fb

RBS directors threaten to resign

In terms of examples of risk management and corporate governance, UK based banking group Royal Bank of Scotland (RBS) just gives and gives.  It’s an unfolding story that continues to grow.

RBS was a big success story in the last decade, showing very fast growth and taking over bigger banks such as Nat West.  Its considerable returns appear to have been won, rather predictably, by taking a high level of risk.  Previous blog entries have mused on the wisdom of having fired their risk manager.

The banking group was saved from collapse by receiving vast emergency support from the UK government.  This was controversial but almost everybody agrees that it was necessary in order to avoid a collapse of the entire banking system.  Such a collapse would certainly have made the recession very much worse.

The British public thus became an involuntary shareholder in RBS.  Indeed, the UK government now holds a controlling interest in RBS, though it’s been keen to avoid interfering much in the management of the bank.

The image of bankers in the UK at the moment is very tarnished. Most people who have an opinion on senior bank staff have an unfavourable opinion; often seeing them as people who were over-rewarded for taking excessive risks.  Many resent having to bail out a bank ruined by unwise risk management.

So it came as a surprise to many when the directors of RBS said that they intended giving bonuses and pay increases to many staff last week.  This provoked anger from the government and outrage from the public. The RBS board stated that they would resign if they weren’t allowed to pay the bonuses, as failing to pay people well would result in loss of talented staff.

It has to be questioned whether the board have ever studied stakeholder management and the Mendelow matrix. With 70% of the ordinary shares, the government is a key player; the views of the public must be respected.  If that means the synchronised departure of the board of RBS, so be it.  Bankers’ salaries and bonuses have been in an inflationary spiral in recent years and some bank must be the first to bring their salaries into the realm of sustainable expenses.

It will be interesting to see if the directors follow through on their threat, back down or are even removed from office by the shareholders (ie the government).  Whatever the outcome, their credibility is arguably much tarnished.

Share this entry

Recent articles

View All Articles
Professionally qualified in one year – DipIFR
Mar 22, 2024
Title
Professionally qualified in one year – DipIFR
Excerpt

Unlocking Opportunities with DipIFR Introduction In the second installment of our series, we shift our focus to the […]

Professionally qualified in one year – CMA (USA)
Mar 21, 2024
Title
Professionally qualified in one year – CMA (USA)
Excerpt

Accelerate Your Career with CMA Certification Series Introduction In our fast-paced world, the demand for highly skilled professionals […]

Lego – building strategy blocks…
Mar 14, 2024
Title
Lego – building strategy blocks…
Excerpt

In the contemporary business environment, characterised by rapid changes and unforeseen challenges, companies across various industries must adapt […]

Weathering the chocolate storm?
Mar 12, 2024
Title
Weathering the chocolate storm?
Excerpt

In today’s interconnected global economy, the ripple effects of local weather phenomena can have far-reaching consequences, extending far […]

Pass the doughnuts…
Mar 12, 2024
Title
Pass the doughnuts…
Excerpt

Does your weight affect the amount of money you earn? That’s an interesting question and researchers from the […]

The Significance of Audit Quality: Lessons from KPMG’s Fines
Mar 06, 2024
Title
The Significance of Audit Quality: Lessons from KPMG’s Fines
Excerpt

In the intricate world of finance and business, the accuracy and integrity of a company’s financial statements stand […]

Insider Trading: A Cautionary Tale from the Oil Industry
Feb 29, 2024
Title
Insider Trading: A Cautionary Tale from the Oil Industry
Excerpt

In the complex world of finance, insider trading remains one of the most controversial and closely watched issues. […]

Lessons from Kraft Heinz’s Sales Decline
Feb 20, 2024
Title
Lessons from Kraft Heinz’s Sales Decline
Excerpt

In the fast-paced world of business, staying ahead of market trends and consumer preferences is paramount. The recent […]