Failure of Public Ownership.

[Fittster]

Today sees the end of the last demutualised Building Society in Bradford & Bingley. So since the Conservative’s Building Societies Act of 1986 the following organisations have been lost:

Building Society	Date	Details	Current position
Abbey National	1989	Converted to plc	Now known as "Abbey", a subsidiary of Banco Santander
Cheltenham and Gloucester	1994	takeover by Lloyds Bank	Now part of Lloyds TSB although C&G still have a branch network.
National & Provincial Building Society	1995	takeover by Abbey National	Business merged into Abbey National, name no longer used
Alliance & Leicester	1997	Converted to plc	Remains independent but a takeover by Banco Santander, which also owns Abbey, has been approved by shareholders
Bristol and West	1997	takeover by the Bank of Ireland	Remains a division of Bank of Ireland but its savings balances and branch network were transferred to the Britannia Building Society in 2005
Halifax	1997	Converted to plc	Now a division of Bank of Scotland plc, the UK banking subsidiary of HBOS, which itself agreed to a merger with Lloyds TSB on 18 September 2008
Northern Rock	1997	Converted to plc	Nationalised in February 2008 following near bankruptcy due to the Subprime mortgage crisis
The Woolwich	1997	Converted to plc	Now part of Barclays plc. Woolwich brand name now only used for mortgages from Barclays with the Woolwich branch network merging with that of Barclays in 2007
Birmingham Midshires	1999	takeover by the Halifax	Now a division of Bank of Scotland plc
Bradford & Bingley	2000	Converted to plc	The BBC reported nationalisation on 27 September 2008

On the other hand the Nationwide which resisted the pressure from the city and carpet baggers for a public listing is now the 2nd largest UK mortgage lender.

If we look at retail Woollies is a PLC in major trouble, Debenhams was recently in the hands of private equity and is now struggling in the market, where as John Lewis appears to be weathering the storm rather well.

While Sainsbury’s has struggled Waitroses has expanded, even the Co-op is still ticking on.

So is being a PLC the best form of ownership for a large organisation? It would appear that the short term demands of shareholders and the City are detrimental to the long term success of an organisation.

Has anyone seen any benefits to the AA since it became a PLC?

As far as I’m aware many large legal firms with high paid staff are partnerships.

Should the government encourage the creation of more Building Societies, Cooperatives, mutual ownership and partnerships?

[JagLover]

Fittster said:

So is being a PLC the best form of ownership for a large organisation? It would appear that the short term demands of shareholders and the City are detrimental to the long term success of an organisation.

Many of those you cite above were taken over by other financial institutions. As long as the price was right this was not a 'failure' but a decision by the directors to maximise shareholder value.

[Fittster]

JagLover said:

Fittster said:

So is being a PLC the best form of ownership for a large organisation? It would appear that the short term demands of shareholders and the City are detrimental to the long term success of an organisation.

Many of those you cite above were taken over by other financial institutions. As long as the price was right this was not a 'failure' but a decision by the directors to maximise shareholder value.

But in the long term has the consumer, employees, or shareholder benefitted? It seems that the financial service industries have done well from privatization but the average man has lost out. The owners of building societies had approximately 150 years of success but within 10 years of floatation they have disappeared. Were the benefits received in those 10 years greater than those that had been received in the previous 150?

Today I'm less convinced by the benefits of public ownership than I was a year ago. Maybe other forms of corporate ownership are more effective (if PLCs are so great, why are all those corporate lawyers picking up large fees from the city happy to be members of partnerships?)

[HiRich]

Fittster said:

So is being a PLC the best form of ownership for a large organisation? It would appear that the short term demands of shareholders and the City are detrimental to the long term success of an organisation.

Warren Buffett has explained this in greater detail, and he has a rather good track record in the area.

Short-termism/greed is the root problem. Management should have the freedom (and be overseen) to consider the long-term requirements. Private ownership or majority shareholding provides the opportunity for someone to keep focus on the long-term. Full public ownership normally removes that check. Many shareholders have no stake in the organisation, except the dividends and share price,

Buffett always buys for the long-term. Management are free to manage, but are kept under considerable pressure to act for the long-term. Oddly, not only does Berkshire Hathaway's performance in the long-term outstrip pretty much any other investment company, it also does pretty well in the short term.