Numbers of building societies currently believe that the time has come to abandon their mutual status in order to create a better platform for growth. Observers who watched the societies throwing their members' money at estate agents in the late 1980s (or, for that matter, the Savings and Loans debacle in the US, or the TSB's disastrous acquisition of Hill Samuel soon after its own flotation), might reasonably feel uneasy at this development.
The building societies' rush to market is indeed bizarre, since it demonstrates their anxiety to rid themselves of two unique advantages. First, with no dividend-hungry shareholders to satisfy, they can offer higher deposit rates and lower banking charges, and reinvest all their profits in the business. Second, while other businesses are desperate to get close to their customers, the societies' whole raison d'etre is to serve their customers' interests.
It is a sad reflection of the societies' performance that, despite these huge inbuilt advantages, they have nevertheless failed to protect their core mortgage-lending activities from commercially-driven competitors.
To plead difficulty of access to the capital markets is a poor excuse for what has been essentially a managerial failure. The problem lies in lack of accountability - the other side of the mutuals coin. In organisations where there has been no coherent sense of ownership, the most common result has been complacent management - which has in turn led to a lack of direction in the business and an inability to recruit and motivate good quality staff.
This is the challenge confronting those building societies which have elected to remain mutuals. By making a conscious decision not to float, they have given themselves the opportunity to set clear objectives built round the natural advantages of their mutual status. If they seize this opportunity, their erstwhile fellows who took the route to market will justifiably stand accused of throwing out the baby with the bathwater.