Nationwide Faces Criticism over CEO Pay Rise Proposal

Nationwide Building Society is at the center of controversy as it controversially decides against allowing its members a binding vote on a significant pay rise for its Chief Executive, Debbie Crosbie. The proposed 43% pay increase could boost her total compensation package to a staggering £7 million.

Concerns Over Member Rights

Critics argue that this decision undermines member rights, leaving Nationwide’s customers with less power than shareholders in publicly listed banks. Campaigners are raising alarms about a potential “loophole” in existing building society regulations, which grant members fewer rights concerning executive pay.

Comparing to Major Banks

Nationwide defends its position by stating that following its £2.9 billion acquisition of Virgin Money, Crosbie’s remuneration needs to be competitive with major banks like Lloyds and NatWest. However, members will only have an advisory vote at the upcoming Annual General Meeting (AGM) on July 25, meaning that even if the proposal is rejected, there will be no obligations for the board to amend it.

Binding Votes for Public Companies

Unlike Nationwide, large banks are legally required to conduct binding votes on their executive pay policies at least once every three years, according to regulations for companies listed on the London Stock Exchange. If shareholders disapprove, they must revert to the previous pay structure and bring forward a revised proposal within a year.

Nationwide’s Approach to Governance

Nationwide claims it goes beyond the legally required frameworks set out by the Building Societies Act, which mandates binding votes solely for board elections. A company spokesperson stated, “As part of our commitment to member engagement, we voluntarily present our remuneration policy for advisory votes.”

Implications of the Pay Package

The proposed pay package for Crosbie raises eyebrows, given that it would represent a historic increase from her current £4.8 million salary. This mirrors practices seen at competitors like NatWest, where a similar compensation package valued at £7.7 million was recently approved for its CEO.

Member Reactions and Expert Opinions

Member sentiments are growing increasingly hostile, with some expressing shock over the lack of engagement in essential decisions like executive compensation. Comments on social media reflect a sense of betrayal among customers. Sara Hall, co-executive director at Positive Money, criticized the rise as contrary to the principles of building societies, which are expected to prioritize customer welfare over shareholder interests.

Nationwide’s Response to Criticism

In defense of its practices, a Nationwide spokesperson highlighted that past pay proposals have always garnered overwhelming support from members. Citing a 94% approval rate at the last AGM, they assured stakeholders that the organization values member feedback and remains committed to delivering exceptional customer service. They also noted that Crosbie’s updated pay would still be notably lower than that of other large banks.