Small shareholders in bid to make RBS a better run company

Press Release 100 – RBS in the firing line as ShareSoc renews campaign  

RBS Shareholders Requisition Shareholder Resolution for a Shareholder Committee.   

• Over 100 shareholders in the Royal Bank of Scotland (RBS) have requisitioned a resolution to install a “Shareholder Committee” at the company, which will include shareholder representatives, to improve the corporate governance and shareholder engagement at RBS.
• RBS will now have to put this proposal to a vote at their Annual General Meeting (AGM) in May 2018.
• ShareSoc and UKSA have supported and coordinated this and will deliver the resolution and a large bundle of associated requisition forms to RBS’s London offices on Friday 29 December at 15.30.
• Second year of campaign.

Why are ShareSoc and UKSA doing this?

Mark Northway, ShareSoc Chairman said “Shareholders, including individuals, deserve a new approach; one with greater involvement and more effective input from them as ultimate owners. RBS, given its incredibly poor track record and consequent taxpayer support, should now be leading from the front in governance matters.”

Cliff Weight, Director of ShareSoc who has coordinated the campaign said “The current method of engaging between shareholders and listed UK companies doesn’t work. We think our proposal at RBS is a good starting point and an example for others to follow.”

The rationale for a shareholder committee is as follows:

Shareholder Engagement

The informal nature of current shareholder engagement (cosy chats with selected shareholders behind closed doors) does not work well for the broad shareholder base. It is not clear whether investors are each being told the same story, how information is being spun, or whether complete or only partial information is being given out. Investors will ask different questions during engagement meetings and so may develop different interpretations of what the company is trying to achieve.

Ad hoc engagements tend to only occur when a problem arises.

Currently, when a large number of investors are “consulted”, it is difficult to have the same conversation with each investor and the proposal often changes over the process of engagement. Currently, the different views of different investors create a very “messy” backcloth in which to engage.

For example, in relation to remuneration proposals, there is often no clear trail from the initial proposal through to the final version voted on by shareholders.

Voting happens too late in the process. Discussion and voting at the AGM is ineffective, as institutions do not like to vote against the directors’ recommendations. A more professional and systematic process is required.

This impasse can be broken through the introduction of Shareholder Committee.

Benefits of establishing a Shareholder Committee:

1. Systematic briefings between the company and knowledgeable Shareholder Committee Members.
2. Shareholder Committee Members will develop good background knowledge, relationships and trust with the company over time.
3. Shareholder Committee Members will be presented with consistent information and explanations, and members will have a forum for the exchange of questions and views.
4. Increased transparency.
5. A Shareholder Committee will report to all shareholders via the annual report, AGM or other route as appropriate.
6. A Shareholder Committee will focus on governance and strategy issues, and will not interfere with the day-to-day management of the company.
7. A Shareholder Committee can be established on a purely advisory basis and does not require any specific powers.
8. A Shareholder Committee might also include workers, customer representatives and other key stakeholders if desired. There is considerable flexibility on how it might operate in practice.
9. It is unlikely that the cases of Persimmon, BP, BHS and Sports Direct would have occurred if such a committee had existed at those companies. And the problems would surely have been resolved quicker if each had had a Shareholder Committee.

Last year’s campaign and lessons learnt

As last year, ShareSoc will be requisitioning a resolution for a Shareholder Committee at the 2018 RBS AGM. This year’s resolution addresses the trivial legal objections previously raised by RBS. ShareSoc is confident that RBS will be obliged to put the resolution to the AGM.

In early 2017, RBS rebuffed ShareSoc’s first attempt to requisition a shareholder resolution, hiding behind tenuous, expensive legal arguments: https://goo.gl/5xuvBM

ShareSoc Director and Campaign Manager Cliff Weight said “This year, we are hoping RBS will engage with us and work constructively in developing an improved corporate governance framework. Since ShareSoc first engaged with RBS in December 2016, there have been several positive developments which we recognise and applaud, but there remains much more to be done on shareholder democracy”.

Further details of the ShareSoc/UKSA RBS Shareholder Committee Campaign are at https://www.sharesoc.org/campaigns/rbs/

Historic problems at RBS

Strategy: an excessive focus on the short-term, rather than prioritisation of long-term sustainability, the large acquisition of ABN Amro for £49 bn with excessive leverage, and a failure to focus on customers.

Operations: not treating customers fairly, miss-selling mortgage-backed securities in the United States, LIBOR fixing, PPI miss-selling, 2008 rights issue, GRG, bad treatment of SMEs. £3.9 bn has been set aside for claims, but some sources say claims could be $27 bn.

Executive Pay: PR surrounding executive pay has impacted the brand, huge criticism of pay complexity, excessive bonuses, complex LTIPs, payments for failure, as well as the overall quantum.

Culture: excessive risk, short-termism, greed and irresponsibility was allowed and to some degree encouraged; a pale, male and stale Board, with one woman out of 18 directors in 2008. This still persists: there are still only 4 women out of 14 board members today.

Note that RBS investors can obtain more information and register their interest in supporting this initiative on this page of the ShareSoc website: https://www.sharesoc.org/campaigns/rbs/

For further information and interviews, please contact:

Cliff Weight

RBS shareholder, ShareSoc Director and RBS Shareholder Committee Campaign Co-ordinator.