Nationwide Building Society, the UK's largest mutual, saw a modest rebellion at its annual general meeting, with candidate James Sherwin-Smith securing only 12% of votes in his bid to become the first member-nominated director in nearly 25 years. The board achieved over 95% approval on all other resolutions, including the advisory vote on directors' pay.
Board's possible reactions to the vote
The directors could interpret the result as a sign that all is well, given Nationwide's strong financial performance and customer satisfaction scores that outpace shareholder-owned banks. However, only about 600,000 of 19 million members voted, indicating limited engagement.
A more forward-looking approach would acknowledge that relying on favorable conditions is risky. In a tougher climate, Sherwin-Smith's arguments about accountability at a member-owned organisation could gain traction.
Takeover of Virgin Money without member vote
It remains contentious that Nationwide members did not vote on the £2.9 billion acquisition of Virgin Money in 2024, which expanded the balance sheet by a third. The 1986 Building Societies Act did not require a vote, and takeover rules discourage voluntary conditions. This suggests building society rules need updating to give owners a say in major transactions.
Non-binding pay votes and governance
Nationwide's pay votes are non-binding under current rules. The society could voluntarily adopt binding votes, aligning with shareholder-owned banks it criticises in adverts. CEO Debbie Crosbie received £4.7 million, not at the level of Lloyds or NatWest but still significant. Pay could become a flashpoint in future.
Sherwin-Smith also criticised the "quick vote" system allowing members to back all board resolutions with one click. While it didn't alter the outcome, it sends a "trust us" message inconsistent with mutual ethos.
Opportunity for governance reform
Nationwide does not need a radical overhaul, being a high-performing operation. However, incoming chair Mike Rogers, former chair of Admiral and Experian, has a chance to review governance amid political interest in mutuals. Membership should entail real votes on takeovers and boardroom pay.
