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  • Writer's picturePeter Smith

SUNDAY 17TH OCTOBER 1999 - Options Make Executives Consider Their Options

It is a perfect autumn day. We go for a walk around Virginia Water (named after my daughter, or at least that's what we told her when she was little.) It is a good chance to forget work briefly, then go home to read the BoS bid document and prepare some responses to those comments that are relevant to purchasing.

My response to their outsourcing claims is that that we do use outsourcing successfully, but also that they are reckless in outsourcing core competencies. That sounds like a good bit of having my cake and eating it. (We do have actually some good and successful examples within NatWest, even if I have been frustrated sometimes by the overall lack of strategy.)

In terms of their comment about "institute stringent purchasing policies," we can respond very strongly. NatWest has had a professional function and a senior director of purchasing for far longer than BoS. We have proper policies and loads of "Group contracts" with suppliers where we use the total spend of all the various Group companies to negotiate better deals than each could do independently.

We have the recent consultant's study where we came second out of 17; and I know that BoS have only just started to bring their whole company together to try and get better agreements. Capital Bank in Chester, one of the major BoS subsidiaries, has run independently from a purchasing point of view until very recently.

But I am starting to wonder how many NW staff really care whether we remain independent. Many of the Branch staff are fairly disillusioned and not over- impressed with our top management. A take-over would probably not change things for them too much anyway as long as it wasn't Lloyds or someone who would really rationalise the network. At management levels, most people have shares, either options or through profit sharing schemes, and might be quite happy to see them paid out at around £15. Most of the options have not vested for the last couple of years. There are quite stringent performance criteria that have to be met and have not been achieved, but if we are bought these don't apply and the options will pay out. Some people will have mixed feelings I suspect!

And at the top management levels, we have one year notice periods, so even someone like me with little redundancy entitlement and limited share options would be looking at a nice amount of cash if someone bought us and did want me to disappear sharpish.

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