Abbey National - taking high quality jobs out of Scotland

The news that Abbey National is planning to withdraw high quality fund management operations from Glasgow and shut down the Scottish Provident operation in Edinburgh, should serve as a dire warning of the consequences of de-mutualisation.

There is a progressive threat to the mutual status of Standard Life, Europe's largest mutual assurer. From some quarters there are mutterings there are political imperatives driving it towards a stock market listing. Certainly there is the ongoing greed of the carpetbaggers who sense one-off windfall payments.

It is worth examining what mutuality is before progressing with this article:

Mutual Company	Public Company
Is owned by it's customers	Is owned by it's shareholders
Profits benefit customers	Profits benefit shareholders
Plans over the medium and long-term	Plans over the short term

It is also worth examining the fate of other Scottish companies that have demutualised:

Company		Fate
Scottish Provident		Now owned by Abbey National. Edinburgh operation to be closed with the loss of 700 jobs. No longer exists as a brand.
Scottish Mutual		Now owned by Abbey National. Highly skilled and highly paid fund management jobs to be transferred out of Scotland. No longer exists as a brand.
Scottish Amicable		Now owned by Prudential. 400+ redundancies, no longer exists as a brand.
Scottish Life		Now owned by Royal London. Future of funds and jobs no longer in the hands of the Scottish economy.
Scottish Widows		Now owned by Lloyds TSB, the lame duck banking group. Future of funds and jobs no longer in the hands of the Scottish economy. New hatchet man running the rule over Edinburgh operation. Expect redundancies.
Scottish Equitable		Now owned by Dutch group Aegon. Future of funds and jobs no longer in the hands of the Scottish economy. Large-scale redundancies in 2002.

Standard Life - Europe's largest mutual assurer and a flagship Scottish company

Standard Life employs more than 12,000 people in Scotland. It is a flagship company for the Scottish economy. They pay their staff well, They aren't looking to short term outsourcing arrangements to drive a small amount of extra profit at the expense of jobs. They plan over the long term, are conservative, responsible and successful. They haven't made anyone redundant, they are a model for the Social Democratic company.

Insurance companies are bound by promises that often stretch over decades. Their strategies must therefore be long term, and a mutual company is much better suited for this requirement. Stock companies must react to market feedback on their quarterly performance. This frustration on the part of stock companies causes decisions that are not always appropriate for the insurance business. The mutual companies have the advantage of being able to make decisions that can stand the test of time are not derailed by the stock analysts and their impatience for current earnings.

Perhaps the most obvious advantage of the mutual company is its simplicity. Going back to their roots, mutual companies are formed for the single purpose of providing benefits for their members at an affordable price. There are no shareholders to complicate the decisions about how to allocate the funds held in trust for the members. The governance of the mutual company is straightforward because the trustees of the company have a clear mission - to fairly collect and distribute funds for the benefit of the members. If the mutual company controls its expenses, it should have a price advantage in the marketplace because it does not have to compensate the stockholders.

De-mutualisation has proved to be of little benefit to the Scottish economy. Sure, it provides jobs. But these are jobs that are not under Scottish control. The profits are not Scottish profits.

There is bugger all wrong with being a mutual company and an awful lot right.

If McConnell and the numpties that represent Scotland want to pick a cause to champion, something that is vitally important to the Scottish economy, they couldn't pick a better one than resisting the de-mutualisation threats to Standard Life.

And, let's be clear here. It is changes to the rules that is forcing Standard Life to consider a stock market listing. Rules are made by politicians.