Former West Bromwich Building Society chief executive Stephen Karle walked away with more than half a million pounds after his shock resignation, it emerged yesterday.
Mr Karle, aged 50, quit suddenly last October, leaving the 160-year-old mutual on the brink of collapse and nursing multi-million pound losses after stacking up bad debts on risky commercial loans.
He got a leaving package of £520,600 on top of ten months’ pay and benefits of £166,000, a total of £686,600, the society’s annual report and accounts for the 12 months to March 31 showed yesterday.
The severance deal consisted of £274,000 notice, £78,000 severance compensation, a £68,000 contribution to his pension fund, a bonus of £82,000 and a further £18,600 “in respect of other benefits”.
Mr Karle received a basic salary of £145,000 for the first ten months of the financial year plus £21,000 in benefits and pension.
He will be eligible for a pension of £95,000 a year when he reaches 65.
The pay-off is believed to be the biggest ever recorded in the building society sector.
The West Brom said yesterday: “All payments were in accordance with external legal advice received by the board at the time of Stephen Karle’s resignation. Only the payments that the board were advised should be paid were paid.”
Mr Karle, a solicitor who had worked for the mutual in a number of roles for 14 years, including two as chief executive, has never commented on his departure at the height of the banking crisis.
In a statement at the time, the society said he “had been discussing with the board his intention to step down when a successor had been identified.
Mr Karle’s departure was announced on Friday, October 10, and the following Monday his successor, Robert Sharpe, the former head of the Portman Building Society, had moved in.
Two other senior executives left the society soon after. Finance director Gary Cowdrill took early retirement at the age of 52 and group commercial director Roger Smith left “after a management restructure”.
A total of 160 other staff were made redundant as the new management team led by Mr Sharpe fought to stabilise the society and prevent the need for a Government bail-out similar to that arrangement for the Dunfermline BS.
The financial crisis caused by the credit crunch and the collapse of the sub-prime mortgage market – to which the West Brom was not directly exposed – resulted in a bottom line loss of £39.3 million after bad debt provisions totalling £65.2 million, the bulk of which related to commercial loans.
It also booked against profit a £21.2 million contribution to the Financial Services Compensation Scheme.
Its future as an independent organisation was underpinned when the Government stepped in to allow holders of £182.5 million of West Brom debt to convert their bonds into a new financial instrument called profit-participating deferred shares (PPDSs) – a move that shored up the balance sheet and boosted its solvency ratios.
Some argue that the PPDSs effectively spell the end of mutualisation by giving outside shareholders a call on the society’s profits, once certain conditions have been met. The rescue package has also angered small investors who hold West Brom PIBS (permanent interest-bearing shares) who have seen annual pay-outs cut.
Mr Sharpe, who according to the annual report received pay and benefits totalling £228,000 between October 2008 and March 2009, said the society had gone “back to basics” to focus on core retail savings and prime residential mortgages financed by deposits.
Despite the year being a “period without precedence for the global economy”, the society won 80,000 new savers last year, he said.