BBC - Peston's Picks: RBS board to quit if chancellor vetoes £1.5bn in bonuses.
The directors of Royal Bank of Scotland have been given legal advice that they would have to resign if the chancellor of the exchequer were to block them from paying the bonuses they regard as essential to maintain the competitiveness of the group.
Let them go, I say.
Can the be replaced? I quote Polly Toynbee:
Appoint the Richard Murphys, Will Huttons and Larry Elliotts not as City tsars but as City Savonarolas to flush out tax avoidance and evasion, to close down tax havens, to appoint honest non-executives to company boardrooms and institute a regime built on public trust.
OK, drop me if you like - just do the other two, plus Prem Sikka and Adam Lent, Roger Bootle and one or two others.
But yes, they can be replaced. And we'd have been a lot better off if they had been a year ago.
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It’s not strictly on point, but for most of us Savonarola is not regarded positively as a pious, some might say fundamentalist preacher. For most of us he is someone who organised book burning, was implacably opposed to the Renaissance and was directly responsible for the destruction of some of the most important works of art ever produced.
I wish the Guardian would be a bit more careful with their references. Why not say “City punk-rockers washing away the established, comfortable, self-absorbed old guard”.
Book burning in my eyes is never something to be associated with.
Is this one of those “who governs Britain” moments?
If Gordon blinks at this point, then we may as well not bother with the next election!
I’ve previously commented on this on my blog here
http://financialrant.blogspot.com/2009/08/we-need-our-big-bonuses-or-london-will.html
There is no change on that position really
I say call an EGM, put it to extra-ordinary resolution and then there can be no claim from the board that its not in the interest of ‘all’ shareholders.
The 75% vote seems to be acceptable for everybody else – I think they would have a hard time justifying it otherwise
More comments here: http://financialrant.blogspot.com/2009/12/same-old-rbs-crap-extra-ordinary.html
It would be entertaining if the Treasury called their bluff.
Where do they plan on going? Even if there were positions available, it would be a poor PR move for any other bank to hire bonus-junkies anyway.
The legal advice would be simple. If a majority shareholder tells a director what to do, then the director becomes little more than an agent for that shareholder and risks becoming liable for claims made by the minority shareholders that they are not acting in the best interests of all shareholders.
What should happen here is simple: the government should request an EGM of all shareholders and put forward a resolution on compensation. That would then be made by all shareholders and would bind the directors. But as a simple matter of law, directors need to be very wary about following “instructions” from majority shareholders that other shareholders may not agree with.
This is one of the reasons why provisions exist in listing rules compelling anyone owning over 30% of a company to make a bid for the lot. Majority shareholdings in public companies are invariably a bad idea.
The RBS directors who think they are God’s essential gift to the rest of us should not resign — they should be sacked. The high and mighty view they have of themselves as indispensible worthies is totally out of sink with the way the people who pay them – the taxpayer – views them.
No one, not even bank directors, is indispensible. Bank managers & directors should all be on performance related term contracts and if they do not perform well then they should be replaced at the end of that term.
Bonuses should be banned. An extension of a director’s contract might include a higher salary if his/her performance in the job clearly justifies it. If during the term of a new contract a director fails to meet the performance target set in the contract then he/she she may have the contract renewed but at a lower salary.
On the otherhand if the bonuses are vetoed and the result are the key staff members jump ship for better offers in other banks, then RBS’s share price tanks with their performance and who do the minority shareholders sue?
Yep the directors for not fufilling their fudiciary duty to ALL shareholders. Hence why their legal advisors are advising them what to do in this case.
Creg
Of course they can sue
And they’ll get the fair value of their shares – which will be nil
Richard
Personally you would think that there is a comprimise that can be done.
1.5 billion is excessive, extraordinary if it’s performance based and the majority of this money was earned on capital supplied by the UK tax payer.
The problem I see is if the board is forced to resign as they see if they ascquiese then they are in breach of their core duties, then the UK gov will probably pick a new board themselves leading to questions of nationisation of the bank.
And if the bank tanks then that is a bug waste of tax payers money