NatWest executive pay plan under fire from proxy advisor

NatWest shareholders have been urged by an influential proxy advisor to vote against the group’s executive compensation plan at this month’s annual general meeting, just days after the UK government reduced its stake in the bank to below 50 percent.

Glass Lewis, the advisor whose recommendations are widely followed by institutional investors and passive investment managers, advised shareholders to reject compensation policies that would increase the potential payout for executives and introduce some sort of bonus structure that offers more certainty of payout.

Executive pay has long been a contentious issue for the bank throughout its involvement by the UK government following its financial crisis bailout. It will be particularly careful to avoid a shareholder rebellion so soon after the government’s majority stake sale.

Under NatWest’s proposed salary plan, the maximum bonus to which CEO Alison Rose would be entitled would be 43 percent higher than her potential payout from the previous year. Katie Murray, the group’s chief financial officer, would increase her potential payout by 25 percent.

NatWest has proposed introducing a short-term incentive plan and replacing its long-term incentive plan with a restricted equity plan that would have fewer performance metrics and make payouts more certain.

“We are concerned about the increase in general incentive opportunities and the introduction of an RSP without a convincing strategic rationale for this type of reward structure,” Glass Lewis said in his statement. “We recommend that shareholders vote against this proposal.”

The bank’s shareholders will vote on the plan at their annual general meeting on April 28.

Rose’s £1.1million salary makes her one of the UK’s lowest paid bank bosses.

“The Board believes this is the right time to normalize our executive pay policy and bring it into line with other UK banks,” NatWest chairman Howard Davies said in a statement.

“Over time, the changes we are proposing will result in a more competitive policy for our most senior executives, while continuing to pay a significant portion of their compensation in shares, aligning management directly with the interests of our shareholders,” he added.

Executive pay has often been a bone of contention at the bank’s general meetings, with former chief executive Ross McEwan’s £350,000 pension package in 2019 drawing criticism from shareholders. Another former CEO, Sir Fred Goodwin, had to pay back part of his £16.9m pension pot after a political backlash in 2009.

Last week NatWest about 5 percent repurchased of its shares from the UK government for £1.2bn, reducing the Treasury’s voting rights in the lender to less than 50 per cent for the first time since 2008. The OTC purchase of nearly 550 million shares, representing 4.9 percent of outstanding shares, meant the Treasury Department had a 48 percent stake in NatWest.

The UK lender bought the shares for 220.5p, well below the 502p a share the government paid to bail out the bank in 2008.

The UK government has owned a majority stake in NatWest, formerly the Royal Bank of Scotland, since it was bailed out with a £46 billion bailout at the height of the financial crisis. NatWest executive pay plan under fire from proxy advisor

Adam Bradshaw

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