RUTH SUNDERLAND: Nationwide’s inability to honour mutual democracy over Virgin deal is a contradiction

For twenty years marred by banking scandals, Nationwide was the honorable exception. The country’s commitment to upholding mutual values ​​is impressive.

That is why the fact that there is no membership vote on the £2.9 billion takeover of Virgin Money seems so incongruous and out of character.

The deal itself appears to have merit: it will move up the banking scale nationwide and give the country leverage against the Big Four – Barclays, NatWest, HSBC and Lloyds.

There is always a risk of deals going bad, as happened with the last major merger between Co-op Bank and Britannia Building Society.

This danger is mitigated by the fact that Nationwide chief executive Debbie Crosbie is a former senior director of Virgin Money who knows the company well. But there is an uneasy feeling about the way in which the principles of mutual democracy seem to have been violated.

The rationale for this major disenfranchisement – ​​that organizing a vote for 16 million members would take too long and potentially open the door to a rival bidder – does not fully satisfy opponents.

Nationwide states that the Takeover Panel would not allow a members’ vote to be introduced as a condition of the deal, and that this would not have been acceptable to Virgin Money’s board.

But in an age of instant digital communication, a virtual meeting with online voting should be feasible.

It is very unusual for a mutual company to undertake an acquisition of this magnitude and the Takeover Code is not designed for this. But the Takeover Panel must be capable of flexibility.

Nationwide and its advisors did not come up with this offer overnight. One wonders whether she could have found a way to allow for a vote by the members as part of the preparations, if she had intended to do so.

Dissident members have organized a petition with more than 500 signatures. This is in theory enough to call for a meeting – but to do that signatories would have to pay £50 each and then verify that they are national members.

Even if they were successful in forcing a vote, it would not be binding.

Crosbie is a highly respected manager. But this is a transformative deal that inevitably comes with risks, one of which revolves around Crosbie himself.

Since the integration would take five years or more, she might be tempted to leave while the merger is still in the middle.

Nationwide’s status as a champion of reciprocity dates back to the 1990s, when the country stood firm against a wave of carpetbaggers. It decided to remain as a mutual rather than float on the stock market alongside its rivals Halifax, Northern Rock, Alliance & Leicester and Bradford & Bingley.

All those former building societies collapsed during the credit crisis – unlike Nationwide, which acquitted itself very decently.

This makes it the undisputed standard bearer for the mutual sector. The Virgin Money deal could result in an even bigger, stronger mutual leader.

At a time when reciprocity is under threat and unfairly disparaged as an outdated business model, that would be a good thing.

Nationwide is not legally obliged to give members input. It is true that offering a vote would not be easy.

It is also true that the association’s own polling shows that the vast majority of members support the deal.

Yet this apparent inability to respect mutual democracy is a contradiction and a great shame.