ShareSoc, the UK Individual Shareholders Society, said it is consulting legal advisors following the decision by Royal Bank of Scotland not to take forward a proposed AGM resolution submitted by ShareSoc and the UK Shareholders’ Association (UKSA) that called for the creation of a shareholder committee.
More than 100 individual shareholders of RBS — coordinated by ShareSoc and the UKSA — had requisitioned a resolution to install a new shareholder committee at RBS to improve corporate governance at the Edinburgh-based financial group.
But earlier this week RBS said that having taken legal advice the proposed resolution “was considered to be inconsistent with the law and the company’s constitution.”
Instead, RBS said it supported the introduction of “formal stakeholder engagement panels, which will allow directors and senior executives to hear directly from a range of key stakeholders, including employees, customers, suppliers and others with an interest in how the company is performing and operating.”
ShareSoc has now responded, saying it “will not permit this unreasonable obstruction of shareholder democracy to stand.”
ShareSoc said: “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.
“Their grounds for rejection have yet to be clarified, but ShareSoc 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 they implement the proposal.
“RBS is not intending to propose an alternative resolution addressing their drafting concerns.
“Hence it is clear that the board do not want a shareholder committee, and the objection is not really to the specific drafting of the requisition.
“ShareSoc is consulting legal advisors on this matter.”
The UK government acquired a roughly 73% stake in RBS at around 503p per share during the taxpayers’ 2008 bail out of the bank.
RBS shares now trade around 222p.
ShareSoc chairman Mark Northway said: “It is disappointing that, instead of leading from the front on corporate governance, RBS have instead chosen to try to thwart this initiative.
“This behaviour by the directors of a company that is majority owned by the UK Government underlines the broad reticence of UK boards to address the breakdown of the agency model and the rights of shareholders.
“There is more work to do at RBS before the government places its 73% holding back into the market.”
The UKSA said in a statement: “It is not clear on what grounds the resolution has been rejected.
“What is clear is that an organisation 73% owned by the government has been able to obstruct a mild attempt to improve shareholder democracy.
“This at a time when a research paper RP261 of the Department for Business, Energy and Industrial Strategy (BEIS) has begun to lift the lid on the corruption of the share ownership system and a BEIS green paper is consulting on ways to fix some of the weaknesses in current corporate governance.
“This episode calls into question whether S153 of the Companies Act, which enables 100 shareholders to requisition an AGM resolution, is fit for purpose.”