Grr, Nationwide!

bowlhead99

skid112 said:

I have had a number of issues with the way they have been spending our money for a number of years but always fallen on deaf ears. The CEO earns...  2018/2019, £2.37m. This includes a bonus of over £1m, pension contributions of £342,000, other taxable benefits, £217,000. 

One way to look at it is that the same report tells us there were 15.9 million members, so a member with an average amount of savings deposits, mortgages and consumer loans could have had a bit less than 15p more savings interest or paid 15p less borrowing interest over the course of the year, if he had worked for free. 

Although why you would work for free when you have ultimate responsibility for the performance of a business with 18000 employees, £190bn of mortgages and consumer loans and over £150bn of customer deposits?  There is a lot to go wrong. Although the pay seems very high to those of us with 'normal' jobs, it's less than could be earned in a FTSE bank, and if he can improve the overall rate of return on the society's £344bn of loans and deposits by only a thousandth of a percent, he would grow the reserves of the organisation by considerably more than his total pay package. Or to put it another way, if they put someone in charge who was willing to literally pay a million pounds a year to come to work instead of being paid out 2.4 million, but the organisation's profits dropped by a thousandth of a percent of the gross assets and liabilities, they would have been better off just recruiting the current CEO and paying out the 2.4m.

Average employee performance pay fell by 8.93% in 2018/2019, yet Mr. Garner's increased by 11.80%, he currently earns 77 times the average of a Nationwide employee

His bonus rise was a combination of a specific reduction in it for the comparative year and the fact he exceeded his objectives by more this year than he did last year. That's generally  how bonuses work. The average employee doesn't work full time or have ultimate responsibility for the performance of a business with 18000 employees, £190bn of mortgages and consumer loans and over £150bn of customer deposits

d63

bowlhead99 said:

skid112 said:

I have had a number of issues with the way they have been spending our money for a number of years but always fallen on deaf ears. The CEO earns...  2018/2019, £2.37m. This includes a bonus of over £1m, pension contributions of £342,000, other taxable benefits, £217,000. 

One way to look at it is that the same report tells us there were 15.9 million members, so a member with an average amount of savings deposits, mortgages and consumer loans could have had a bit less than 15p more savings interest or paid 15p less borrowing interest over the course of the year, if he had worked for free. 

Although why you would work for free when you have ultimate responsibility for the performance of a business with 18000 employees, £190bn of mortgages and consumer loans and over £150bn of customer deposits?  There is a lot to go wrong. Although the pay seems very high to those of us with 'normal' jobs, it's less than could be earned in a FTSE bank, and if he can improve the overall rate of return on the society's £344bn of loans and deposits by only a thousandth of a percent, he would grow the reserves of the organisation by considerably more than his total pay package. Or to put it another way, if they put someone in charge who was willing to pay a million pounds a year to come to work instead of being paid 2.4 million, but the organisation's profits dropped by a thousandth of a percent of the gross assets and liabilities, they would have been better off just recruiting him and paying out the 2.4m.

Average employee performance pay fell by 8.93% in 2018/2019, yet Mr. Garner's increased by 11.80%, he currently earns 77 times the average of a Nationwide employee

His bonus rise was a combination of a specific reduction in it for the comparative year and the fact he exceeded his objectives by more this year than he did last year. That's generally  how bonuses work. The average employee doesn't work full time or have ultimate responsibility for the performance of a business with 18000 employees, £190bn of mortgages and consumer loans and over £150bn of customer deposits

ultimate responsibility? erm, so if it all goes pear-shaped and the business collapses, everyone gets laid off, he gets taken out and put up against a wall and shot? more like he will get a golden handshake and go off to be CEO of some other huge company. but this is capitalism, and ok, maybe it's not the worst system in the world to be living under, is it really the best we can do? heaven help us all.

Eassenav

I managed to get my first sole account set up and it says I get the 5% interest.  Have had to get hubby set up again for online banking as he never uses it now and has forgotten his details, but as soon as that comes through we will get him an account and a joint account.  We will probably close them once the introductory offer ends.

I too have issues with how they spend our money, it would be interesting to see how much money is spent on corporate hospitality events for which I know they have many.  I have no issues if companies are transparent about these things and particularly if they need to return a profit for their shareholders.  But Nationwide trade on the fact that they are not a bank and that they benefit their members.

port_of_spain

d63 said:

bowlhead99 said:

skid112 said:

I have had a number of issues with the way they have been spending our money for a number of years but always fallen on deaf ears. The CEO earns...  2018/2019, £2.37m. This includes a bonus of over £1m, pension contributions of £342,000, other taxable benefits, £217,000. 

One way to look at it is that the same report tells us there were 15.9 million members, so a member with an average amount of savings deposits, mortgages and consumer loans could have had a bit less than 15p more savings interest or paid 15p less borrowing interest over the course of the year, if he had worked for free. 

Although why you would work for free when you have ultimate responsibility for the performance of a business with 18000 employees, £190bn of mortgages and consumer loans and over £150bn of customer deposits?  There is a lot to go wrong. Although the pay seems very high to those of us with 'normal' jobs, it's less than could be earned in a FTSE bank, and if he can improve the overall rate of return on the society's £344bn of loans and deposits by only a thousandth of a percent, he would grow the reserves of the organisation by considerably more than his total pay package. Or to put it another way, if they put someone in charge who was willing to pay a million pounds a year to come to work instead of being paid 2.4 million, but the organisation's profits dropped by a thousandth of a percent of the gross assets and liabilities, they would have been better off just recruiting him and paying out the 2.4m.

Average employee performance pay fell by 8.93% in 2018/2019, yet Mr. Garner's increased by 11.80%, he currently earns 77 times the average of a Nationwide employee

His bonus rise was a combination of a specific reduction in it for the comparative year and the fact he exceeded his objectives by more this year than he did last year. That's generally  how bonuses work. The average employee doesn't work full time or have ultimate responsibility for the performance of a business with 18000 employees, £190bn of mortgages and consumer loans and over £150bn of customer deposits

ultimate responsibility? erm, so if it all goes pear-shaped and the business collapses, everyone gets laid off, he gets taken out and put up against a wall and shot? more like he will get a golden handshake and go off to be CEO of some other huge company. but this is capitalism, and ok, maybe it's not the worst system in the world to be living under, is it really the best we can do? heaven help us all.

The major culprit here is capitalism, not Nationwide. Top executive pay is too high. And performance-related pay doesn't improve performance, it lowers it, because executives game the system to boost their performance-related pay, instead of just doing their job. (It is also one of the factors encouraging excessively short-term thinking.)

We could do various things about this. Though many of them would start with having a Government which wants to do something about it, which we chose not to last December.

For their top jobs, Nationwide needs to recruit people with experience in running large organizations, and in various aspects of finance, and running retail networks, and so on. Most of the people with suitable experience will have worked in comparable roles in banks, some in other building societies. As Bowlhead suggested, given the general levels of pay for such jobs, they have little practical choice but to pay more than some of us would like them to.

Little choice, but some. Their pay policy for top jobs, when I lasted looked at it, was to look at comparable jobs and then aim for something at the mid- to low end of the range. Now, perhaps they could aim a little lower than they do. I rather think they could. But there is a limit to how much they can do by themselves.

bowlhead99

port_of_spain said:

For their top jobs, Nationwide needs to recruit people with experience in running large organizations, and in various aspects of finance, and running retail networks, and so on. Most of the people with suitable experience will have worked in comparable roles in banks, some in other building societies. As Bowlhead suggested, given the general levels of pay for such jobs, they have little practical choice but to pay more than some of us would like them to.

Little choice, but some. Their pay policy for top jobs, when I lasted looked at it, was to look at comparable jobs and then aim for something at the mid- to low end of the range. Now, perhaps they could aim a little lower than they do. I rather think they could. But there is a limit to how much they can do by themselves.

Exactly. The pool of people with board-level experience of running a financial services business with tens of thousands of employees and hundreds of billions of pounds of loans and deposits, is quite small at any one time. The people with the experience of doing it, or without the exact experience of doing it but with enough experience that it would be the natural next step for them, will naturally want to charge a lot of money for their services. That's because with such a small pool of executives, they could each find themselves shortlisted for any number of high profile jobs, some of which pay astronomically or offer lucrative opportunities once you get them on your CV. 

If the people looking for the CEO job could work for a large corporate owned by stock market in any major economy in the world, and have access to stock-based incentivisation schemes, they are looking at overall earnings package of £1m to £10m++ if the business is a success for its owners. The Nationwide on your side can decide that it is trying to keep costs down and can't offer a stock options based package, so that it is only going to limit the candidates who would expect £1m to £3m instead of the ones who think they are worth £5-15m. That might be fine if the ones who want a £5m+ paycheck are all arrogant greedy !!!!!!, or lazy old stereotypes whose decades of experience is struggling to be relevant to modern business and they're just coasting along for the last few years before retirement. However, setting a low remuneration policy probably means missing out on some good candidates. And when a fraction of a percent of performance is enough to easily cover the wage demands of the better candidate, it's easy to see why they are willing to pay £900k base salary and 24% pension, instead of £90k base salary and 5% pension.

I think most of us struggle with the concept of the boss of a business being worth pay and bonus equating to 70x its average staff salary. Still, there is only one CEO and 18000 other staff, and similar banks and building societies aren't suggesting paying their CEO 18000x as much as the other staff, because we all know the CEO isn't worth as much as everyone else put together. 

But 'overall leadership' of the business is a critical piece, just like cleaning the offices or clerking a cashier desk or manning the phonelines. The contribution by the Board might just be 2% of the overall success of the business, with 98% of the profits dependent on all the other divisions and departments. But if a business is willing to spend a couple of percent of the £820m staff costs on senior executive remuneration, you can see why there is £10-£20m in the pot for the key directors. And there are not many of them because you don't need 18000 of them in those roles. You do need hundreds of call centre staff and branch cashiers for every one CEO, but there are lots of people who are qualified to work in a call centre or in a branch. So those individuals don't get paid as much.

That's capitalism.  In communism we could all just take it in turns to be the CEO and all get paid the same regardless of role from time to time. But Doris who's really good at photocopying loan application forms or ordering new stationery might not be as good at deciding what to do with the provisioning on the £200bn of mortgages or leading a change in the customer acquisition strategy for a change in interest rates etc. I guess we'll never know until we try it. But no bank wants to be first-mover on that, so we are where we are.

port_of_spain

"That's capitalism" is a specious way of putting it. We could (just as an example) discourage high ratios of top pay to average pay by applying a higher corporation tax rate to companies with ratios considered excessive. We could make it compulsory to have some worker-directors on the board, and on the committees determining executive pay. For very high pay over a certain threshold, employers could be required to demonstrate to a High Pay Tribunal (I just made that title up) that the pay is justified. And so on. The point isn't to argue for any specific measure. It's just that there are many potential measures. And if we did some of those things, we'd still have capitalism, but in a slightly different form. Putting up communism as the only alternative to what we have now is a straw man.

Pay ratios have risen massively over the last 40 years. We didn't have communism before they rose.

I think we agree that, in the absence of any of those potential measures, and in the current pay market, Nationwide need to pay their top executives somewhere around the range for comparable jobs. Will they miss out on more talented candidates by only paying near the bottom of the range?

I don't think so. Nationwide need competent leadership. But I don't think they even need exceptionally brilliant leadership. Because a building society is supposed to be a steady-as-she-goes, conservatively-run organization. Someone trying to be too clever could be a liability.

And what about the commercial banks? Perhaps they need more exceptional leadership, because their aim is to maximize profits, not to keep offering decent products, with decent quality service, to the mortgage and savings customers who are also the owners of the business?

Well, that's exactly the kind of thinking that led to Fred the Shred and the banking crisis. The banks would have been better led by less ambitious people, who tried to keep the business growing organically, and did fewer big corporate deals. They'd have been more successful if they'd been run more like building societies. (And of course, some of the worst examples were former building societies who converted to banks. But it wasn't only them.)

This brings me back to my point about performance-related pay being counter-productive. It encourages top executives to adopt methods that make the short-term results look good, even when that conflicts with the longer-term success of the business. It encourages too many corporate deals — which have been shown to destroy value, not enhance it, on average.

So, not only is high executive pay not an inevitable part of capitalism, it's also closely associated with some of the aspects of capitalism which don't work so well.

Albermarle

Pay ratios have risen massively over the last 40 years. We didn't have communism before they rose.

This brings me back to my point about performance-related pay being counter-productive. It encourages top executives to adopt methods that make the short-term results look good, even when that conflicts with the longer-term success of the business. It encourages too many corporate deals — which have been shown to destroy value, not enhance it, on average.

So, not only is high executive pay not an inevitable part of capitalism, it's also closely associated with some of the aspects of capitalism which don't work so well.
In general I agree with you , with one caveat. What you describe above is the weakness of anglo- saxon/US style capitalism. Some countries, notably Germany, have a more sensible capitalist system , that puts long term success of the company as the priority.

[Deleted User]

Albermarle said:

Pay ratios have risen massively over the last 40 years. We didn't have communism before they rose.

This brings me back to my point about performance-related pay being counter-productive. It encourages top executives to adopt methods that make the short-term results look good, even when that conflicts with the longer-term success of the business. It encourages too many corporate deals — which have been shown to destroy value, not enhance it, on average.

So, not only is high executive pay not an inevitable part of capitalism, it's also closely associated with some of the aspects of capitalism which don't work so well.
In general I agree with you , with one caveat. What you describe above is the weakness of anglo- saxon/US style capitalism. Some countries, notably Germany, have a more sensible capitalist system , that puts long term success of the company as the priority.

There is zero evidence that massive CEO pay multiples deliver better results for shareholders or members in this case. A number of German CEOs have their package capped at a comfortable multiple of base employee salary with no ill effects. 

I'm a member of Nationwide but think it's lost it shine as it wastes lots of money on adverts and useless gimmicks like recommend a friend pay plus it's products aren't competitive or innovative anymore.