High societies

By RICHARD DYSON
Updated: 19:00 EST, 12 April 2003

BUILDING society bosses enjoyed bumper pay rises averaging 7% in 2002 - more than double the increases seen by millions of their ordinary members. Despite growing economic gloom, faltering house prices in some regions and savings rates plunging to 40-year lows, a Financial Mail survey has found that building society bosses are awarding themselves pay rises of up to 16%.

Their six-figure salaries are in addition to lavish pension schemes. Some bosses' pensions entitlements are valued in millions. They amount to hundreds of thousands in annual retirement income guaranteed for life.

April is the busiest month in the building society calendar when most mutuals, including Coventry, Britannia, Norwich & Peterborough, Skipton and Leeds & Holbeck, hold their annual meetings.

This year, boardroom pay is high on the agenda as societies are under pressure voluntarily to follow new regulations that apply to quoted companies. The rules require firms to be more open about executive pay and pensions. But a handful of societies, including Nationwide, Britain's biggest, are going one step further and for the first time are asking members to vote their approval of boardroom pay deals.

The only other big society yet to reveal the size of pay deals for 2002 is West Bromwich, which will publish the information next month. The rest of the biggest 15 have published figures for 2002.

Two-thirds of chief executives enjoyed pay rises of at least six% - almost twice the rate of wage inflation. Britannia's Neville Richardson had a 15.5% rise, but that was largely a reflection of the fact that he was promoted to replace Graham Stow last November.

One of the biggest rises went to Skipton's John Goodfellow, whose £428,000 package represented a 12.3% increase. He now earns more than any other building society executive apart from Williamson, even though Skipton, with just 80,000 mortgage borrowers, is only the sixth-biggest mutual.

Skipton says Goodfellow's pay rise was due mainly to performance-related bonuses reflecting the success of its commercial subsidiaries, such as estate agencies and commercial lenders. A spokesman says: 'These businesses make money for the society, allowing us to improve rates for members.'

Skipton will not put Goodfellow's pay to the vote at its annual meeting on April 28, though it is possible that a disgruntled member might raise the subject.

But Robert Sharpe, boss of Bournemouth-based Portman, can be sure his £394,000 pay will attract angry questions at the society's annual meeting on the same day. Portman member Caroline Dalrymple, who runs an interior decor shop in Pewsey, Wiltshire, has been a fierce critic of Sharpe since he upset residents by closing the local branch last year.

Caroline, a 63-year-old widow, says: 'It is obscene. What does he do for us to justify this fortune? We don't get many advantages as members of the Portman. The accounts are often less competitive than others.

'Shareholders of big companies such as Vodafone can rebel when executives get too greedy, but there seems to be nothing that we can do. We have no one on the board to represent ordinary members.'

Portman says: 'Running a building society of this size requires specialised skills and expertise and we pay a proper market rate to ensure that we have the right person. Mr Sharpe's salary is independently assessed and is absolutely in line with his peers in financial services.'

Critics disagree and cite the earnings of regional managers of High Street banks such as Halifax.

Each of Halifax's eight regional managers, for example, earns a £90,000 basic salary with a target-related bonus of up to one-third of that sum again.

Each controls thousands of staff operating through hundreds of branches and each will have 300,000 to 400,000 borrowers on their books.