Sir Howard Davies
The board of Royal Bank of Scotland survived a potential shareholder revolt at its AGM yesterday but bosses were subjected to a series of protests over executive pay packages, legal struggles and staff pensions.
Shareholders in the still 73 per cent state-owned, bailed-out bank had been urged to vote against the bank’s remuneration report at the lender’s AGM in Edinburgh by corporate governance group PIRC who had warned of “important concerns” over what it said was excessive remuneration for executive directors.
The call had been expected to help stoke a sizeable vote against the bank’s pay for bosses, but in the event only 0.4 per cent of votes cast went against it.
However, a number of shareholders did speak out over boardroom pay at the company, whose chief executive saw his total annual pay package double to £3.8m last year although that included long-term incentive payouts for the first time. For the third year running, Mr McEwan will give part of his package to charity.
One shareholder, Lynn McMillan, spoke out against “some of the huge salaries that ordinary people do honestly see as being obscene”, adding: “Some of us don’t actually believe you could spend as much money as some of you earn in a year.”
In response, Sir Howard Davies, chairing his first RBS annual meeting at the bank’s Gogarburn HQ, said: “I think what we are doing in this bank is trying to pay responsibly for people who will do a good job in the interests of shareholders.”
Bosses were also targeted to settle the looming £1.2 billion class action being brought against RBS by shareholder groups over the bank’s doomed 2008 rights issue.
Veteran Edinburgh corporate financier Peter de Vink, and one of the founders of the RBS Shareholder Action Group consisting of more than 100 institutions and 32,800 small shareholders, including 28,000 in Scotland and 4,000 current or former RBS employees who are suing the bank, led the calls with an impassioned appeal that claimed some of the the plaintiffs had been left “financially devastated” by the bank’s 2008 crash.
Mr De Vink said the £1.2bn case, which centres around the allegation that shareholders were misled about its financial position of the bank in the run-up to the April 2008 rights issue, is already costing RBS “£90 million and rising” to contest.
Two action groups have raised £30m to fight the case, which is due to reach the High Court next March and last six months.
Mr De Vink told the meeting that when the case was briefly in court last year the bank was represented by four QCs and 14 lawyers effectively on rates of £1,000 an hour.
He said: “It’s a fact no lawyer will have an interest in settling such a case which is providing a bonanza for them at our expense.”
He went on: “Legally, morally and politically this case should settle, if it doesn’t and the bank goes to court and loses, the charge would be so huge it would be the end of RBS …. While the lawyers make many millions, the small people suffer a great injustice.”
Responging to this issue, Sir Howard said the board was “very alert to the possibility of finding a way to resolve this action, it is a very costly action on both sides”.
Also brought forward was the issue of derivative-linked Lobo loans sold by RBS to public bodies, such as Edinburgh City Council.
Barclays, which has also sold the products, last week agreed to a meeting with an affected council to discuss the arrangements, which have forced local authorities to pay sky-high interest rates or face exit penalties of 90 per cent.
Seeming to absolve the bank of responsibility, chief executive Ross McEwan said public bodies were required to take advice from “appropriately-qualified professional people” and had agreed loans “in an interest rate environment that just happens to be quite different to what it is today”.
The fraught meeting also saw a protest from staff furious at a raid on their pensions.
Union members say the company, unlike other banks, is making employees pay for a rise in National Insurance (NI) contributions.
The Unite and IBOA trade unions slammed bank plans to pass on £18 million of extra costs from last month’s scrapping of contracted-out pensions, which will see a rise in NI contributions for both employer and employees.
RBS is expecting staff to cover the cost of both increases, resulting in members having to pay in a mandatory extra two per cent into the pension scheme.
Shareholder Simon Godfrey, speaking on behalf of 27,000 Unite members, told the meeting at Gogarburn: “It’s a disgrace… it will wipe out this year’s pay rise for thousands of staff.”
He said 57 per cent of Unite members in RBS report that they are already struggling with week-to-week bills.
The bank could not afford to pay the £18m yet “continues to put millions aside for litigation”, Mr Godfrey said.
RBS chairman Sir Howard Davies said the bank put £4.2 billion into the pension scheme last year and ensured shareholders did not bear “unreasonable costs”, but a consultation on the bank’s proposals was still under way.
Speaking on the general health of the bank which posted £1 billion loses for the first three months of the year on Friday, the 26 per cent fall in the share price since last year’s AGM was similar to other UK and European banks and that the bank’s fortunes were “heavily influenced” by the UK economy and would feel an “unwelcome headwind” if a Brexit vote led to a slowdown.
Sir Howard told shareholders that his board was overseeing delivery of a “refocused profitable and socially responsible bank”.