Rock staff protest about job security

Jan 15 2008 by Adrian Pearson, The Journal

PRESSURE is mounting on the Government to explain what job security is available to thousands of Northern Rock employees.

Staff are set to protest outside Newcastle’s Metro Radio Arena today as shareholders meet to block any plans by the bank to accept a cheap sale.

And as speculation mounts that the bank is edging towards nationalisation, union members and shareholders will call on Northern Rock directors to do all they can to prevent the Government taking over.

Union leaders, opposed to anything that will make nationalisation more likely, are calling on shareholders to drop plans which would see the board of directors restricted in their ability to negotiate with Northern Rock assets.

At today’s shareholder meeting, directors will be asked to agree to constraints on what they can do during the sale process.

Hedge funds SRM Global and RAB Capital, which together own around 18% of the lender, want to limit the board’s ability to sell assets and issue shares without prior approval, but Northern Rock chairman Bryan Sanderson has said the “potentially damaging” measures could hinder a rescue.

Robin Ashby, of the Northern Rock Small Shareholders Group, said: “Small shareholders will, for the first time, be able to meet the man who has been acting as chairman, and put to him our arguments.

“As far as I’m concerned, the best result would be for the motions put by the two largest shareholders – to stop unauthorised sale of large parts of the company’s assets – to be passed.

“We need these motions to go through to stop the board simply chopping the company into smaller bits and the suggestion that this will stop a sale is ridiculous.”

Mr Ashby added that any nationalisation could lead to legal action from the bigger shareholders.

He said: “The small shareholders’ group could not enter into legal action, we do not have the assets.

“But I would not be surprised if some of the larger shareholders at least considered it.”

The shareholders are also facing criticism from Graham Goddard, Unite deputy general secretary. He said: “Along with the loyal customers, employees of Northern Rock are the life blood of the bank.

“Without the continuous dedication of these employees throughout the current crisis, there would be no viable business for shareholders to discuss at their meeting.

“Months of unremitting speculation about the future of Northern Rock have left long-serving employees feeling insecure about their jobs.

“Unite is urging shareholders to hear the concerns of staff and consider the Unite Charter on the future of Northern Rock.”

The Liberal Democrats last night added to the pressure by demanding rapid action on the long-term future of Northern Rock jobs.

Yet despite the calls for job assurance, Liberal Democrat shadow chancellor Vince Cable has made no secret of his desire to see the bank nationalised.

The Liberal Democrats argue that nationalisation is the only way to guarantee that taxpayers see the £25bn loaned to the bank returned.

Tory leader David Cameron said a nationalisation move would be a staggering failure for the Government.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rock Q & A

WHAT does the union want?

Unite opposes nationalisation and has a six-point charter which includes calls for the bank to remain a UK listed company and for continued support of the Northern Rock Foundation.

What do shareholders want?

Money. Many small shareholders have stood by Northern Rock for years, refusing to sell their shares during the run on the bank.

Small shareholders are calling for the bank to return that loyalty.

Many say they depend on the shares as part of their retirement plan.

What happens if nationalisation is chosen?

The bank’s staff become Government employees, its mortgage book a Government asset. This could see a historical first in which people who default on their mortgage repayments see their home repossessed by the Government.

How do you nationalise a bank?

The simple answer is an Act of Parliament, but since the Government secured all Northern Rock accounts last September, it has effectively been in charge since then.

The chairman and chief executive were appointed after Government consultation and any sale must have Government approval.

If the Government does opt for formal nationalisation it will have to OK the decision with the European Commission, whose competition rules do not normally allow such measures.

What happens to shareholders if the bank is nationalised?

The worst-case scenario is they get nothing. When the Government nationalised Rolls- Royce in 1971, shareholders lost out.

But ministers may face legal action as a result of nationalisation.

And the political repercussions?

Shadow chancellor George Osborne would have the easiest job at Westminster.

The Government’s strong record on the economy has taken a battering in recent months, and nationalising the bank would be seen by some as a sign of weakness.