INVESTORS are set to question chiefs at Royal Bank of Scotland (RBS) and Lloyds Banking Group this week, with executive pay and branch closures expected to be high on the agenda at annual general meetings (AGM) in Edinburgh.
The banks will see little reprieve from shareholders at Thursday’s meetings, despite a return to form in the first quarter which saw Lloyds double profits and RBS swing back into the black.
Shareholders in RBS are being urged to vote against a new remuneration policy, which will face a binding investor vote at the bank’s annual meeting at Gogarburn.
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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.
Although the awards are a decrease on the previous 400 per cent investor advisory group Institutional Shareholder Services (ISS) said this was not “sufficient”, and recommended shareholders oppose the remuneration policy.
In addition, ISS expressed concern over proposals that would see executives remain in line for pay awards even after they leave the bank.
Pensions & Investment Research Consultants (PIRC) is also calling on shareholders to vote against the new pay scheme, stating: “The executives should be rewarded for the period they served the company and nothing more.”
In its defence, RBS has said the aim of the new policy is to “encourage sustainable long-term performance, with executive directors having significant alignment in shares both during and after employment”.
PIRC is also advising shareholders to oppose the re-election of chairman Sir Howard Davies over the lack of female representation on the board.
In a report, the group hit out at the fact that there is “no clear commitment to increase overall gender diversity at board level”.
While there are no signs that Lloyds will be hit with a shareholder rebellion, the bank could still face tough questions over plans to slash its high street branch network and efforts to redress fraud victims who suffered at the hands of former HBOS staff.
Lloyds came under fire from the unions in April after releasing further details on plans to shut branches, with 100 sites earmarked for closure between July and October.
The move is part of some 200 closures announced by the bank last summer. Lloyds also said last month that it would begin making compensation offers to HBOS fraud victims in May, while payments are expected to begin in June.
It comes after a group of corrupt financiers were jailed for carrying out a £245 million loans scam and squandering the profits on prostitutes and luxury holidays.
MPs wrote to Lloyds’ bosses in February demanding “proper compensation” for defrauded businesses, claiming neither HBOS nor Lloyds had adequately investigated complaints.
Chief executive Antonio Horta-Osorio’s pay will also be under the spotlight when investors meet at Edinburgh International Conference Centre.
Horta-Osorio’s total pay package fell to £5.5m last year from £8.7m in 2015, due to a cut in his long-term shares award after the stock took a battering following the Brexit vote.
Under the bank’s new remuneration policy, which faces a binding shareholder vote at the AGM, Horta-Osorio has the potential to earn a maximum of £8.2m.
Question marks hang over his long-term future, as the government edges closer to fully re-privatising the lender after reducing the taxpayers’ stake to less than one per cent.