Semi-Nude Parliamentary Candidate Protests Against Banker Pay At RBS AGM

Semi-Nude Parliamentary Candidate Protests Against Banker Pay At RBS AGM

Another happy RBS shareholder

By Ian Fraser, a financial journalist who blogs at his web site and at  
qfinance. His Twitter is @ian_fraser. He is not related to Kit Fraser.

I missed this extraordinary scene. When the aspiring politician Kit  
Fraser stripped to his boxer shorts outside RBS’s annual shareholder  
meeting last Tuesday, I was already inside the meeting, listening to  
chairman Sir Philip Hampton defend the bank from shareholder  
allegations that he had lost the plot on pay.

The AGMs of Britain’s bailed out and recently nationalised banks have  
become increasingly colourful affairs, with disgruntled small  
shareholders complaining vociferously about shoddy standards of  
service, “obscene” bonuses awarded to traders and investment bankers  
as well as about the banks’ abuse of small and medium-sized corporate  
customers. Outside, a range of special-interest groups try to outdo  
each other to grab the media’s attention with colourful displays of  
grievance.

The mood inside Tuesday’s meeting was uglier than any I remember in  
the past decade, with many investors enraged that the bank was paying  
out £1.1bn in bonuses – including a total package of £7.7m to chief  
executive Stephen Hester.  The bonuses wiped out any profit at the  
Edinburgh-based institution.

Many observers are baffled by the bank’s decision to reward staff so  
handsomely at a time when the bank remains heavily dependent on  
taxpayer support and remains loss making. After paying the bonuses it  
made a loss of £1.1bn loss in 2010 (down from a loss of £24bn in 2008  
and £3.6bn in 2009).  The fact the bank is behaving like this at a  
time of national austerity when the UK’s public sector is facing  
massive spending cuts, – and when investors aren’t getting any  
dividends – fuelled the palpable anger inside the meeting.

Small shareholder Ken Cramond told RBS directors had an “inflated idea  
of their own importance”. He added:

You’re not irreplaceable, you’re paid too much. Can you and Stephen  
Hester answer how you can justify your bonus when frankly customer  
service is going down the toilet?

Another shareholder said the bonuses paid out by the bank were:

Really obscene to the degree of greed and corporate theft …You should  
not be paying yourselves anything until the debt is paid off to the  
government and to the people.

Investor Tom Weir said:

You should not be paying yourself anything until the debt is paid off  
to the government – (chief executive) Mr Hester has got his £7.7  
million because it is agreed by the cabal in London.

RBS chairman Sir Philip Hampton tried to claim “we are all in this  
together” but this was met with derisive laughter from some the  
audience.  His consistent line of defence was to say that if the bank  
didn’t pay the market rate for traders, etc, it would be unable to  
compete with other banks. In his opening remarks he said:

In order to deliver this goal [returning the bank to an even keel] we  
need talented and motivated people and we need to be able to pay them  
fairly.

Hampton, a polished performer under fire, also insisted that UKFI, the  
arms-length agency that holds the British government’s 83% stake in  
RBS, institutional shareholders and other stakeholders, “generally  
recognise the need to make a commercial judgment on this issue.” He  
added:

It is important to remember we have to motivate all staff and that  
only a tiny minority were responsible for the problems RBS  
encountered, all of whom have now left.

Hampton also talked of an international market for talent, but this  
line has been widely rubbished by serious thinkers including the late,  
great Alastair Ross Goobey, as “so much hooey“. Under pressure,  
Hampton admitted that he found the payment of bonuses “hard to  
justify”, echoing remarks he made in January about the “gangmaster  
culture” in investment banking three months ago. But he just felt he  
had to pay them or risk seeing an exodus of talent.

Since it was nationalized in 2008, RBS has transferred £230.5bn of its  
more toxic loans in the UK government’s Asset Protection Scheme (APS),  
a state subsidized repository or “bad bank”. If the value of these  
duff assets falls, the bank is expected to absorb the first £60bn of  
losses. Any further losses would be shared by RBS and the government,  
with RBS taking 10% of the loss, and the government 90%.

However the questionable arrangement, launched in the dying days of  
Gordon Brown’s regime, has come into the firing line in recent days.  
On Wednesday, the House of Commons Public Accounts Committee said that  
RBS and Lloyds Banking Group — which was initially going to park its  
own toxic crap in the APS but got cold feet — had “failed to provide  
robust data about the state of their balance sheets”. Margaret Hodge  
MP, chairman of the committee said:

…We found this alarming. It places a question mark over the standards  
and practices of the banks themselves, and whether or not there was  
effective oversight by regulators and the banks’ own auditors.

This is a bigger topic than I have space for in this blog post…

To return to the annual general meeting: towards the end of the  
session, Nigel Henderson, a shareholder and a former hotelier from the  
historic Scottish coastal town of Montrose, gave an eloquent and  
impassioned speech about what he sees as the bank’s questionable  
history of wrongfully expropriating the assets and businesses of small  
and medium-sized corporates.

Henderson, together with other corporate customers known as “Baker’s  
Dozen” claim they have incontrovertible evidence that RBS has nicked  
their businesses by arbitrarily shortening payback periods and  
amending the terms and conditions on loan agreements without notice.  
Henderson said:-

The conduct of a significant number of employees in your bank would  
make even the most crooked, unscrupulous and despicable back street  
loan shark appear as a paragon of virtue. Yes, the jackboot culture is  
alive and kicking – literally as well as metaphorically within your  
bank, despite your pious statements.

All the financial hacks in the room religiously downed their pens at  
this point, clearly believing such claims would be of no interest to  
their readers.

The meeting was wrapped up with the voting. UKFI — which as I’ve  
explained in earlier blog posts is an ethical wasteland and a useless  
institution — weighed in behind the bank’s board and backed all the  
resolutions, which some commentators believe must have been quietly  
approved of by the chancellor of the exchequer George Osborne.

In the end, all 22 resolutions were passed with more than 99% of votes  
cast. In its live blog on proceedings the Telegraph noted, “Robert  
Mugabe would be happy with that type of result.”

Kit Fraser may seem like some half-crazed prankster. But having spoken  
to him after the event, it’s clear that he is a serious would-be  
politician. He has formed a new single issue party called the Ban  
Bankers’ Bonuses Party and is seeking election in the Scottish  
Parliamentary elections on May 5th.

In its manifesto, the BBB Party, which is also fielding a candidate in  
the West of Scotland region, said that if its elected it would:

commission a full public inquiry into the failure of the banks, to  
include the role of the central banks, the impact of fractional  
reserve lending, the effect of the derivatives bubble in the global  
monetary system, and how these circumstances affect the Scottish  
people, communities, and public and private organisations

No other UK political party that I’m aware of is promising such a  
profound probe. If he gets in, Fraser – who owns the Hootenanny and  
Joy of Talk restaurants in Inverness, and is a scion of the  
aristocratic Frasers of Lovat dynasty – intends to use his  
parliamentary seat as “a platform to campaign for bank reform”. A  
first step would to seek to mobilize customer power to force state- 
rescued banks including Lloyds Banking Group and RBS to stop all bonus  
payments to their staff, using the threat of Dutch-style massed  
withdrawal of deposits.

It’s an amazing precedent. This is not wild theory or abstract  
rubbish, it is something that actually happened, something we can do.

Fraser seems confident that what happened with ING in March could  
easily be replicated in the UK.

Some other links:

Jill Treanor’s Guardian piece on the RBS AGM
Telegraph Live Blog on the RBS AGM
Damian Carrington’s Guardian Environment Blog on the RBS AGM




naked capitalism 4/21/11 11:33 AM Richard Smith Banking industry  
Curiousities Free markets and their discontents Guest Post Investment  
banks

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