Sunday 23 June 2013

"On your side" ? Nationwide Building Society directors buying our votes with our money

What's wrong with this picture ?
A Building Society is defined as "a financial institution owned by its members as a mutual organization". Building societies originated as a means by which poor working people could club together and provide funds to build housing for their members, however these days they are run very much like banks and provide the same services as do banks. I still have a small amount of money in the Nationwide Building Society in the UK and as a result I am one of the owners of the Nationwide Building Society. I have as much right as other members to vote in their AGM and I was recently sent an invitation to do so. Here is the voting form:
What's wrong with this voting form ?
You may notice that there aren't exactly a lot of options to vote for. The Board recommends that members vote for those things that The Board wants to do. They make it easy to do so by providing a single box to put a cross into and tell us that this is "in your best interests as a member of the Society". Anyone who ticks this box, also offered as the first choice to anyone who votes online, has rubber-stamped whatever it is that the board have decided to do on our behalf.

The other option is to go through each of the items individually. All that the options provided allow a voter to do is to choose "for", "against" or "abstain" next to each of the suggestions of The Board. Ther are no options to vote for or against anything which has come from a source other than The Board. This is not a real democratic process because no alternative is provided. The only thing that anyone can do to express displeasure is to go to the effort of voting against each of these proposals individually, and you have to tick every single "against" box because otherwise "If you do not do this for a particular item, the Chairman or your representative can vote on it as he or she sees fit." i.e. unless you make sure you put a cross in all the "against" boxes then you will still be held as having voted "for" what the board has already decided to do. This is analogous to voting forms in communist countries where "Communist election committees typically counted as "aye" all the ballots unless both the first and last name of their unopposed candidate were crossed off completely. A casual scratch across a name or the whole list was not considered a vote against."

Communism ? Capitalism ? For the average guy, what's the difference ?

What's wrong with what we're voting for ?
So what is it exactly that we're being asked to vote for ? Primarily the pay-rises of the directors. The most up to date official figures show the average salary in the UK to be £26,500 per year, with a rise over the year of 1.2% for men and 2.0% for women. How do Nationwide executive directors compare with this ? All of their salaries were already well in advance of a million pounds per year, and their average rise is 16.2%. One of them is taking a 77.2% rise in his salary. These people are well into the stratosphere in comparison with the normal working people who's money they are entrusted with.

Non executive directors are "paid a basic fee, with an additional supplement paid for serving on or chairing a Board Committee". So how do they fair ? The Chairman - i.e. he who will vote for you should you decide not to vote yourself - does not get a pay rise this year, but he does still expect to receive 300,000 for his services. The smallest amount paid is 27,000, but this is to someone who retired in April, so it is not a full year's pay. Many of the non executive directors can expect to receive six figure sums for part time work.

 "On your side". I'd smile
too on £2M per year
How does the board of a building society, which was started on mutual ideas and which supposedly exists to benefit its members, convince those members to vote for every increasing salaries for the board ? That's where marketing comes in...

A leaflet enclosed with the voting form including the "Voting guide and Notice of AGM 2013" is entitled "Your building society - On your side" . Here are some images from that leaflet:

"On your side" and "Helping to get you moving". i.e. they've "helped" people to take debt to buy a home. Note also the "caring" cycle helmet.

They're also "Living on your side" and have agreed to give a million pounds over four years to Shelter. Sounds good, but it's actually only about 1/30th of what the five top earners will pay themselves over the same period, and note that this money like that of the directors' salaries comes from you. The directors are using your money to buy your vote from you by appearing to do something charitable.

Another distraction is that 20 p per vote is donated to Macmillan Cancer Support. Again it's a worthwhile organisation, but this is another example of how the directors are using your money to buy your vote, and it costs less than you think. 6.4 million pounds over 20 years works out as only about £300K per year. i.e. it's equivalent to about two months pay for the top five directors of Nationwide.
Win your own money back !
If you're not convinced to vote for the directors by their (greenwash like) "generous" offer to distribute some of your money to charities, perhaps you'll be impressed by the back page offer of a prize draw which can only be entered by voting. Someone stands to win £5000 while five others will receive £1000 as runner up prizes.

Not bad, eh ? But remember that such trifling amounts of money only sound like much if you don't have much. These prize draw sums are significant only to "the little people". For the top earner, Mr Beale, even the top prize is less than one day's salary. For him, it would hardly be worth the effort of bothering to go and collect such a sum. What's more, this is again your money that they're offering to buy your support. While normal members of the society each have a small chance to win £5000, the top five directors pay-rises for 2013 together add up to be worth 200 times this amount. The real prize on offer here is you give them your votes so that they can carry on as they have always carried on.

Why pick on Nationwide ? I actually doubt that any of the other building societies are much different. However, I'm a member of Nationwide so I was sent their literature. They're also the largest BS in the UK so could lead by providing a better example than average.

Lots of people work hard in this world, but few of us are in the position of being able to vote ourselves ever higher salaries. For my part, I've been struggling to reach minimum wage for years despite working very long hours at a number of different initiatives