After taking control of the bonus pool of the Royal Bank of Scotland (RBS.L), a battle is shaping up between the British Treasury and institutional shareholders in the bank over the effects that could have on the company and its ability to attract qualified workers.
In a report from The Times, the British Treasury maintained they retain the right decide the “quantum and shape” of the bonuses the bank issues in 2009. Much of that comes about from the concerns on public reaction to bonus pay after billions of pounds have been loaned to the bank as a result of the global economic crisis.
The British Treasury has made this a condition of RBS entering into the insurance strategy concerning troubled assets, where in return RBS will have another $37.29 billion loaned to the bank.
Shareholders are concerned, as mentioned earlier, that the banks ability to compete for top employees could be hampered by these new restrictions. Some noted that it could end up “ruining the business.”
One report from Sky News said that the entire board of RBS would resign if the bonuses approved by directors of the company were vetoed by the government, or if they were asked to do something which would be detrimental to shareholders in the company.
In response, a spokesman for the British Treasury said: “As a major shareholder, UKFI need to be satisfied that RBS’s approach to remuneration is in keeping with the Financial Services Authority’s code of practice. We expect other institutional shareholders to ensure remuneration practices do not pose a risk to the stability of the organisation.”
On December 15, shareholders will be given the opportunity to vote on whether the company should enter into the insurance scheme to raise capital or not.
