Royal Bank of Scotland today defended pay schemes for its top bosses, plans to axe branches and its failure to establish a shareholder committee at its AGM in Edinburgh.
The lender hit back after facing criticism from investor advisory groups, including Institutional Shareholder Services (ISS), which urged investors to oppose a new RBS remuneration policy on the grounds that its efforts to reduce pay awards were not “sufficient”.
Under the new pay plan, chief executive Ross McEwan would be eligible for a long-term award of 175 per cent of his salary and finance chief Ewen Stevenson 200 per cent, both a decrease from the previous 400 per cent.
Speaking at the Gogarburn meeting, Sir Sandy Crombie, chair of the RBS remuneration committee, said: “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’.
“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.”
Chairman Howard Davies said the bank decided not to bring forward a proposed resolution to create a shareholder committee at RBS.
“We considered this proposal to be inconsistent with both the law and the company’s constitution and of course it might prove not to be compatible with the government’s reforms.”
One shareholder discussed the issue, accusing the lender of being “doggedly determined to be a dark hole in British banking”.
Another shareholder, an accountant, said he had been wrongly told that a branch was being kept open after closures by Clydesdale and Lloyds in the local area and had consequently been advising customers to open accounts at RBS.
He asked if the bank was reviewing its closure programme in the likes of Troon and Prestwick.
Davies said the issue of closures is a “difficult and sensitive one” but there has been high take-up of digital services and trying to keep up “is a very challenging process”.
Both he and McEwan said branch use has gone down by more than 40 per cent over the last three years. Many branches “have found it very difficult to be viable and stay open”, said McEwan, who also said the manager who advised the man was not at fault as he wouldn’t have known about the branch closure.