James Sherwin-Smith, which plans to become the first customer to be voted onto the board of Nationwide in nearly 25 years, deserves high marks for persistence. His attempt to get his name on the ballot paper a year ago was blocked, or so it seemed, due to data protection laws and the like. This time, he has the 250 nominations needed to become a candidate at the July annual meeting.
This is a welcome development. As argued here a year ago, democracy is lacking across the country. While Britain’s premier mutual-owned society understands the fact that it doesn’t have to answer to predatory shareholders, member ownership doesn’t always translate into giving those members a real voice in how the place is run.
There will be no referendum of members when Nationwide buys Virgin Money for £2.9bn in 2024, although the publicly listed bank will have to get formal approval from its shareholders to increase the size of its balance sheet by a third. Nationwide argued that its hands were tied by the Building Societies Act of 1986, which was legally sound, but not good.
Equally, it is perverse that Nationwide does not give its members a binding vote on boardroom pay. When the chief executive has the potential to earn up to £7m a year, a very bankable rate of remuneration, he really should make sure members are fine with the procedure, which means voting with the teeth rather than a consultative version.
Sharon Smith, note, does not come across as a one-dimensional rioter. He is a former executive in the payment systems world and presents himself as an important friend across the country. Its manifesto, as it were, contained such non-fundamental ideas as “improving transparency” and helping to ensure that the benefits of mutual ownership were “balanced”, sanctioning a “fair share” of cash loyalty payments and ongoing internal debate about savings and higher mortgage product prices. On the face of it, he may have something to contribute to boardroom discussions.
Is it possible that Nationwide’s board will also endorse Sharon Smith’s candidacy? That seems unlikely. But the building society should be careful to allow it a fair run.
Another controversial aspect of nationwide voting is the use of an “instant vote” electronic system that allows members to check a box in favor of all board recommendations. The claimed justification is greater engagement and greater turnout. But the potential for such a setup to kill an outsider’s electoral chances is clear: no one needs to use the instant system, but in practice the board starts with a sliver of votes in its back pocket.
Under the circumstances, the best course of action would be to keep things simple and suspend the “instant vote” system for this year’s session. If the board wants to oppose Sharon Smith, which it is fully entitled to, it should clearly present its case as to why it considers it inappropriate or unnecessary.
Whatever its recommendation, the board has reasons to be confident it will prevail in the end. Nationwide is a high-performing organization that performs well year after year in customer satisfaction surveys. It should not need to use a cumbersome voting system.
