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Abbey policy holders Essay

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But the massive loss suffered by Abbey in 2003 has affected shareholders. At a time where other banks are making record profits (Royal Bank of Scotland recorded 6.2 billion profit before tax9), the Abbey shareholders may not even receive any spare capital that has came from the sale of assets in the wholesale bank. As Abbey sold off over 80 per cent of the assets of the wholesale bank, analysts were hoping that Abbey could return between 1.2bn and 1.5bn to investors via a special dividend or share buy back. However, the chief executive of Abbey, Luqman Arnold was said to be “increasingly cautious” about the amount of cash that would be released due to regulatory changes. Whether or not this will affect the position of the shareholders is still unknown.

Customers are an important group of stakeholders for Abbey. They are outside stakeholders. Communicating with them is a vital part of Abbey’s strategic plan. They do this by advertising on various mediums, (television, radio, etc). This has proved successful in the past, as Abbey have won various awards for their “Plain English” approach. This strategy of not using banking terminology was very successful. However, should customers not be satisfied, there is also a customer relations unit available to help solve disputes.

But a recent development regarding profits has upset many customers. For the second year in a row, those customers with a “with-profits” policy will not receive their annual bonus. There will also be higher exit penalties for those who choose to leave the with-profit policy, which could reach up to 10 per cent. This affects nearly 400.000 of Abbey policy holders. According to Abbey’s employee report “Employee involvement and effective communication remain vital to {our} success.” 10 There are various means of communication, from an intranet site, to a quarterly magazine (abbeyview).

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There are a growing amount of concerns among the staff in Abbey however, in the amount of job losses that are occurring within the organisation. As part of their return to traditional banking, Abbey has been cutting a vast number of jobs, many in the fund management sector. Many jobs have gone abroad to India. This has caused conflict not only amongst employees, but among the general public also, who are outside stakeholders of Abbey also. They see it as downsizing and taking jobs away from Britain.

Recently, eight executive directors of Abbey have been paid �2.8 million made up of cash bonuses and shares between them, at a time when the company has suffered massive losses. The bank’s staff got an average of about six percent of their salary as a bonus last year, which was a rise of two percent from a year earlier. A member of the ANGU, (Abbey National General Union) said “Staff were very pleased with the bonus that was paid out in a difficult year. However, in light of what management received it wasn’t very much”. This could lead to further problems in the future.

Conclusion

Abbey are still in the middle of a three year turnaround, so are asking their stakeholders to bear with them. But with the massive losses, and the seeming disregard for employees, shareholders and customers alike, they may find that it will take longer than three years to have their strategy.

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Hi, I am Sara from Studymoose

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Hi, I am Sara from Studymoose

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