ShareSoc has today issued the following press release:
The Royal Bank of Scotland (RBS) has rejected a requisition to implement a Shareholder Committee.
ShareSoc will not permit this unreasonable obstruction of shareholder democracy to stand. It is a basic principle of Company Law that shareholders can requisition resolutions which must be put to a vote of shareholders. If the directors do not like a requisition, then they can advise shareholders to vote against it. But they should not be using tenuous technical excuses to avoid putting it to shareholders.
Their grounds for rejection have yet to be clarified (see note 1), but ShareSoc took great care to ensure that the requisition was valid and would not create practical problems with implementation. The requisition provided RBS with wide discretion on how they implement the proposal. (see note 2)
RBS is not intending to propose an alternative resolution addressing their drafting concerns. Hence it is clear that the board do not want a Shareholder Committee, and the objection is not really to the specific drafting of the requisition.
ShareSoc is consulting legal advisors on this matter.
ShareSoc Chairman Mark Northway had this to say: “It is disappointing that, instead of leading from the front on corporate governance, RBS have instead chosen to try to thwart this initiative. This behaviour by the directors of a company that is majority owned by the UK Government underlines the broad reticence of UK boards to address the breakdown of the agency model and the rights of shareholders. There is more work to do at RBS before the government places its 73% holding back into the market.”
The resolution, from 168 shareholders, was jointly coordinated by ShareSoc and the UK Shareholders Association (UKSA).
RBS accepts that the resolution was properly delivered under CA 2006 S153 with the requisite number of member signatures, but is refusing to distribute and / or to present the resolution to the AGM on the basis that it is “inconsistent with the law and with the company’s constitution”.
In a meeting, representatives of RBS suggested that the proposed resolution breaches CA 2006 S172, and that this is the basis for claiming inconsistency with the law. They further claimed that the resolution is inconsistent with the company’s articles, by dint of being too broadly drafted. This notwithstanding the fact that it is a special resolution.
ShareSoc have asked RBS to provide their reasons in writing, but so far RBS has not done so.
The RBS AGM resolution is quite simple. It reads as follows
That the Directors establish a Shareholder Committee, the members of which will include representatives of large shareholders willing to serve and a representative of retail shareholders, and that the Directors be instructed to use any and all means to implement this resolution, subject to appropriate conditions to ensure that the CA 2006 S172 duty to act fairly between members is not breached.
The purpose of the introduction of a Shareholder Committee is to improve corporate governance in a company. We suggest that this initiative will significantly benefit corporate governance at RBS, and represents a valuable opportunity for RBS to lead the way in exploring a concept which works well in other countries, which is under consideration by the UK Government, and which could have broad application in addressing the current breakdown in the agency model in UK public companies.
Note that more information about Shareholder Committees and their applicability to RBS can be obtained from this page of the ShareSoc web site: http://www.sharesoc.org/rbs.html
Investors in RBS can register their interest in the campaign on that web page.