No revolt as RBS pay plan gets shareholder green light

A widely anticipated shareholder revolt over executive pay failed to materialise at Royal Bank of Scotland’s annual general meeting yesterday after the still 73 per cent state-backed lender received backing of more than 92 per cent for its remuneration plans.

Backing was given to the new plan that will see chief executive Ross McEwan would be eligible for a long-term award of up to 175 per cent of his salary and finance chief Ewen Stevenson 200 per cent. The bonus rates represent a decrease from their previous 400 per cent maximum top-ups. In both cases this represents a decrease from the previous 400 per cent.

However, the bank’s remuneration committee chairman Sir Sandy Crombie was forced to defend the bank’s pay plans after criticism from investor advisory groups such as Institutional Shareholder Services (ISS) and Pensions & Investment Research Consultants (PIRC) in the weeks preceeding the meeting at the bank’s Gogarburn HQ.

Sir Sandy told shareholders: “You may be aware of the press commentary following the publication of proxy adviser reports, in particular the recommendations against the new remuneration policy by ISS and Pirc (Pensions Investment Research Consultants).

“RBS has been a market leader in showing restraint”.

“We disagree with the conclusions reached in these reports.

“RBS has, since the financial crisis, been a market leader in showing restraint in executive pay and in seeking to move away from the unintended consequences of highly geared financial incentives.”

In addition, the lender announced that shareholding requirements for executive directors would rise from 240 per cent to 400 per cent of salary for the chief executive and from 125 per cent to 250 per cent for the salary of the chief financial officer.

The AGM also saw the RBS board refuse to rule out moving its headquarters south of the border if an SNP government embarks on another campaign for Scottish independence.

RBS chairman Sir Howard Davies told shareholders the banking group would keep them “posted” on any plans to move to England if another separation poll is called.

The comments came as the bank also moved to address concerns about the lack of female representation on the board by announcing that Yasmin Jetha had joined as a non-executive director after Sir Howard had come in for criticism over diversity on the bank’s board.

The PIRC had called on shareholders to vote against the reappointment of Sir Howard, saying he had failed to draw up targets for boosting the number of women executives.

Ms Jetha’s appointment now means 27 per cent of the board is now made up of women, bringing it back above the Davies recommendation for at least 25 per cent after it slipped below the target in April.

Ms Jetha is currently a Non-Executive Director of Nation Media Group (East Africa) and an independent panel member of the Cabinet Office Major Projects Review Group and was previously a Non-executive Director designate of Williams & Glyn. During her executive career, Ms Jetha held Chief Information Officer roles at Bupa and the Financial Times, where she became the Chief Operating Officer. She previously had a career spanning nearly 20 years at Abbey National PLC, latterly serving as an Executive Director on the board.

The bank announced that it had also appointed John Hughes as a non-executive director. An audit specialist with KPMG, he has also served as a member of the Audit and Assurance Council (formerly the Auditing Practices Board) of the Financial Reporting Council for six years.

Last month in its first quarter results, the bank said restructuring costs were £577 million, an increase of £339 million compared with Q1 2016, while litigation and conduct costs of £54 million comprised a number of small charges.

Yesterday’s meeting was held while RBS is being sued by shareholders for allegedly misleading them over true financial stain it was under during a £12 billion rights issue in 2008, which preceded the government’s £45.5 billion bailout.

Meanwhile, Chancellor Philip Hammond last month warned that taxpayers were likely to make a loss when the government sells its stake, telling MPs “we have to live in the real world”.