Royal Bank of Scotland, Britain's biggest banking group, is set to clash with investors over the "potentially excessive" bonuses to top management when it faces shareholders at its annual meeting next week.
Pirc, the pension fund consultants, is urging shareholders to vote against the remuneration package of the Edinburgh-based bank at the meeting on 29 April because it believes its chief executive, Fred Goodwin, and other directors could receive inappropriately high pay.
Under Pirc's analysis, Mr Goodwin could be paid nearly £4.5m, or five times his salary, under the various bonuses and incentive schemes that the bank has put in place. A spokesperson for Pirc said: "We think a combination of incentive schemes should be no more than 200 per cent of salary. We do not think the targets in RBS's long-term incentive plan are sufficiently challenging, given the level of awards, which are potentially excessive."
Pirc's criticism comes after RBS, which is Britain's second most profitable bank after HSBC, clocking up £6.2bn in profits in 2003, has already been forced to defend accusations of excess. It transpired only this month that the bank owns a private jet worth £17.5m for the use of Mr Goodwin and his board. The plane is estimated to have running costs of £7,700 an hour.
Manifest, another shareholder advisory group, has said Mr Goodwin could earn up to £8m, or nine times his salary, under RBS's medium-term incentive scheme. But an RBS spokesman last week denied this was possible, saying the award could only be three times his salary.
RBS has also been taken to employment tribunal by IT workers with fixed-term contracts who were barred from receiving a bonus paid to other staff for the successful integration of NatWest, which RBS bought in 2000. In contrast, Mr Goodwin received a £1.7m bonus in 2002, which the bank said at the time reflected the successful integration of NatWest into the group after the 1999 takeover.
Abbey National is also heading for a showdown with investors at its own AGM this Thursday after the National Association of Pension Funds criticised the bank for paying hefty bonuses to its bosses in advance of its recovery.
The powerful NAPF questioned whether the payments were "appropriate prior to concrete evidence" of a successful transformation at Abbey, which lost £636m last year. However, the pensions group stopped short of calling for a rebellion at the AGM.Reuse content