he discusses among other things Steiner’s influence and Triodos’s approach to money on YouTube.

The Charity Bank is owned by CAF, the Charities Aid Foundation (the “charities’ charity”).  It offers savings products but not personal banking.  Unity Trust, owned by trade unions and with a minority shareholding from the Co-operative Bank, offers banking for charities and the not-for-profit sector but not for individuals.

And last but not least is Britain’s growing credit union movement. Britain was a late developer in terms of credit unions (perhaps because of the reach of building societies) and not everything over the past twenty years has been entirely plain sailing but Britain does now have some established and strong credit unions, the largest of which offer basic personal banking.  I wrote earlier this year on credit unions for the magazine Choice, and you’ll find this article on my website here.