Press release

Independent review of building society governance published

21 May 2015
Management and governance at building societies must be every bit as rigorous as that at shareholder-owned banks.  An independent report published today¹ reviews governance in building societies.  It has found that the quality of governance in the sector has improved significantly since the financial crisis.  All building societies follow the UK Corporate Governance Code (UK Code). 

The review by Odgers Berndtson, found that adherence to the UK Code across the sector was strong, with considerable positive change coming from board responses to the changing regulatory landscape.   There has been a substantial refresh of society board composition and capability, with candidates who have strong financial services or risk management credentials favoured.  Diversity is firmly on the agenda, but with a limited pool of talent to draw on, competence and skills fit come first.

The UK Code remains appropriate for building societies, despite its design for PLCs.  There are however, areas where building society governance is distinct.  Boards are, for example, clear about the particular role they have to serve the best interests of their members and are committed to doing this.  In addition, a number of boards articulated a distinctly different stewardship role: meeting the needs of future generations of members as well as today’s.  Alongside risk appetite, it is this which underpins the distinct, long term perspective they take in leading their societies.

Much of the review was positive, but it also identified areas for continued debate and development.  Succession planning, coupled with the need for diversity will see boards seeking a steady flow of talent.  The available talent pools, particularly in areas such as risk management, strategic technology and treasury are comparatively small and it is an on-going challenge to recruit the right individuals.  This may not be aided by the two-speed approach to board level accountability proposed by the regulators.

Similarly, engaging society members in their capacity as owners rather than customers remains a work in progress.  The value in doing so and the investment to deliver improvement in this area has gone up sharply, with 57% of chief executives - who responded to a BSA survey² - reporting that they believe their members have a role in setting the strategic direction of their society.  This has risen from 16% in 2010.   Investment in this area is also up, with 76% of these chief executives saying that they had committed greater resource to member engagement in the past two years; 77% will commit greater resource in the next two years.  

At present this leaves much of the role undertaken by activist shareholders - where they exist in a PLC environment - to society boards; the regulator, particularly the Prudential Regulation Authority and in a different way the BSA³. 

Commenting, the author of the review, Jeff Morris, a partner at Odgers Berndtson said.  “It is apparent that the quality of governance in the sector has improved significantly.  There are challenges ahead, but this review is a valuable way point   The intrusive nature of current regulation, whilst one of the drivers for this positive change, does now risk blurring the distinction between non-executive and executive directors across financial institutions generally – a core plank of the UK Code.”

Robin Fieth, Chief Executive of the BSA said:  “Adherence to the UK Code is clearly strong across the whole sector.  However, it is in the very nature of corporate governance that the work will never be completed.  Circumstances change, best practice continues to develop, the bar goes up."

Press Contacts:
Hilary McVitty
Head of External Affairs
0207 520 5926
07507 837 326
Notes to Editors: 
  • ¹The full review entitled Building Society Governance by Odgers Berndtson is downloadable from the BSA website.A pdf or print copy is also available on request from the BSA.Please contact Amanda Esteban on 0207 520 5904 or
  • This review is based on consultation with members of 31 building society boards, including 8 of the 10 largest.Full details of methodology are noted in the review document.
  • ²In addition, the BSA is also publishing a review of member engagement at building societies.Entitled Engaging Conversations it too is downloadable from the BSA website or obtainable from Amanda Esteban.
  • This review includes views from 22 building society chief executives and includes examples of the engagement that societies have with their members both as owners and customers.
  • ³The role of the trade body is to provide guidance on the evolving UK Code; facilitate learning and discussion and provide a framework to strengthen future leadership capability.


Hilary McVitty

Head of External Affairs

Tel: 0207 520 5926

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