Banff Councillor Supports RBS Shareholder Group's Call Over Better Governance

>> 31 December 2017

Banff & District SNP councillor Glen Reynolds has welcomed a drive by RBS shareholders last week to question key RBS decision making, not least over planned local branch closures.

Last week, and for the second year running, two individual shareholder associations have called on RBS to submit a resolution at its annual general meeting with a view to establishing a new shareholder committee which will aim to bring transparency to RBS decision making.

Commenting, Cllr Reynolds said:

"I understand their initial proposals were rejected on legal grounds by RBS last year, and the shareholder representatives said they had adjusted their proposals to address the bank’s concerns. I believe that 'ShareSoc' and the 'UK Shareholders’ Association' have or are about to submit a resolution on behalf of 136 investors in the bank, calling on RBS to establish a committee of shareholder representatives 'to improve the corporate governance and shareholder engagement'.

"The Westminster Government had turned its back on the idea of shareholder committees in response to its green paper on corporate governance reform in August, saying they “would be difficult to implement practically and could moreover undermine the UK’s unitary board system”. But they already exist in Sweden and work well, where investor representatives have formal powers to approve of or dispose of board members each year.

“In the UK by way of further example, Marks & Spencer decided in 2016 to set up a shareholder panel that invites a group of private investors to meet senior managers twice a year to discuss key issues. That needs to happen with RBS in order that a moral backbone has a role to play in what can otherwise be a simple accounting exercise that does not take into consideration or rural communities.”

Cllr Reynolds continued:

"There is a context to this welcome move. We need action on this and not just words, action that is sadly lacking from our local Westminster MP who limply talks of lessening pain on customers. However, RBS have replied to a letter from MSP Stewart Stevenson in December, in which they say they will 'not be revisiting the decision to close local branches', despite the opposition of loyal customers. They refer in the letter to an alleged cut in Banff 'transactions' at the branch of 33%, but I believe this decision is more about increasing profits at the expense of local need.

"There is more to this decision in terms of bad governance and a lack of stakeholder accountability than is being made public, which is why measures tackling accountability by the bank to key stakeholders, employees and shareholders, is a positive direction. Put crudely, the bank closures to date are a balance sheet exercise that lacks moral credibility which should protect local communities. It is the second time in nine months that the RBS, which is still majority government-owned, has announced branch closures as it attempts to cut costs and boost profits."

In March, RBS announced it was closing 158 local bank branches, following 191 closures over the previous two years. RBS will have cut more than one-third of its UK branch network since the start of the 2017.

Cllr Reynolds supports the stance taken by the Federation of Small Businesses, who said: "Many such businesses, particularly those in rural areas with poor broadband access — relied on their local bank branches to seek personal advice as well as to deposit their cash takings. It’s not just about transactions - small firms still hugely value the in-person support they receive at branches, particularly when it comes to completing complex transactions and making big financial decisions."

ShareSoc and UKSA said the current mechanisms for companies to consult their shareholders “create a very ‘messy’ backcloth in which to engage”. They added: “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.”

In conclusion, Cllr Reynolds stated:

"I hope such proposals will enhance our focus on strengthening the voice of employees and other non-shareholder interests at board level as an important component of running a sustainable business. An impact assessment and input by the local community should be incorporated into the decision-making process here as the transparency around this debacle is sadly missing."

RBS has been engaged in drastic restructuring for almost a decade since being bailed out by the UK government during the financial crisis.

Ross McEwan, chief executive, has promised the bank will return to profitability next year after a decade of losses. This would help the government achieve its aim of selling part of its stake in the lender by March 2019. RBS recently scraped through the Bank of England’s annual stress tests without needing to raise capital, giving analysts hope that next year it will be able to pay its first dividend since the crisis.

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