As a NED of a Building Society I understand the reputational risk any Director is exposed to particularly Directors in the financial services sector. Partly complexity of the industry and partly due to risk by association in current times.
The media are extending the Co-op issues and branding all Mutuals and Building Societies with the same brush. Such associations risk more harm to stakeholders than add value.
There are some very strong and professional Building Society Boards.
There is no excuse for lax corporate governance in any entity or sector and post the Walker Review and the split of the regulator into the PRA and the FCA, the financial services sector has no excuses.
Today the Sunday Times has focused a light on the Mutual and Building Society sectors and made reference to Britain’s rotten mutuals and states that 55% of Building Society boards do not conform to good corporate governance standards. Most of the article is a history of the stresses and strains felt by the sector through the crisis. In the article Revealed: boardroom shambles at mutuals the authors give more history and focus on tenure as the main governance culprit. This was countered by the BSA stating that experience and independence were more valuable to a society being steered safely than tenure.
It still remains that a Board needs to be sure that it does not offer “non compliance hooks” that can create reputational damage.
Sometimes it is easier to have the governance messages provided clearly to the Board by an outsider rather than from inside. This is where the Walker Review suggesting annual internal and external board effectiveness reviews every three years as being the way a Board can review its governance in a constructive manner.