AN influential group of Royal Bank of Scotland shareholders is demanding the chairman leaves his post and the board’s pay policy is rejected amid a bitter row over the management of the bank.
The UK’S largest representative body for individual investors has recommended shareholders vote against Sir Howard Davies’s reappointment at the state-owned bank’s general meeting next month.
ShareSoc argues that he must bear responsibility for what it regards as an attack on shareholders’ rights by the board.
The organisation has accused RBS of actively obstructing investors’ legal rights by refusing to give them a vote on a proposal that a shareholders’ committee be established to help improve governance at the firm.
They are also calling for the bank’s chief executive Ross McEwan to be required to hold more shares in the firm to ensure he has bigger incentive to deliver the reforms needed to return RBS back to health.
Sir Howard stressed Royal Bank supported increased stakeholder engagement but had been advised the resolution proposing the vote was inconsistent with the law and its constitution.
ShareSoc also wants investors to reject Royal Bank’s directors pay policy on the grounds it only requires Mr McEwan to have a £4 million shareholding in the taxpayer-owned giant he has run since 2013.
The organisation has been locked in dispute with RBS since January when the bank snubbed a proposal for an investor vote on the creation of a shareholder committee.
ShareSoc thinks such a committee would give private investors more effective oversight and influence over Royal Bank’s management and accord with the official drive to improve corporate governance in the UK.
A statement said: “CEO McEwan does not have enough skin in the game. How can shareholders be sure that he will be retained and motivated?”
“He should be highly incentivised to manage and resolve the legacy issues for the benefit of shareholders.”
The comments were included in a strongly worded statement by a not-for-profit organisation with more than 3,000 members.
It believes private investors have been the biggest losers from the collapse in the value of Royal Bank’s share price since the financial crisis.
The share price suffered a dramatic fall in the credit crunch and then its eventual bailout which saw the Treasury pump pump £45billion into the bank to keep it afloat from the brink of collapse.
RBS shares collapsed from £102.23 in January 2007 to £23.47 in August 2008.
They then fell to just £2.20 in four months, which left investors with a fall of 90.6per cent in their investments, many of them small investors based in Scotland, including staff. Several major firms, including BP and Weir Group have been hit by shareholder revolts over the last two years over pay awards and corporate governance. After accusing Royal Bank in February of trying to thwart democracy, ShareSoc renewed the attack on the board’s action yesterday and criticised the firm for refusing to give the body details of the legal advice it has received.
The organisation said: “ShareSoc cannot simply ignore the fact that RBS is refusing to put a validly requisitioned members’ resolution to the AGM ... Alleged minor technicalities are being used as a foil to prevent a discussion and a shareholder vote on an important matter.”
Noting the organisation had been advised RBS should share details of the legal advice it received, ShareSoc added: “We believe that the company is actively obstructing our legal rights on both counts.”
ShareSoc said Sir Howard “has ultimate responsibility for this action”. It also wants shareholders to vote against the reappointment of non-executive director Penny Hughes, chairwoman of the bank’s Sustainability Committee, whose remit covers stakeholder engagement.
ShareSoc noted Mr McEwan is expected to earn £3.8m this year, against a going rate of around £7m for a group the size of RBS.
But it said the requirement he holds shares worth four times his £1m base salary is inadequate.
The bank’s remuneration report “fails to get to grips with the keysuccession”.
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