The members of the mutual insurance company and the building society, as individuals, do not have much power. Collectively, however, they can take bad boards and reverse bad tactics.
This is what happened to insurance company LV, whose members, led by interim chief executive Mark Hartigan, refused to give the green light to a self-interest plan to sell mutual equity.
Attendance at a special meeting in December to decide on a proposed deal with U.S. buyer Baron Bain Capital was not huge at 15 percent, but it was the highest in LV’s living memory.
Say one: LV has over a million members and they need to get their voices heard again.
Sales, and the greed of LV bosses, have awakened a sleeping monster: member power.
Not satisfied with trying to bulldoze through the sale of private equity, the insurer added insult to injury by offering a bonus of more than £ 500,000 for Hertigan, the architect of the ruined sale plan.
Details of his award were published in the annual report, with Deloitte’s so-called experts paying more than £ 45,000 to advise the pay committee. This meant money for the old ropes, when any conscientious person could tell the board without reason that it would be unreasonable for Hartigan to hand over any bonuses.
LV has more than one million members, and they do not have to stand idly by and allow themselves to be treated with such naked contempt. Or, in that regard, the need for members of the Schipton Building Society and other mutual, whose swollen prizes my colleague Jeff Prestridge published in the Sunday Mail (see link to related articles below).
At LV’s annual meeting, likely to be held in September, there is an opportunity to vote against Hartigan’s salary and to propose a no-confidence motion against him.
Voting on remuneration is not only advisory, but still sends a strong message.
If members can personally attend the annual meeting, this is an opportunity for the board to ask questions from the floor, or in the case of an online meeting, in a virtual format.
From the beginning, Hartigan’s tenure has been disastrous, to a degree that would have been risky if not for the interests of its members. He continued to argue that the Bain agreement was necessary because LV did not have a good future as an independent entity.
In the face of a rapid vault, we are now being told that commercial performance is improving. LV is now apparently ‘a place where it can move forward and successfully compete in the market as a vibrant, sustainable mutual brand’. Neither of these positions can be accurate. There is no doubt that the LV camp argues that the situation has changed, but it is not a defense.
The whole point of reciprocity is that this is not a strategy for the long run, but rather a strategy to evade the first blow of inconvenience – or, as one might suspect, the smell of potential rewards for top executives.
It’s ridiculous that Hartigan remains at the top of the LV at all, let alone that he’s taking bonuses. In the interests of its members, a complete reset of the LV is required, beginning with the appointment of a heavyweight chairman such as Joe Garner, the outgoing boss of Nationwide, or pension champion Barnes Altman. That person should then quickly appoint a credible CEO.
LV’s executives claim that through Bain’s defeat, “we have heard, we have learned and we know we need to do better to engage our members in the future.”
The reality is that board members have tin ears. They seem to have forgotten that they and Hartigan have to serve the members, not otherwise. It’s time for LV members to hear their voices again.
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