Bank shareholders question bonus scheme

Nearly a quarter of Royal Bank of Scotland shareholders voted against a bonus scheme that could net executives shares worth up to 300% of their salary at the company’s annual meeting today.

The bank’s 2007 executive share option plan faced opposition from 22.44% of shareholders at the group’s AGM in Edinburgh.

Under the deal, chief executive Sir Fred Goodwin could gain a potential £3.6m (€5.2m) – three times his £1.2m (€1.8m) basic salary.

The new deal was opposed by the pension fund adviser Pensions Investment Research Consultancy, which criticised the scheme for excessive rewards and a lack of transparency.

Shareholders questioned why there had been a lack of disclosure on performance targets for the scheme, which RBS says have a direct link to share price performance.

They were told these targets would be set at the same time as the award levels are agreed and would then be disclosed, probably in February next year.

Bob Scott of the RBS’ Remuneration Committee said the remuneration policy was designed to “attract, motivate and retain high-calibre executives".

The resolution was eventually passed with 77.56% of the vote, but 96,650,983 shares withdrew or abstained.

The share option plan at the UK’s second biggest bank will be introduced this year to replace the existing scheme approved by shareholders in 1999.

Mr Scott said the rules of the new option plan had been “specifically drafted” to meet current best practice.

He added: “The new option plan has no embedded share value at time of grant, and participants will only benefit to the extent that the share price increases from the time of grant.”

The group was given another bloody nose when 9.75% of shareholders also voted against a remuneration report which would benefit the companies’ executives. A total of 115,226,508 shares abstained.

Although it was passed with 90.25% of votes, RBS had to assure shareholders that the share option was used as a long-term incentive for executives.

RBS said that several hundred executives would be involved in the scheme and there would be no initial cost to the shareholder.