Shareholder group attacks 'immoral' bank salaries
Government must reform part-nationalised banks before selling its stake, says UK Shareholder Association
By CFOWorld.co.uk | CFO UK | Published 09:54, 13 April 12
Executive salaries at the part-nationalised banks is "excessive and immoral", a private shareholder group said on Friday.
The UK Shareholder Association (UKSA), which represents retail investors and has around 1,000 members, said business practices at Royal Bank of Scotland and Lloyds should be reformed before the government sells its stake.
Lloyds and RBS hold their annual general meetings in May and UKSA director Eric Chalker called for the establishment of private shareholders' committees on the boards of banks to help reform executive pay.
"It has become a truism that senior bank pay is grossly excessive and, some would say, immoral," Chalker said.
The government owns 82 percent of RBS and 40 percent of Lloyds after rescuing the banks during the crisis with £66 billion of taxpayer money.
Speculation has mounted in recent weeks that the government may sell some of its RBS stake to Middle Eastern sovereign wealth funds.
Even though a sale at current levels would represent a loss to the Exchequer, which effectively acquired its RBS stake for 49.90 pence, the argument is it could boost investor interest in the stock.
In January, RBS' chief executive Stephen Hester and Chairman Philip Hampton bowed to political pressure by waiving their bonuses, while Lloyds CEO Antonio Horta-Osorio also declined his bonus after taking time off work in 2011 on sick leave.
RBS has said that the ongoing row over its salaries and constant political interference is damaging, and CEO Hester told Reuters last month that "the faster the government starts selling its stake, the better for everyone".
However, Chalker said it was vital that the government used its position as RBS and Lloyds' leading investor to reform those banks before selling its stakes back to the private sector.
"It has a great opportunity here, which could set an example for others to follow with the potential to produce a sea change in director behaviour. It is an opportunity that should not be wasted," Chalker said.
Earlier this month, the UK's most powerful institutional shareholder group said it had concerns about executive pay at Barclays, adding to growing criticism over a £17 million award for chief executive Bob Diamond.
Photo credit: Reuters
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