Members will recall that in one of our previous Newsletters we discussed in detail the bank’s new retail strategy. Whilst the new value treatment strategies are all very interesting, our concern is about how the rush for growth is going to change the culture of the bank. Is Lloyds going back to the failed sales practices of the past? How will Lloyds achieve the kind of growth the bank is looking for without adopting those old behaviours? The language used in the presentations adopted by the Retail Banking Executive Committee (RBEC) doesn’t bode well for the future. ‘Share of wallet’, ‘cross-sale opportunities’ and ‘penetration rates’ seem like a throwback to a bygone age. But that’s the language executives are now using when talking about customers. How long will it take before that language trickles down to the front-line? The reality is, not very long.

It’s clear the Lloyds Banking Group Board expect the culture of the bank to change because of its growth strategy. At a Board Governance presentation on 14th December 2022, Robin Budenberg, Chairman of Lloyds Banking Group, said:

“In the past our strategy was very much about simplification and efficiency. Under Charlie Nunn’s leadership we are moving that to a more growth focused strategy and that brings important implications for governance, particularly around things like culture and, as Alan will speak on later, remuneration. We need to have very clear growth objectives that we hold our executives accountable for.”

We have highlighted the key phrases.

Incentives Drive Behaviours

The Board has also said that it is moving back to a Long-Term Incentive Plan (LTIP) for Charlie Nunn, Group Chief Executive, and senior executives. That new plan will be announced to shareholders on 22nd February. LTIPs have always been controversial because, despite their name they are often wolves in sheep’s clothing, rewarding executives for achieving short-term performance goals at the expense of sustained long-term growth.

When the Board got rid of LTIPs a few years ago it said: “we believe that a reward package that has less volatile outcomes is more reflective of our objective of delivering stable and sustainable returns and will incentivise stewardship over longer timeframes”. Under the current plan executives gave up the possibility of bigger pay outs for the certainty of smaller ones. It seems that the Board now wants to move back to bigger pay outs for Charlie Nunn and his executive team.

That’s important for front line staff because all the research shows that incentive targets influence CEO behaviour and that executives, motivated by share options, often act to hit targets in ways that drive the wrong kinds of behaviours. One could easily make the argument that the PPI mis-selling scandal was driven by very lucrative reward packages for bank executives that focused on short-term growth.

We don’t want to see the bank move back to sort of sales practices that drove the mis-selling scandals of the past. Having the right culture in place would help ensure that does not happen again. The bank needs to address this issue – quickly.

Where’s The Evidence, Charlie

At one of his ‘Town Hall’ sessions, Charlie Nunn addressed the issue of the pension cap which affects 19% of active Lloyds and Halifax staff.

To recap, Mr. Nunn said: “We reviewed the cap but when we looked at the trade-offs and what we are trying to do to support our colleagues we don’t think now is the right time to revisit the cap”. If the bank has carried out a review of the pension cap, something on which many staff are sceptical, it should publish the results of that review, explaining all the arguments considered. We have produced some text (below) that members can send to Sharon Doherty, Chief People and Places Officer, asking for a copy of the review. If Ms. Doherty refuses to provide details of the review, members will no doubt question whether it ever existed in the first place.

Members with any questions on this should contact the Union’s Advice Team on 01234 262868 (choose Option 1).

Here is the text to send to Ms Doherty:

Dear Ms Doherty

I’m one of the members of staff subject to the pension cap.

When the cap was introduced the bank said that it would be kept under constant review. I understand from Charlie Nunn that the bank reviewed the pension cap last year but decided not to change it. You will not be surprised learn that, like most of my colleagues in the same position, I am disappointed by that decision. However, I would like to understand the basis of that review and what factors were considered by the bank in coming to its decision. To that end, I should be grateful if you could send me a copy of the bank’s review.

Yours sincerely

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