More than 160 investors in Royal Bank of Scotland (RBS) have asked the bank to create a shareholder committee to improve the bank’s corporate governance structure.
ShareSoc and UK Shareholders’ Association (UKSA), two shareholder groups, will present the proposal at the bank’s AGM in May. They claim to represent the interests of the bank’s long-term investors, which have seen shares fall more than 95 percent since their 2007 peak.
The resolution would need 75 percent of the votes cast at the meeting in order to pass. The British government’s investment fund UKFI, which currently owns 71 percent of the bank following its $55 bn bailout in 2008, would need to vote for the resolution or abstain in order for it to pass.
An RBS spokesperson declined to comment.
The resolution comes a little over a month after UK Prime Minister Theresa May’s call for businesses to focus on good governance. The government’s green paper includes calls for businesses to publish pay ratios, as well as having the remuneration committee consult shareholders before developing a pay policy.
The green paper acknowledges shareholder committees as an option exclusively in relation to remuneration issues, but cautions that they ‘require careful consideration due to the use of the unitary board in the UK’.
A NEW APPROACH
Mark Northway, ShareSoc chairman, explains that the resolution is an attempt to prevent the mistakes that led up to RBS’ government bailout and continued questions around high executive pay.
‘A dominant CEO; concealing the true financial position of the company from investors; proceeding with a reckless acquisition; and then publishing a rights prospectus that concealed the problems faced by the company – these are not examples of good governance,’ he says. ‘Shareholders, including individuals, deserve a new approach.’
Shareholder committees are largely unused in the UK, but are a staple in Sweden, where a board may be made up of more non-executive directors. The ShareSoc and UKSA resolution suggests that an RBS shareholder committee should have a say on the appointment of board directors and executive pay.
Paul Rosen, partner in the corporate practice with Katten Muchin Rosenman, says this is ‘likely to be a relatively unique situation’, due to the government’s majority stake in RBS.
‘In the UK, shareholders already have a mix of statutory and fiduciary protections without the need for shareholder committee structures,’ he explains. ‘Although there has been some recent publicity around limited proposals concerning executive remuneration, the market in general does not appear to be calling for any greater formalization of shareholder – or other stakeholder – involvement.’
