RBS defends pay plans for top bosses
The Royal Bank of Scotland has defended the way its top bosses are awarded after some shareholders criticised the lender for not making deeper cuts to pay.
The bank said it was a sector leader when it comes to "showing restraint" over executive pay, as it responded to two investor advisory groups which had urged shareholders to oppose the lender's new pay policy on the grounds that cuts to salaries and bonuses had not gone far enough.
However, more than 96% of investors backed the new pay plan during a heated annual general meeting (AGM) in Edinburgh, which was punctuated by investor anger over branch closures, corporate governance and the ongoing scandals surrounding the taxpayer-backed bank.
Speaking at the AGM, Sir Sandy Crombie, chair of the remuneration committee, said RBS had drawn up a pay policy that was simpler and "significantly reduced" the maximum amount bosses could earn.
He said: "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."
Under the new pay plan, chief executive Ross McEwan would be eligible for a long-term award of 175% of his salary and finance chief Ewen Stevenson 200%.
While the awards are significantly lower than the previous 400%, proxy shareholder advisory group Institutional Shareholder Services (ISS) said prior to the meeting that the pay cuts were not "sufficient".
The Pensions & Investment Research Consultants (PIRC) also raised concerns about measures within the policy that would allow executives to secure pay awards even after they leave the bank.
Sir Sandy added: "You may be aware of the press commentary following the publication of proxy advisor reports, in particular the recommendations against the new remuneration policy by ISS and PIRC.
"We disagree with the conclusions reached in these reports and strongly challenged the view from ISS that the level of discount was insufficient under the new construct.
"We subsequently re-engaged with a number of our major shareholders, and I am pleased to say that the vast majority indicated their continued support for our proposals.
"In addition, Norges Bank, one of our major shareholders, has recently issued a public statement confirming support for the new policy highlighting the simplified structure and reduced maximum award levels. They also commended the board's "willingness to challenge conventional thinking on remuneration".
Chairman Sir Howard Davies also batted away concerns over how much the bank has spent defending itself against shareholder compensation claims in connection with the 2008 rights issue.
RBS may face parliamentary inquiry into the amount of money it has dished out on defence lawyers, with the bill escalating towards £125 million.
Sir Howard said: "The costs we are having to meet are high because of the extraordinary breadth and complexity of the case."
While investors hit out over branch closures and the scandals dogging the lender, the most intense exchanges centred around the bank's decision not to introduce a shareholder committee, which would give retail investors a formal say on RBS proposals, such as executive pay and company strategy.
Sir Howard said it had decided against an investor panel because it was "inconsistent with both the law and the company's constitution".
However, Gavin Palmer, an outspoken RBS shareholder, lambasted the move. He said corporate governance at the bank was "lamentable" and claimed RBS was "hiding behind" its lawyers.
Cliff Weight, a director of investor group ShareSoc, also took umbrage with the board's conclusion, saying the lender could have escaped criticism over executive pay if it had an investor panel in place.
The comments came as RBS headed off concerns about the number of top-level women at the bank by announcing that former Abbey National director, Yasmin Jetha, had joined the board.
It means that 27% of the board is now made up of women, bringing it back above the Davies recommendation for at least 25%. The bank had slipped below the target following the appointment of non-executive director Mark Seligman in April.
RBS has enjoyed a bright start to the year, after reporting in April that it had booked its first quarterly profit since 2015 at £259 million.