Ethical Performance
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RBS faces shareholder lawsuit over frailties 'hidden' during £12bn rights issue

October 2012

Shareholders are preparing to sue British bank Royal Bank of Scotland (RBS) and its former CEO Fred Goodwin over a £12bn ($19.4bn, €15bn) rights issue of six billion shares offered in 2008 just weeks before the group's huge deficit resulted in its nationalisation.  

Altogether, 95% of eligible investors bought shares and lost nine-tenths of their money. They maintain the bank's frailty had been hidden from them.

The 91 institutional investors backing the shareholders include Collins Stewart Wealth Management, Crédit Agricole, Deutsche Bank, HSBC and the finance group State Street. If the shareholders raise the funds to sue, they will serve a writ within weeks.

The move is one of three recent investor actions against large UK company board decisions.

Leisurewear chain Sports Direct scrapped an annual meeting vote on a £25m package for executive deputy chairman Mike Ashley when it saw rising shareholder opposition. The company was about to award eight million shares to Ashley, who owns 71% of existing shares but is not paid a salary, if the company hit three-year profit targets.

The Association of British Insurers objected because the scheme applied to no other Sports Direct executives and the only performance measure was underlying earnings before interest, tax, depreciation and amortisation.

At electrical group Dixons, 20.5% of votes contested the annual meeting remuneration report. The company, benefiting from strong TV sales boosted by the London Olympics, introduced a pay structure for a new management team, which awarded shares equivalent to 200% of salary worth £1.2m to chief executive Sebastian James.

RBS | UK & NI Ireland | Shareholder activism

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