RBS under pressure from small investors over governance

Royal Bank of Scotland is facing pressure from small investors who want more control over corporate governance and say their stance is vindicated by an escalating row over executive pay.

RBS will hold a vote at its annual meeting next month on whether to create a committee of shareholder representatives that would regularly meet the board and executives.

A similar resolution was defeated last year after a two-year battle, but Cliff Weight, director of shareholder rights group ShareSoc, said a recent outcry over high pension contributions justified a second vote.

“We as owners of these companies — and particularly for RBS as taxpayers own 62 per cent — should be telling them to behave properly and be open and transparent”, Mr Weight said.

RBS is one of several banks that have come under fire from activists, investors and politicians in recent weeks over the size of pension payments to senior executives.

The Corporate Governance Code recommends executive pension contributions should be in line with the majority of employees, which tend to be capped at about 10 per cent of base salary. RBS chief Ross McEwan is set to receive a payment worth £350,000 this year, equivalent to 35 per cent of his salary.

The bosses of Barclays, Standard Chartered and Lloyds are also set to receive contributions of between 34 and 40 per cent of their salaries in 2019.

RBS shareholders are not due to vote on remuneration policy until next year, but one person close to the bank said the decision to cap pension contributions for its new chief financial officer at 10 per cent of salary showed its “direction of travel” and it was likely to eventually lower the contributions for the chief executive as well.

Jonathan Reynolds, Labour’s shadow city minister, said: “It cannot be right that there is such a huge disparity in pension contributions between banking executives and their staff. This needs addressing as part of an overall reconsideration of executive remuneration in the sector.”

Shareholder committees are common in countries such as Sweden, but have never been used in the UK. The Conservative government previously considered encouraging committees to increase scrutiny of companies. However, UK Government Investments, which manages the taxpayers’ stake in RBS, voted against creating a committee last year, suggesting it would damage its ability to sell shares at a good price.

RBS said it did not believe creating a committee “would be in the best interests of the company”, citing concerns including the difficulty of finding a representative panel and “undermining” the unitary board structure.


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