Yahoo News Activist Fund Squares Up To RSA In Pay Row
A powerful European activist fund is squaring up to the board of RSA, the FTSE-100 insurer, in a row which reunites two of the key protagonists of the British banking crisis.
Sky News has learnt that Cevian Capital, which holds a stake of more than 10% in RSA, is leaning towards a decision to vote against the company's remuneration report ahead of its annual general meeting on May 8.
If Cevian does oppose the insurer's 2014 payouts, it would ignite an intriguing conflict between Lord Myners, the investment group's UK chairman, and Stephen Hester, RSA's chief executive.
The two men worked closely together after Mr Hester was parachuted in to rescue Royal Bank of Scotland (RBS) in 2008, with Lord Myners being appointed as City Minister in the then Labour government at around the same time.
Like a number of other shareholders, Cevian is understood to be concerned about RSA's performance as well as the decision by its remuneration committee to abandon its pay policy by awarding Mr Hester a share award worth three times his £950,000 salary.
Sources said that Martin Scicluna, RSA's chairman, had convened a meeting next week with a group of the company's biggest institutional shareholders to discuss their concerns.
Sky News revealed earlier this month that RSA was facing an investor backlash over the award, but a prospective 'no' vote from Cevian threatens to escalate the row into one of the biggest shareholder protests of the year.
This week, both AstraZeneca and HSBC saw substantial rebellions from investors over boardroom pay.
RSA, which ordinarily makes such awards worth a maximum of 230% of salary, had said last year that an identical award to Mr Hester was a one-off.
Some investors are angry that RSA has reneged on that pledge without providing what they believe is an adequate justification.
A substantial revolt against the company would embarrass both RSA and Mr Hester, whose pay was constantly in the spotlight during his time at RBS.
Mr Hester forfeited annual bonuses on several occasions amid intense political pressure, and was eventually forced out by George Osborne, the Chancellor, in 2013, despite having done a crucial job in stabilising RBS.
Last month, it emerged that he was receiving two-thirds of his annual bonus for 2014 despite RSA missing financial performance targets.
One factor mitigating against a broader revolt at RSA is that that Institutional Shareholder Services, a big proxy voting advisor, is understood to have recommended on Friday that investors support the company’s remuneration report.
In a statement earlier this month, RSA said: "Although the previous intention upon Stephen’s appointment in 2014 was that future grants would not exceed 230% of salary, the Remuneration Committee believed a further award at 300% of salary was appropriate in 2015.
"This level of grant was given in recognition of the crucial role Stephen has in the transformation of the Company over the next few years".
The company added that none of the £2.85m share award would pay out unless performance conditions were met during the three-year period of 2015-2017.
In a further statement issued to Sky News on Saturday, RSA said it was grateful for shareholders’ support:
"The pace of change has been and continues to be intense. All of the company's restructuring targets for year one were exceeded and cost targets significantly improved going forward.
"This progress has been widely acknowledged despite the economic headwinds."
RSA added that it remained determined to deliver "ambitious and wide-ranging reforms".
"We maintain a regular dialogue with all of our major shareholders and take on board all of their comments and feedback," it said.
Cevian declined to comment please.
