Nationwide’s Board Wins Annual Meeting Despite Member Rebellion

What Happened at Nationwide's Annual Meeting?

In the end, the rebellion at Nationwide, the country’s biggest building society, was modest. James Sherwin-Smith, who was trying to become the first member-nominated director in almost 25 years, secured only 12% of votes cast – enough to count as unusual but a long way short of causing embarrassment for the board.

Meanwhile, the society got its usual 95%-plus majorities on every other resolution, including the advisory one on directors’ pay. The outcome raises questions about governance within building societies and highlights the broader issues at play. Only about 600,000 out of 19 million eligible members voted at the annual meeting, suggesting that Nationwide’s members are largely content with the status quo.

There are two ways the directors could react to this result. The first is to conclude that everything is tickety-boo at the UK’s most important mutual. The society's financial performance is undeniably strong, after all, and the scores for customer satisfaction remain streets ahead of those of the shareholder-owned banks. In operational terms, a lot is going right at Nationwide. This helps to explain why the members are not clamouring to register dissatisfaction or any other form of discontent.

The more far-sighted approach would be to concede that one cannot rely on the skies remaining permanently sunny. In a different operating climate, some of Sherwin-Smith’s points about the meaning of accountability at a member-owned organisation might prove harder for the bosses to bat away. It remains bizarre that Nationwide's members did not get to vote on the £2.9 billion takeover of Virgin Money in 2024, a deal that took the society into a bigger league by expanding its balance sheet by a third.

The formal reason given for not requiring a vote was based on legalistic grounds: the 1986 Building Societies Act did not require it, and the takeover code, with an eye on protecting the interests of target companies, doesn’t encourage voluntary conditions to be attached to an offer. The logical conclusion to be drawn from that episode is that building society rules need an overhaul.

For example, if Nationwide, through its success, is now in the business of multibillion takeovers, the owners surely need a real say in future adventures. Equally, it is unsatisfactory that Nationwide continues to plead “them’s the building society rules” as an explanation for why its votes on pay are non-binding. On this front, it could just show leadership and fall into line with the shareholder-owned banks whose greedy ways Nationwide likes to attack in its adverts.

When its chief executive, Debbie Crosbie, is getting £4.7 million – not Lloyds or NatWest levels but definitely not small change either – you'd think Nationwide itself would see the merit in getting more than a confirmatory thumbs up from the ranks. Additionally, it's a feature that sends a “trust us” message from the boardroom that is at odds with the member-owned ethos.

None of which is to suggest that Nationwide needs a radical overhaul. To repeat, it’s a high-performing operation. And, in a more tightly regulated financial services world, it is probably simply harder for member-nominated directors to become common again. However, Nationwide has an incoming chair, Mike Rogers, a former chair of the insurer Admiral and the credit-checking group Experian, who has a chance to look afresh at governance at a time of heightened political interest in how mutuals are run.

At a minimum, membership ought to mean real votes on takeovers and boardroom pay. The outcome of this year’s annual meeting is a wake-up call for Nationwide to ensure that its member-owned status truly translates into meaningful voting rights on significant decisions like takeovers and executive compensation. Only then can it fully uphold the values it claims to represent.

Source: The Guardian