Excessive Pensions, Lloyds Bank and RBS

This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

Over 20% of shareholders voted against the Lloyds 2017 Remuneration Report. Lloyds then consulted with shareholders, but this still resulted in the awful recent press. Clearly the engagement process did not work.

I therefore call for Lloyds Bank to implement a Shareholder Committee, which is a more formal and regular engagement process, which builds trust and understanding between committee members and the company. This can only improve the current processes.

The Lloyds 2018 annual report says:

Responding to feedback

We were disappointed that our report for 2017 did not receive the high level of support from shareholders at the 2018 AGM that we had previously experienced. We place great importance on the opinions of our shareholders and other stakeholders when considering our remuneration policy and its implementation.

During 2018, I took the opportunity to meet a broad selection of shareholders and other key stakeholders, to obtain feedback on our approach. This included shareholders who opposed the 2017 remuneration report. It became clear in these discussions that, while disclosure levels were generally considered good, the way we determined bonus awards for Executive Directors was perceived to be too complex, and we could make clearer both how the annual awards were calculated and where judgement or discretion had been applied by the Committee. This report has been designed in part to respond to that feedback and I believe we have listened to, and addressed, the concerns raised. I have summarised the key changes below.

We are not seeking to make any changes to the Directors’ Remuneration Policy for 2019, however we will consult widely on policy changes ahead of the Annual General Meeting in 2020.

It clearly did not work. Today, there is hard hitting article in the FT with a strange headline, Lloyds chief’s £3,000 pension cut criticised as ‘obscene’ by unions, see https://www.ft.com/content/66ab1ffc-4b00-11e9-8b7f-d49067e0f50d , if you have a FT.com subscription.

On Sunday, the Mail reported https://www.thisismoney.co.uk/money/markets/article-6815461/Fat-cat-bankers-pension-pots-slashed.html that Lloyds pension will be cut from £575,000 (2018) to £413,000 (in 2019). This is of course still far too much.

RBS getting more stick

The FT also reported in its article today:

Ross McEwan, chief executive of taxpayer-backed RBS, is set to receive a lump sum of £350,000 in 2019, equivalent to roughly 35 per cent of his cash salary. Luke Hildyard of the High Pay Centre called on UK Government Investments — which controls the Treasury’s 62 per cent stake in RBS — to take a stand against the arrangements at the bank. “You would think the UKGI would have something to say on this but they’ve generally been quite weak-willed on pay practices at RBS,” he said.

When RBS recently appointed Katie Murray as its new chief financial officer, it agreed to pay her a pension lump sum equivalent to 10 per cent of her cash salary. That represented a significant cut compared to the arrangements for her predecessor, Ewen Stevenson, who received 35 per cent. Sarah Wilson, chief executive of Minerva Analytics, a consultancy that advises shareholders, criticised RBS for not also revising Mr McEwan’s arrangements when it lowered the sum paid to its chief financial officer. “It’s disappointing the remuneration committee didn’t use the opportunity to renegotiate both contracts and rebalance them on to par,” she said.

I think it is shameful sex discrimination at RBS, 10% pension for a woman and 35% for a man. Put them on par please RBS, as Ms Wilson suggests. I wrote to RBS warning of this impending PR disaster, pointing out that if they had a shareholder committee (as we are proposing via our 2019 AGM shareholder resolution) they might have been more alert to the issue. I received the following response, which highlights the way the corporate governance at RBS tends to be so very slow to change.

“We are aware of investor sentiment on this issue and, in particular the views of the Investment Association, which seek to go wider that the recent changes to pension funding introduced under the UK Corporate Governance Code.   

That is why we took the step with our new CFO’s construct, being a new appointment, to move to the 10% rate. As we have disclosed in our Directors’ Remuneration Report, the position for our CEO as an incumbent director will be reviewed when our Executive Director remuneration policy is next due for renewal, at the 2020 AGM.  Our Remuneration Committee will continue to actively monitor investor sentiment and market practice as part of our policy renewal process.”

Let us hope they act more quickly. It was good to see the RBS share price up to to £2.70 on Tuesday, but sad to see it drop 5% this morning to £2.51. This volatility in the share price is quite worrying. Another reason for a shareholder committee.

Cliff Weight, ShareSoc Director and RBS Shareholder Committee Campaign Coordinator.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.