RBS Shareholder Committee Campaign Update 5

This note has been issued to the campaign supporters.

Thank you for help and support so far. I am writing to update you on progress, which is very disappointing. I expect some of you will not read all of this long post and quite understand if you only read part: for those who wish to, I have included my full report on the RBS AGM below.

RBS refused to put our resolution on the AGM Agenda. Mark Northway, ShareSoc Chairman and Cliff Weight, the RBS Campaign Co-ordinator flew up to Edinburgh to attend the AGM and ask questions about RBS’s behaviour. It is now clear why RBS do not want to have a Shareholder Committee and hence why they have used flimsy legal excuses to refuse to put our resolution to the 2017 AGM. However, we do not have the financial resources to contest the (expensive) RBS legal opinions, so have decided to take no further action in respect of the 2017 AGM resolution. Sadly, the way the law works is that there are sometimes different sets of laws for the rich (and very rich), than for the average man in the street – and this is an example of where the legal system is not working as well as it should.

We have however learned many lessons, and you can rest assured that the fight does not end here. We plan to put forward another resolution to the 2018 RBS AGM, which will overcome their legal objections and force them to accept it. I will be writing to you about that towards the end of 2017.

I wrote up my visits to the AGMs of RBS, Lloyds and Aviva and you can read my comments here. https://www.sharesoc.org/blog/company-news/a-tale-of-three-agms/

Below is my more detailed report on the RBS AGM and what happened.

RBS 2017 AGM Report, by Cliff Weight

The RBS AGM meeting in Gogarburn was the worst by a long way that I have ever attended. It was scheduled to start at 2pm, which meant it was impractical to attend both the Lloyds meeting which started at 11am and the RBS meeting. Cock up or conspiracy? I suspect the latter, as a means of reducing the number of attendees, but either explanation is bad.

Coffee and biscuits were served before the meeting, which was rather meagre for those who had had no lunch having left the AGM at Lloyds before it finished!

There seemed to be lots of employees and advisers and hangers on, some of whom owned shares, but I doubt if there were more than 50 independent shareholders. It was also clear that there were very few institutional shareholders represented. It is extremely disappointing that such a large company has such a poorly attended AGM and does not seem to care.

The video of the AGM can be viewed by clicking here. Mark Northway speaks at 45mins 30 seconds, and I speak at 1hour 20:30 and 1hour 51:30 into the video.

It is clear that, unlike Sir Adrian Montague at Aviva, RBS do not regard this as their most important day of the year or even close to it! After a perfunctory 12 minute introductory speech from the chairmen (Sir) Howard Davies, the chief executive Ross McEwan spoke for eight minutes and then Sandy Crombie, the remuneration committee chairman explained the changes to be remuneration arrangements in quite some detail.

(Sir) Howard explained to the meeting that corporate governance was changing in the UK. The Government had issued its Green Paper and RBS had responded saying that it was in favour of engaging with all stakeholders. He mentioned the shareholders’ resolution and said it was inconsistent with company law and the constitution of the company and incompatible with the way we (RBS) work. He announced two new meetings for individual shareholders in London on 31 July and Edinburgh on 30 October and invited shareholders to register for these events after the meeting: their purpose was to improve the way RBS engages with its individual shareholders. I cannot find how to register on their website, so I suggest you email Aileen.Taylor@rbs.com the RBS company secretary if you wish to attend.

With regard to the RBoS Action group 2008 rights issue claim, he said there was no admission of liability and the trial is due to start on 22 May. It is normal practice to indemnify directors and former directors on claims in respect of actions whilst in office.

Sandy Crombie’s speech about remuneration sounded very similar to what was in the annual report and shareholders’ circular, but he did mention a thorough consultation process with feedback from major shareholders (no mention here of individual shareholders who were not included in the consultation process). He mentioned the press coverage of the ISS and PIRC comments (without mentioning that Glass-Lewis another US based proxy adviser also recommended voting against the new remuneration policy) and said that RBS had re-engaged with shareholders and the vast majority were supportive. Norges Bank confirmed their support and publicly announced this.

(Sir) Howard Davies opened meeting to questions saying customer issues should not be raised and there was a customer services desk in the room outside the meeting staffed with people ready to answer such questions (I could not locate this, but it may have been there). However, he proceeded to allow a large number of questions which I consider to be customer service questions or customer complaints and which should have been deemed outside the scope of the meeting. I felt that most shareholders would view this as a waste of their time.

Questions did not have to be pre-registered. Everyone was given a handset and when questions started we were asked to press buttons on the handset if you wanted to ask a question. So, we had no idea when we would be called or where we were in the queue. In the event, it worked OK; Mark Northway asked the first question and I was allowed to ask two questions later in the meeting.

As questions were about to start Gavin Palmer jumped up and raised a point of order stating that the meeting was invalid as the ShareSoc / UKSA shareholders’ resolution was not included in the AGM papers. (Sir) Howard said he disagreed and his legal advice was that the resolution was ineffective and should not be put.

Another shareholder interrupted to ask the Chairman to publish his legal advice and the Chairman refused to do so saying that it was advice to the Board (i.e. it did not have to be made available to the shareholders who ultimately paid for it).

Mark Northway, Chairman of ShareSoc, who like me had flown up from Gatwick specifically to attend the RBS meeting, asked the first question. He asked the Chairman to explain the board’s fundamental objection to a shareholders’ committee. The Chairman’s answer was evasive, but to some extent, the Chairman had already given his views in earlier statements and in response to Gavin Palmer’s point of order.

We had submitted our intended questions a few days prior to the meeting, which was polite in my view but enabled RBS to make statements at the start of the meeting which greatly reduced the impact or relevance of our questions. Since most of my points had been answered and since most of the other questioners were hyper critical of one or other aspects of the RBS or the way it was or is run, I decided to try to be positive in my question and note the progress RBS had made following our initial contact – they were not going to respond to the Government Green paper and changed their mind and did so – and I said I was also pleased with the resurrection of the individual shareholder meetings.


I commented that their proposal for stakeholder engagement panels and more formalised engagement processes were not too dissimilar to ShareSoc’s proposal for a shareholder committee. I asked about the key differences. Sir Howard replied that “the shareholders’ committee is not compatible with the corporate governance framework with which we operate”. In plain English, they want to do things their way and do not want to listen to ShareSoc, UKSA and the 168 shareholders who supported the resolution.

After several more questions I decided to ask another question and this was allowed. I started with Lord Blackwell’s (the Chairman of Lloyds) quote “if you hide behind lawyers you cannot expect to build trust”. I then said “We simply cannot 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. ShareSoc/UKSA took great care to ensure that the requisition was valid and would not create practical problems with implementation. The requisition provided RBS with wide discretion on how the Board implement the proposal.

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 have tried to stop this unreasonable obstruction of shareholder democracy. It is a basic principle of Company Law that shareholders can requisition resolutions which must be put to a vote of shareholders. 

If the directors do not like a requisition, then they can advise shareholders to vote against it. But they should not be using tenuous technical excuses to avoid putting it to shareholders. I recommend a vote against the company Chairman Howard Davies who has ultimate responsibility for this action. What is your response, Chairman?” It was more a statement than a question and (Sir) Howard said he disagreed but I was entitled to my view and to vote as I wished.

There were a long series of customer complaints, barely dressed up as shareholder questions. They highlight the very serious nature of the RBS legacy if only a small percentage have any validity.

One questioner asked why the Chairman was badged as plain Howard Davies when he had a knighthood. After all, it was the ROYAL Bank of Scotland and we should be proud of our royal connections, he said. (Sir) Howard meekly confirmed he had his honour. This was another sharp contrast to Sir Adrian and Lord Blackwell who proudly displayed their deserved honours.

There were few fund managers visibly present and few questions about factors driving the share price. I suspect the latter is a consequence of the former. I concluded the AGM needs to be better structured and I will send RBS the ShareSoc guidance on how to run meetings. (www.sharesoc.org/How_To_Run_General_Meetings.pdf is a useful guide and can be sent to any company to help them improve their AGMs.)

All the resolutions were passed with large majorities. 3.67% of shareholders voted against the remuneration policy, but if we exclude UKFI, 13.6% of the remaining votes were against, which is quite a sizable minority. UKFI did not vote on the independent director resolutions as it is a majority shareholder. Arguably it should also not have voted on the remuneration policy, which is meant to align directors with long term success and UKFI has already announced its policy to unload its stake as soon as possible.

In summary, it was clear from the AGM arrangements and from the board’s performance that RBS continues to regard its members, the owners of the company, as just another nuisance stakeholder to be dealt with as quickly and superficially as possible and to be kept at arm’s length through toothless stakeholder panels. The IoD, in its 2016 Good Governance Report, ranks RBS 100th (bottom out of the FTSE 100) for shareholder relations; the AGM underlined this poor ranking. There is plenty of room for improvement here.

After a mostly tedious two and half hours, the meeting closed and we returned to the pre-meeting room where I was amazed(!) to find there were no drinks and no food. Somewhat starved, I did however have my bar of chocolate emblazoned with the Lloyds bank logo which I was able to share around!

Report written by Cliff Weight, 17 May 2017.

Postscript The FT published my letter on 30 May mentioning RBS, see https://www.ft.com/content/9e7ca6b8-453e-11e7-8519-9f94ee97d996#comments

RBS latest: RBS Informal shareholder event at 250 Bishopsgate, London EC2M 4AA on 31 July:  registration from 5pm:  the event is from 5.45 pm to 8pm. RBS have mailed to shareholders, on 26 June, about this event. To register, email your name, postcode and shareholder reference number to RBSEventLondon@computershare.co.uk by 7th July. This is a chance for individual shareholders to listen to and engage with RBS.

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