Report
Expert Corporate Governance Service (ECGS)
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Royal Bank of Scotland - AGM 26 April 2019

Restructuring

The Group announced on 22 March 2018 that its proposed Ring-Fencing Scheme had been sanctioned by the Court of Session in Scotland and has been effective since this date.

As previously announced, under the scheme, the Bank will transfer its UK retail & commercial banking business to Adam & Company PLC (Adam); transfer its covered bonds in issue and Mentor business to National Westminster Bank Plc (NatWest); and transfer branches and other properties to either NatWest or Adam. Please see the attached report for further details.

 Litigation

The Bank continues to face litigation related to residential mortgage backed securities, LIBOR, treatment of SMEs, money laundering, payment protection insurance, and disputed taxes. Please see the attached report for further details.

 Item 2: Approve the Remuneration Report

The structure is unacceptable given the use of the fixed share allowance and the excessive pension contributions.  The quantum is excessive given the high levels of fixed pay.  We recommend shareholders oppose.

 Item 22: To approve a general authority to the directors to issue equity convertible notes and to replace securities that will not be eligible as regulatory capital in 2019, we believe that a dilution rate of up to 12.41% of share capital is simply excessive. We continue to believe that a rights offering to shareholders which would increase the CET 1 ratio is the best way for a bank to meet its capital requirements.

Item 28:  To request that the Board establish a Shareholder CommitteeThis is a shareholder proposal submitted by ShareSoc, The UK Individual Shareholders Society, and UKSA, The UK Shareholder's Association.  The shareholders propose that the Board establish a shareholder committee in order to facilitate more effective oversight by shareholders of the governance of the Company. 

The Board recommends shareholders vote against the proposal.  In their view, it might be hard to have members on the committee that would represent the views of all shareholders and the existence of the committee might "blur the lines between stewardship and executive decision-making and undermine the unitary board model." 

They feel that the Board already engages with shareholders and other stakeholders and the appointment of such a committee would not be in the interest of all shareholders.

ECGS recommends support for the initiative by shareholders to have a formal, structured forum for ongoing engagement with the Board as well as their intentions to be more involved with key governance issues such as nomination, remuneration and auditing.  We also consider that the proposal to provide a forum for all shareholders, reporting to all shareholders of the committee's activities and voting advice would offset some of the concerns about the benefit of the committee to all shareholders rather than just a small group.

 This proposal was also made at the Companyns 2018 AGM, and received a level of 1.35% support from shareholders. Given that there is a controlling shareholder, the requisitionists consider this a remarkable result.  They note that change does not occur immediately.

Underlying
Royal Bank of Scotland Group PLC

Royal Bank of Scotland Group is a banking and financial services company. Co.'s activities are organized in franchise basis; Personal and Business Banking (PBB) comprising UK PBB and Ulster Bank RoI segment, which serve individuals and small businesses in the U.K. and the Republic of Ireland; Commercial & Private Banking comprising, Commercial Banking and Private Banking segment, which serve commercial, corporate and private banking in the U.K. and Western Europe; RBS International, which serves retail, commercial and financial institution in Jersey, Luxembourg and London; and NatWest Markets, which provides risk management and financing solutions through its trading and sales operations.

Provider
Proxinvest
Proxinvest

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