Kent Reliance Building Society Executives' Remuneration

I have a mortgage with Kent Reliance Building Society. It's fine, meets my requirements and I'm very happy to have it. This makes me a member of the Society and entitles me to vote at their Annual General Meeting. But I just received voting papers and a summary of their 2007 Financial Performance. Whilst Income from Interest was £13.6m (up 12% from 2006) expenses were £8.3m, up 13% from 2006! Now, as a customer, I'm pleased that, as a mutual society, profit is not their first priority. But surely, efficient running should be a priority? That will help keep customers' costs to a minimum. (Incidentally, Assets Employed rose from £1.6B to £2.1B. Was this the metric which justifies a claim of improved year-on-year performance? If so, how does this benefit the Society's Members?)

Now, I'm not saying 'sack the management team' - within the context of the difficult financial markets, this may be a satisfactory performance. But I can't see any way in which it can be defined as impressive. Yet, if the Directors' Remuneration Report is approved by members, CEO Mike Lazenby will see his salary and fees increase by 32% from £266k to £350k and Deputy CEO Rob Procter and Financial Director Bob Scruton will see theirs rise by 33% from £166k to £220k. Regarding bonuses, Mr. Lazenby's will rise by a remarkable 131% from £16k to £37k whilst Messrs. Procter & Scruton will have to struggle through with a mere 110% increase from £10k to £22k. Finally, Messrs. Procter & Scruton's pension contributions will increase by 45% from £20k to £29k, Mr. Lazenby enjoying a more restrained 20% increase from £38k to £46k.

Now don't expect a diatribe from me on the subject of Directors' salaries being too high. No, I fully support anyone who delivers real value to shareholders or members receiving a salary that reflects the contribution they make to an organization, but I also believe that Boards Of Directors should reduce remuneration for unimpressive performance, and in situations where management significantly underperforms, dismiss for underperformance without compensation. After all, we're constantly being told that one reason why top executives receive high salaries is to compensate for the risk of dismissal. So why are the Kent Reliance Building Society's Board Of Directors proposing such significant increases in executive compensation packages?

If, next year, the KRBS can demonstrate a 32% increase in performance, I'll be the first to approve a 32% increase in Mr. Lazenby's salary, and I'll do it with a smile on my face. But, until that situation arises, I think the Directors need to come back to their Members with a more realistic remuneration proposal.