The chairman was then questioned about the pay rises which included a 64% rise in chief executive Fred Goodwin’s pay package with a £1.7m performance-related bonus, which brought his earnings up to a massive £2.58m. Shareholders were also unhappy about the remuneration received by the head of Citizens, the bank’s US subsidiary.
At the agm, Matthewson said the bonuses were made following the merger of RBOS with NatWest and they were not ‘transactional bonuses,’ the ones usually frowned upon by the market. He said: ‘It was vital the NatWest integration was completed and done well. It required enormous effort and this acquisition was one of global standing, and therefore merits the bonuses paid.’
Matthewson is known to be a straight talking man who is not afraid of controversy or standing against the tide. He defended his company’s stance on awarding high salaries to its directors in front of 3,000 business people at the Institute of Directors Conference at the Royal Albert Hall in London at the end of last month. The chairman said that good executives are hard to find and high pay rewards were a necessary part of keeping a company competitive and essential to attracting highly competent individuals to top management.
‘Where real value has been created, there should be high remuneration for the executives who have created it. Executives who can create real shareholder value are just as rare and as unusual as talent in any other sphere of life,’ he said.
Matthewson also admitted that the method under which RBOS took over NatWest had helped in facilitating the quick and full integration of the two companies.
‘We could not have done this if it had been a merger and not a hostile takeover because the politics and negotiations would have delayed the process far too long,’ he said. He added that, because it was a takeover, the RBOS was able to shut down NatWest’s head office and evaluate and choose the best senior management within 30 days.
Other dilemmas the chairman is facing include the £100m loss it made on its investment into troubled hotel chain Le Meridien, which recently warned that the SARS outbreak had hit its profits, and the bank’s board, who do not conform to the recent Higgs proposals.
Ironically, in the chairman’s statement in the latest annual report, Matthewson endorsed Higgs saying: ‘Having participated in the review of the role and effectiveness of non-executive directors undertaken by Derek Higgs, we are considering his recommendations to ensure that we continue to apply the highest standards of governance.’
Hmmm, it seems it’ll take some work to convince the board of this.