Risk & Compliance

RBS Investors Propose Shareholder Committee

Shareholder groups say the committee would “prevent poor stewardship” and avoid a repeat of mistakes that led to the bank's 2008 bailout.
Matthew HellerDecember 30, 2016
RBS Investors Propose Shareholder Committee

More than 150 investors in Royal Bank of Scotland are pushing the bank to improve its corporate governance to avoid a repeat of its near-collapse in 2008.

Long-term investors have seen RBS shares fall more than 95% since their 2007 peak. Two shareholder groups, ShareSoc and U.K. Shareholders’ Association (UKSA), have now proposed that RBS create a committee of shareholders to “prevent poor stewardship.”

RBS will have to put the proposal to a vote at its annual general meeting in May. For the resolution to pass, it would need at least 75% of shareholder votes cast.

“One objective is to stop the events that took place at RBS from ever happening again,” Mark Northway, chairman of ShareSoc, said.

“A dominant CEO, concealing the true financial position of the company from investors, proceeding with a reckless acquisition, and then publishing a rights prospectus which concealed the problems faced by the company,” he added. “These are not examples of good governance.”

As The Guardian reports, the shareholder groups’ proposal was developed with Gavin Palmer, an outspoken RBS investor who interrupted the bank’s 2013 AGM to hand out a petition calling for a committee on the board.

“Shareholder committees are largely unheard of in Britain, though [they] are a staple of corporate governance in Sweden, where they nominate who should sit on a company’s board,” Reuters noted.

RBS, which was saved from collapse by a $55 billion bailout, is in the midst of a restructuring that includes asset sales, job cuts and taking multi-billion dollar charges to settle litigation and pay regulatory fines for past misconduct.

The British government holds 71% of the bank’s shares and would need to support the shareholder committee proposal or abstain for it to pass.

“Most large shareholders are intermediaries who tend to act in their own interests and not those of the ultimate beneficial owners,” UKSA chairman John Hunter said. “This needs to change and this proposal is a step towards that.”