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Jan 04, 2018

Shareholder groups escalate efforts to create board liaison committee at RBS

Aim is to improve corporate governance and shareholder engagement at the bank

Two shareholder organizations are intensifying their efforts at Royal Bank of Scotland (RBS) to guarantee their voices are heard by calling for the creation of a new committee to liaise with the bank’s board on governance issues.

For the second year running, two shareholder associations – the UK Individual Shareholders Society (ShareSoc) and the UK Shareholders’ Association (UKSA) – have called on RBS to submit a resolution at its annual meeting on setting up a new shareholder committee.

After their initial demands were rejected on legal grounds by RBS last year, the groups adjusted their proposals to address the bank’s concerns. ShareSoc and UKSA submitted the new resolution last Friday on behalf of 136 investors, calling on RBS to establish a committee of shareholder representatives ‘to improve corporate governance and shareholder engagement’.

In the UK, Marks and Spencer Group set up a shareholder panel in 2016 that invites a group of private investors to meet with senior managers twice a year to discuss key issues.

RBS, which is 72 percent owned by the UK government after a major bailout in 2009, says in a statement: ‘While it is of course the role of the company directors to represent shareholders, we will review any proposal that is submitted and make our response clear in due course.’

Although RBS rejected the idea of a shareholder committee last year as ‘inconsistent with the law and the company’s constitution’ it did respond to investors by arranging two meetings between private shareholders and its senior directors and executives.

The government dismissed the idea of shareholder committees in response to its green paper on corporate governance reform published in August 2017, saying they ‘would be difficult to implement practically and could, moreover, undermine the UK’s unitary board system’.

These committees do exist in Sweden, however, where investor representatives have formal powers to approve or dispose of board members each year.

ShareSoc and UKSA say in a statement that the current mechanisms for companies to consult their shareholders ‘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 though to the final version voted on by shareholders.’