Royal Bank of Scotland owner NatWest warded off a mini-revolt by shareholders yesterday against plans that could lead to double-digit percentage increases in bonus payouts to its top executives.
A backlash had been anticipated after investment consultant Glass Lewis urged shareholders earlier this month to reject the new pay policy, citing reservations over increased bonuses and the decision to replace the bank’s long-term incentive plan (LTIP) with a scheme with fewer performance metrics that could make it easier to secure payouts.
“We are concerned by the increase in overall incentive opportunity and the introduction of an RSP (restricted share plan) absent a compelling strategic rationale for this type of award structure,” Glass Lewis said in its report. “We recommend shareholders vote against this proposal.”
Despite this, 92.75 per cent of eligible shareholders who voted at yesterday’s annual general meeting were in favour of the new remuneration policy, with 7.25% against. Investors representing nearly 127 million shares withheld their votes.
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NatWest, which is posting its first quarter results this morning, has said that the time has come to “normalise” its executive pay policy after years of majority ownership by the UK Government. The taxpayers’ stake, dating back to the bail-out in the wake of the financial crisis, fell below the symbolic 50% level at the end of March.
Under the new scheme, the maximum bonus chief executive Alison Rose could earn is 43% higher than her potential payout from the year before. Group chief financial officer Katie Murray’s potential payout will increase by 25%.
Ms Rose, whose base salary is £1.1 million, was paid nearly £3.6m in 2021 under the previous bonus scheme. By the time the new policy is fully implemented in 2023, her potential pay packet will rise to £5.2m.
During the meeting at the group’s Gogarburn campus in Edinburgh – the first face-to-face annual meeting to be held since 2019 – chairman Howard Davies apologised for failing to prevent money laundering that landed NatWest with a fine of £264m last year after the group pled guilty to three offences of failing to comply with regulations.
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“We deeply regret that we failed adequately to monitor one of our customers between 2012 and 2016 to prevent money laundering,” Mr Davies said.
“And while the case has now come to an end, we continue to invest significant resources in the ongoing fight against financial crime and fraud.”
Ms Rose said the cost-of-living crisis had not yet led to any significant signs of financial distress with customers struggling to keep up with mortgage and credit card payments. However, the group is “very aware of the challenges and concerns” facing many people.
Today’s trading update is expected to show an increase in total income to £2.7 billion for the first quarter, up from £2.65bn in the same period a year earlier. However, profits are expected to slide by 20% to £755m.
Last year’s total profits came in at £2.95bn, up from a loss of £753m in 2020. The numbers were flattered by the release of £1.28bn of reserves that had been set aside to cover bad loans during the pandemic.
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