The chairman of a parliamentary group that normally waves the flag for financial mutuals has criticised building societies for awarding chief executives five or six-figure bonuses last year while the country was in lockdown.
Exclusive research by The Mail on Sunday shows that 23 building society bosses received bonuses last year, ranging from £3,000 to a staggering £226,000. These bonuses were received at a time when many of the industry’s 25million customers were struggling financially – not least from record low savings rates.
Gareth Thomas, Labour MP for Harrow West and chairman of the All-Party Parliamentary Group for Mutuals, told The MoS: ‘Runaway levels of executive pay are an issue for society as a whole and there cannot be any business or moral justification for any executive pay to be obscenely disproportionate to that of its lowest paid workers.’
Happy days: Yorkshire Building Society boss Mike Regnier received a £226,000 bonus
He added: ‘At a time when so many livelihoods are at threat as a result of the pandemic it is only right that all businesses, including mutuals, show some sensitivity with the levels of pay they dish out to their executive teams.’
His views are supported by the Building Societies Members Association, which represents the financial interests of customers. It says some of the annual bonus payouts to bosses in 2020 were ‘as unmutual and insensitive as you can get’.
Unlike banks, that are owned by shareholders, building societies are set up as mutuals and owned by their savers and borrowers. They should in theory be more customer focused and offer better financial deals.
But Ted Fisher, a spokesman for the association, said: ‘Many building societies seem to be in the race to the bottom of the league for savings rates while the directors seem to be in a race to the top for pay increases.
‘In many cases, executive bonuses have been paid regardless of the financial hardship the pandemic has brought upon customers. Come what may, it seems many bosses get their bonuses.’
He added that with the ban on mortgage repossession having just come to an end, some building society customers could possibly lose their homes in the coming months. The MoS has examined the 2020 accounts of 34 building societies that have so far made them available online. A number of societies, most notably sector leader Nationwide, have yet to publish them because their financial year runs into 2021. In total, there are 43 building societies countrywide.
The results of our research show that 23 of the 34 chief executives were awarded bonuses in 2020.
The largest went to Mike Regnier, of Yorkshire Building Society, with three other bosses receiving bonuses in excess of £100,000. The bonuses were often received despite plunging profits and in some cases shrinking balance sheets as well (Leeds and Progressive, for example).
At Nottingham, boss David Marlow received a £47,000 bonus despite the society running up losses (for the second year running) of £8.4million and seeing its assets shrink. Building society losses are frowned upon by the City regulator and can result in a society being taken over by a rival. Saffron also recorded a loss.
In contrast, the bosses of 11 societies, most notably Skipton’s David Cutter, received no bonuses. In most cases, this was in direct response to the difficult economic backdrop facing customers although some bonuses were lost as a result of profit targets not being met. In Manchester’s case, it recorded losses of £344,000 – the only one besides Nottingham and Saffron to report a 2020 loss.
Some societies such as Darlington and Furness suspended their executive bonus scheme. Instead, they made a flat-rate payment – £250 and £1,000 respectively – to all staff as a reward for helping steer their businesses through the pandemic.
The boss of Leek United agreed to reduce his salary in the second half of 2020 due to the pandemic and the impact it was having on customers. He also received no bonus.
In Regnier’s defence, his total remuneration for 2020 fell by 4.6 per cent to £926,000 – with Yorkshire reporting a fall in pre-tax profits of 3.5 per cent to £161.3million. As the table shows, a number of bosses received bonuses and saw their remuneration rise compared to 2019.
On Friday, Yorkshire said Regnier’s remuneration ‘included consideration of the impact Covid-19 has had on both members and the society’s financial performance’.
It added: ‘Our business performed well in a difficult year, meaning we did not furlough any of our staff or look to the Government for support. We focused on giving as much back to our members as we could in an ultra-low interest rate environment.’ It said its savings rates ‘beat the market consistently’ and it launched a market-leading regular savings account and new loyalty Isas.
A similar defence was given by Coventry whose boss Steve Hughes was parachuted in from rival Principality in April 2020. He received total remuneration for eight months’ work of £702,000, including a £143,000 bonus and a cheque for £160,000 for his loss of office at Principality. Last year, Coventry’s profits fell 15 per cent to £124.4million.
On Friday, it said: ‘Steve joined us during the first lockdown and has led through this turbulent time. His bonus was based on the society’s overall performance and reflects the huge effort Coventry has made to support its members, colleagues, communities and partners.’
Building society members can vote against executive pay at the annual general meeting – something they can do online ahead of the AGM – but the vote is not binding. Also, many societies encourage members to use a ‘quick’ vote which hands their vote to the chairman.
The trade organisation, the Building Societies Association, said: ‘Pay and bonuses for senior leaders is an understandably sensitive topic and receives a great deal of thought by remuneration committees and boards before they make decisions.’
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