ShareSoc urges RBS shareholders to oust chairman

RBS chairman Howard Davies

UPDATE 2 — ShareSoc, the UK Individual Shareholders Society, recommended that investors vote against the re-election of Royal Bank of Scotland chairman Howard Davies at the bank’s annual general meeting on May 11 after RBS resisted ShareSoc attempts to establish a shareholder committee.

ShareSoc also recommended that RBS shareholders vote against the proposed remuneration package for RBS chief executive Ross McEwan because “the CEO is able to sell all but £4 million of his shares whenever he likes.”

Explaining its recommendations, ShareSoc said: “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.

“Our own legal advice is that RBS is obliged to share this with us.

“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.”

ShareSoc said it could not ignore the fact that RBS was refusing to put a “validly requisitioned members’ resolution to the AGM.”

It claimed the legal reasons given for the 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 …

“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.”

RBS — still more than 70% owned by the UK government following its £45 billion bailout during the financial crisis — said in February it made an attributable loss in 2016 of £6.95 billion which included litigation and conduct costs of £5.87 billion and restructuring costs of £2.1 billion.

On McEwan’s remuneration, ShareSoc said the target pay for the RBS CEO was £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, ShareSoc added: “RBS have adopted an inadequate share ownership guideline of 400% of salary.

“This means that the CEO is able to sell all but £4 million 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 McEwan 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 two 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.”