More than 100 shareholders in Royal Bank of Scotland (RBS) are demanding changes at the beleaguered high street bank.
The activist group plan to put forward a resolution at the annual general meeting (AGM) in May 2018 to install a ‘Shareholder Committee’.
The committee would include representatives aiming to bolster corporate governance and improve communication between the RBS board and shareholders, especially small investors.
This move has been coordinated by two shareholder pressure groups; the UK Shareholders’ Association (UKSA) and ShareSoc. They plan to deliver their demands to RBS’s London offices tomorrow (29 December).
BEEN HERE BEFORE
This is not the first time a resolution to improve dialogue between RBS and shareholders has been attempted. Earlier this year, RBS rebuffed ShareSoc’s attempt to requisition a shareholder resolution.
This led the activist group to accuse RBS directors of ‘hiding behind tenuous, expensive legal arguments.’
ShareSoc director and campaign manager Cliff Weight says ‘this year, we are hoping RBS will engage with us and work constructively in developing an improved corporate governance framework’.
PROBLEMS AT RBS
The issues highlighted by ShareSoc are widespread, and in some cases, historic. The pressure group continues to lament RBS’s ill-fated acquisition of Dutch bank ABN Amro in a £49bn deal, although this was over a decade ago.
More generally, ShareSoc is concerned with an excessive focus on the short-term, rather than long-term, sustainable performance. It also complains about the bank's failure to focus on customers.
Like its FTSE 100 banking peers, RBS has fallen foul of regulators on both sides of the Atlantic. It has faced mortgage-backed securities mis-selling in the US and Libor rate fixing, not to mention widespread mis-selling of payment protection insurance (PPI).
RBS has set aside £3.9bn for claims although ShareSoc claims that some sources put the figure for settling these claims at around $27bn.
BEHIND THE TIMES, CLAIMS
ShareSoc also claims that the culture of the board of RBS is wrong, describing it as ‘male, pale and stale’. Although female representation on the board has improved since 2008 when there was only one woman out of 18 directors, ShareSoc claims that the bank's board culture persists. There are currently four women out of 14 board members.
The UKSA and ShareSoc say that problems seen at retailers BHS and Sports Direct may have been avoided if a similar committee had been in place.
But getting the proposed resolution taken seriously faces an uphill task. The UKSA and ShareSoc groups represent retail investors which own a very small minority of the bank's stock.
