Commercial Finance Specialists

Angry scenes mark the beginning of a torrid season of meetings for building society bosses, as members vent their fury at the AGM of the Hanley Economic Building Society.

For many years, Hanley Economic Building Society has served the financial interests of its members with distinction, building up a loyal customer base in its heartland and playing a key role in local communities worst hit by the financial downturn. But like many other societies, Hanley is paying the price for trying to be more than just a building society.

Before the credit crunch, Hanley made several decisions that would cost it dearly. In 2008 the society became involved in property development finance in parts of the country that it wouldn't usually operate in which caused many problems. As it mutually owned by its members, this would directly effect customers through more expensive mortgages and lower savings rates.

Earlier in the week, the 185-year-old Hanley became the first of the UK's 52 societies to hold its 2009 annual general meeting, following publication of its results. Most societies have a calendar year-end, however, Hanley's is at the end of August. Although only 21 of the 35,000 members showed their faces at the meeting at the new headquarters, they were not in the mood for platitudes.

They were angry with over-paid executives and upset with the society for getting involved with dealings outside its normal field of expertise - and they didn't keep their feelings to themselves, which made for an uncomfortable one-and-a-half hours for chief executive David Webster and fellow board members.

If the events at the Hanley AGM are a sign to things to come, the other 51 societies should expect a similar reaction from members when they hold their AGMs in coming months. They will be put under pressure to explain their bloated remuneration and justify ill-judged forays into high-risk areas such as sub-prime lending and the acquisition of third-party mortgages.

Last week, Chancellor Alistair Darling included society executives in his clampdown on excessive bonuses in the banking sector - a move that is likely to cause some societies to face large tax bills if they wish to continue paying executives big 'performance' bonuses.

Leading the members on Hanley's boardroom was Nigel Stuart, a businessman from Newcastle-under-Lyme.

He believes Webster's remuneration of £200,000 in 2009, an £5,000 increase on the previous, is 'obscene' and didn't keep his feelings to himself. After the meeting, Nigel said: "Unemployment in Stoke-on-Trent is high. The average wage is £18,000 and families are struggling. Many of my friends have taken pay cuts to keep their jobs.

"In light of these local economic difficulties, it is grotesque that Mr Webster can get paid so much for running an organisation so poorly and earn himself a £10,000 bonus in the process. What sticks in my craw is that as a member, I'm paying for his largesse."

Although Hanley made profits of £683,000 in 2009 - 57% lower than 2008 - this was boosted by £1.8 million which came from the sale of its old head office. removing this one-off gain from the picture, says Nigel, Hanley made a lossof £1.1 million, mainly due to a staggering £1.8 million provision against loans made to finance property developments in Cheshire and Merseyside.

"what was Hanley doing lending there?" asks Nigel. He was not the only one to have views on the matter. Philip Jones, a county councillor from Stone, referred to the 2009 accounts as 'truly awful' and couldn't understand why Webster was paid a higher salary than the boss of Leek United Building Society, which is more than twice the size of Hanley's and made £2.5 million in profits last year.

Winston Leese, 69, a former company director with DIY group Focus, said Webster's pay package was not in line with the amount to the bosses of similar sized societies such as Dudley, Marsden and Tipton & Coseley. Last year, the bosses of these three mutuals, Geoff Caves, Neil Shoesmith and Chris Martin were paid £126,498, £187,249 and £135,000 respectively. "It's a fairness issue, I just don't think a Hanley chief executive should be receiving a bonus when everyone locally is up against it. It sends out the wrong message." said Leese

Webster said: "I am well remunerated for what I do. Of course, I empathise with members who express concern over my remuneration. My rewards are determined by a committee of non executive directors who go about their work diligently and ensure myself and my fellow executives are not ostentatious."

He also added that while the AGM had been dominated by those speaking out against directors' rewards, members had overwhelmingly approved the remuneration report. In line with voting patterns across the building society industry last year, 93 per cent of Hanley's voting members approved Webster's pay.

Written by Sam Gooch