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Fiona Walker reports
"Fat cat allegations came from small and large investors"
 real 56k

Wednesday, 11 April, 2001, 14:23 GMT 15:23 UK
Royal Bank chiefs defend bonuses
Sir George Mathewson
Sir George: No bragging power from his bonus
Royal Bank of Scotland (RBS) has defended its decision to pay huge bonuses to senior directors following the bank's acquisition of rival Natwest.

But outgoing chairman Viscount Younger acknowledged the decision had caused shareholders "great discomfort" and said the bank would consult them in future before paying such bonuses.

Rebel shareholders had said they would vote at Wednesday's annual general meeting for the ejection of RBS directors over bonus payments.

Two directors had faced calls to stand down after agreeing 2.5m in bonuses and share options for four fellow board members.

Re-elected

The payments, a reward for clinching the takeover of Natwest in February 2000, were condemned as "inappropriate" by the National Association of Pension Funds, whose 1,450 members control one quarter of RBS shares.

While RBS has proved one of the most successful UK banks over the past year, "this was not clear" in March last year when the bonuses were paid, NAPF spokesman John Rogers said.

"The payment bonuses should have been related to the success of the takeover in the longer term," Mr Rogers told BBC News Online.

At Wednesday's meeting, all four directors paid the bonuses were comfortably re-elected.

Doing our damnedest

Lord Younger said it gave RBS "great concern that some shareholders have felt unhappy about this".

"We do our damnedest all the time to act in the interest of the shareholders."

He said it was not normal policy to pay transaction-related bonuses but said the Natwest deal was "unique" and "worthy of special recognition".

But he added: "I take the point that there has been discomfort about this and if we decide to make such remunerations in the future we will certainly consult with shareholders before doing it."

More say

Mr Rogers also confirmed that the NAPF, which is calling for laws to give shareholders more say in directors' pay awards, has been in talks with Marks & Spencer over bonuses to chief executive and chairman Luc Vandevelde.

The association is also investigating the award made by United Business Media, where chief executive Lord Hollick received 648,900 after securing the sale of television interests, and a payment by Schroders bank to former chairman Sir Winfried Bischoff.

At Royal Bank of Scotland, the NAPF urged members to vote against the re-election of non-executive directors Sir Iain Vallance and Sir Angus Grossart.

While the pair were not among the four executives who benefited from the 2.5m bonus payouts, they sat on the RBS remuneration committee which approved the awards.

Voting against the pair's re-election to the board is the only way open to the NAPF to express dissatisfaction at the committee's behaviour, Mr Rogers said.

"We have nothing against them being directors," Mr Rogers said.

"But the way corporate governance works, we have no other option if we want to make our feelings felt."

'Bragging power'

Shareholders have been further angered that the 1m bonus paid to chief executive Sir George Mathewson is being awarded despite his switch to the non-executive position of deputy chairman.

Such bonuses have typically been paid by RBS only to executives who continue to have a hands-on role in its affairs.

Sir George also courted controversy last month by defending the 2.5m bonuses as insufficient to provide "bragging power in a Soho wine bar".

Sir Iain and Sir Angus were also both re-elected on Wednesday.

"That we do not win [the vote] is not the point," Mr Rogers said. "We have flagged up the issue. We have acted in support of our aims to boost corporate governance.

"Royal Bank of Scotland knows it has messed up. If they could rewrite history, they would."

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See also:

01 Mar 01 | Business
Royal Bank beats forecasts
27 Jul 00 | Business
Halifax profits up 21%
11 Feb 00 | Business
NatWest takeover battle
21 Feb 00 | Business
Insurers braced for shake-up
10 Feb 00 | Business
NatWest takeover: a chronology
17 Jan 00 | Business
Royal Bank of Scotland: A history
10 Feb 00 | Business
NatWest: A history
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