Outside the Royal Bank of Scotland’s annual general meeting in Edinburgh, Kit Fraser stripped to his boxer shorts in protest against elevated executive pay and bonuses at the state-rescued bank. It’s all part of day’s work for Fraser (no relation), who is standing for election to the Scottish Parliament for the Ban Bankers’ Bonuses Party. Heis also author of Toff Down Pit and two other books, co-founder of the Moniack Mhor Writers Centre, and a scion of the Frasers of Lovat.
The mood inside the meeting was uglier than I remember at any RBS AGM in over a decade, with many investors expressing barely disguised fury about the greed of the 10 men and two women on the podium, who included Royal Bank of Scotland’s chief executive Stephen Hester and its chairman Sir Philip Hampton. Many investors were incredulous that the state-rescued bank was paying out £1.1bn in bonuses – including a total package of £7.7m to Hester — wiping out any profit.
Other major concerns included the bank’s shoddy standards of service, the part it is playing in destroying the environment, and the its serious abuse of small and medium-sized corporate customers.
During a rambunctious AGM , held in the bank’s conference centre at its Gogarburn campus, investor Ken Cram stood up and accused the Royal Bank of Scotland directors of having an “inflated idea of their own importance”. He added: “You’re not irreplaceable, you’re paid too much. Can you and Stephen Hester answer how you can justify your bonus when frankly customer service is going down the toilet?”
Another shareholder, Tom Weir, said the bonuses paid out by the bank were: “really obscene to the degree of greed and corporate theft …You should not be paying yourselves anything until the debt is paid off to the government and to the people,” he said.
Hampton’s consistent reponse was that if the bank did not pay the market rate for traders, etc, it would be unable to compete. In his opening remarks he said:-
In order to deliver this goal we need talented and motivated people and we need to be able to pay them fairly. I know that pay is an important issue for many shareholders and therefore we have made full disclosure of our remuneration policy….Earlier this year Penny Hughes, chair of remuneration committee consulted extensively with our majority shareholder, UKFI, institutional shareholders and other stakeholders on our remuneration approach. They generally recognised the need to make a commercial judgement on this issue. About 46,000 people have joined the group since the crisis. It is important to remember we have to motivate all staff and that only a tiny minority were responsible for the problems RBS encountered, all of whom have now left …
Overall we have tried to strike an appropriate balance between paying people at a level so they are motivated to stay with the bank, and showing restraint to reflect the concerns we have heard.
Hampton also talked of an international market for talent. Yet this line has been questioned by serious financial thinkers including the late, great Alastair Ross Goobey, as “so much hooey“. During the meeting Hampton did admit he found bonuses “hard to justify”, perhaps echoing the remarks he made about the “gangmaster culture” in investment banking three months ago.
Nigel Henderson, a shareholder and former hotelier from Montrose, claimed he had evidence that RBS defrauded him, and expropriated his businesses. Among other things, Henderson said: “the conduct of a significant number of employees in your bank would make even the most crooked, unscrupulous and despicable back street loan shark appear as a paragon of virtue. Yes, the jackboot culture is alive and kicking – literally as well as metaphorically within your bank, despite your pious statements.
As is their wont, the financial hacks in the room downed pens during Henderson’s speech/question.
UKFI — which as I’ve said in earlier blog posts is a supine and fairly blinkered institution — weighed in behind the bank’s board when it came to the voting. In the end, all 22 resolutions were passed with more than 99% of votes cast. The Daily Telegraph noted, “Robert Mugabe would be happy with that type of result.”
- Jill Treanor’s Guardian piece on the AGM
- Damian Carrington’s Guardian Environment Blog on the AGM
- Harry Wilson’s Telegraph live blog on the AGM
- A longer version of this blog post was published on Naked Capitalism
This blog post was published on 19 April 2011