Mutual makes a mockery of democracy
Mutuals make great play of the fact that they are owned by members, not dividend-hungry shareholders – although some, such as NFU Mutual, pay an annual mutual dividend to members in recognition of their loyalty.
Mutuals also make a song and dance about the right of customers to vote at their annual meeting and to attend in person and ask difficult questions of the board.
They call it member democracy and it’s meant to differentiate them from those companies listed on the stock market (most banks and insurers) that are interested only in generating fat profits.
Yet some mutuals, I am sad to say, make a mockery of member democracy. Last week, the mighty Royal London held its annual meeting. The insurer, which embraces a number of leading financial brands including Scottish Life, Bright Grey and Scottish Provident, has more than half-amillion members, with the biggest concentration in the North West, North East and the Midlands.
Yet bizarrely, the insurer chose to hold its meeting in central London, where only five per cent of its customers live. To make matters worse, it opened the meeting at 11am, making it almost impossible for members in the North to attend.
Unless the train journey had been booked weeks in advance, it would probably have cost about £300. Hardly an incentive to attend. This all may explain why fewer than 40 diehard members (0.00772 per cent) bothered to attend the Royal London meeting.
Were those that make up Royal London’s board disappointed with such apparent member antipathy? Of course not. The meeting’s awkward logistics were deliberately designed to stop members from voicing their concerns over the greed shown by former chief executive Mike Yardley and new boss Phil Loney.
As Financial Mail exclusively reported last month, Yardley, who quit in September, was awarded a £4million ‘resignation’ package plus an index-linked pension of £447,000 a year that he can take in five years’ time. Loney received a ‘golden hello’ package worth £1.28million as compensation for leaving Lloyds Banking Group.
Although about ten per cent of members voted against Royal London’s remuneration report (not surprising in light of some of the comments made by readers on thisismoney.co.uk, such as ‘mighty deep troughs’, ‘shocking’ and ‘another instance of a mutual acting in the interests of directors’), there was not a murmur of dissent from those at the annual meeting.
The result was that the board was let off the hook. Maybe the 40 hardy souls were too weary to vent their anger, although some did agree to speak to Financial Mail.
Dennis Evans, 66, a retired architect from Stroud Green, north London, said: ‘Why is a third of the pay the directors receive made up of bonuses? The structure of executive boardroom pay is wrong to me. We are a mutual organisation and this pay seems excessive.’ A member of seven years, Anthony Asiadu-Buoh, 47, from Stoke Newington, north London, agreed. He said: ‘In the current climate, is it right for executives to be taking these sorts of bonuses? The company’s performance has not been that strong in the past 12 months.’
Anthony also criticised the timing of the meeting and said: ‘I was recently made redundant, so I have the time to come to this meeting, but most members are working and cannot get to central London in the daytime. I don’t think that’s fair.’
Royal London has got away this year with the equivalent of AGM murder. As a result, it has given mutuality a bad name. Shame on it.
The awkward logistics were designed to stop members voicing concerns
BAR the horrible thought that the Bank of England base rate might have to be cut to zero to save the economy from depression, savers were given a little cheer last week with the news that the annual growth in the Consumer Prices Index fell last month from 3.5 per cent to three per cent. This means there are savings accounts offering rates in excess of inflation.
For savers, the hurdle rates are three per cent, 3.75 per cent and five per cent, depending on whether they are a non-taxpayer, a basic-rate taxpayer or a higherrate taxpayer.
Ensure your savings are clearing these hurdles with room to spare.