ShareSoc has today issued the following press release giving voting recommendations for the Annual General Meeting of the Royal Bank of Scotland (RBS):
ShareSoc recommends voting against the following resolutions at the Annual General Meeting (AGM) of RBS: 2 Remuneration Policy, 3 Remuneration Report, 4 Chairman Howard Davies, 12 NED Penny Hughes and 24 General Meetings at 14 day notice.
RBS have continued to resist our request for a shareholders’ resolution to be put to the AGM for the establishment of a Shareholder Committee, and have steadfastly refused to share their legal opinion.
We consider the behaviour of the RBS board in this matter to be undemocratic. Shareholders should be able to consider our resolution and decide for themselves whether the company should implement a Shareholder Committee. RBS will have seen how seriously the concept of a Shareholder Committee has been taken by many players in the financial world, and that there is a good possibility that the idea will gain further traction.
ShareSoc has observed a more conciliatory tone in communications with RBS in recent weeks; however we note with regret that this has not resulted in the tabling of a motion to discuss the benefits of a Shareholder Committee. This is a missed opportunity for RBS to lead from the front.
Mark Northway, ShareSoc Chairman, said “It is very disappointing that RBS are effectively taking the position that they will only make substantial improvements to their governance models and shareholder engagement processes if such improvements become mandatory. This is a missed opportunity for RBS to lead from the front”.
Voting recommendation re Resolutions 4 and 5 (re-election of Howard Davies and Penny Hughes): VOTE AGAINST
ShareSoc cannot simply ignore the fact that RBS is refusing to put a validly requisitioned members’ resolution to the AGM. The legal reasons given for such refusal are tenuous at best, and make it clear that the board’s issue lies more with the concept of the Shareholder Committee than with the form of the resolution; alleged minor technicalities are being used as a foil to prevent a discussion and a shareholder vote on an important matter (see below).
It is not reasonable to expect shareholders to simply roll over on this matter when we believe that the company is actively obstructing our legal rights on both counts. We recommend a vote against the company Chairman Howard Davies who has ultimate responsibility for this action; and against Penny Hughes who chairs the Sustainability Committee, whose ambit covers stakeholder engagement.
Remuneration Resolutions 2 and 3: VOTE AGAINST
Target pay for the CEO is £3.8 million versus a going rate of around £7 million for a company of this size so RBS should be praised for adopting a pay policy which follows ShareSoc’s remuneration guidelines that FTSE100 CEO pay should be reduced to roughly half of current levels.
However, RBS have adopted an inadequate share ownership guideline of 400% of salary. This means that the CEO is able to sell all but £4million of his shares whenever he likes. Where is the alignment with shareholders in this approach? How can shareholders be sure that he will be retained and motivated? CEO MacEwan does not have enough skin in the game. He should be highly incentivised to manage and resolve the legacy issues for the benefit of shareholders. These questions are not discussed in the remuneration report, which fails to get to grips with the key issues of motivation, alignment and succession.
RBS should require executive directors to hold their shares until 2 years after they leave. Such time will enable any legacy issues to show through before the executives cash in their shares. That is the best way to create alignment with shareholders.
Resolution 24, permission to reduce notice of general meetings to 14 days: VOTE AGAINST
ShareSoc disapproves of such provision for any company as we believed it reduces shareholders rights. We recommend that shareholders vote against this resolution.
More information on our campaign to obtain a Shareholder Committee at RBS and the benefits of such committees is present on our web site here: www.sharesoc.org/campaigns/rbs/. Shareholders in RBS can register their interest on that page.