NatWest shareholders have been urged to vote against the group’s executive pay plan at this month’s annual general meeting by an influential proxy adviser, just days after the UK government reduced its stake in the bank to below 50 per cent.

Glass Lewis, the consultant whose recommendations are widely followed by institutional investors and passive investment managers, advised shareholders to reject the pay policy, which would increase the potential payout for senior executives and introduce a type of bonus structure that offered more certainty in paying out.

Executive pay has long been a contentious issue for the bank throughout its part-ownership by the UK government following its bailout during the financial crisis. It will be especially keen to avoid a shareholder rebellion so soon after the government sold down its majority stake.

Under NatWest’s proposed pay plan, the maximum bonus chief executive Alison Rose would be entitled to would be 43 per cent higher than her potential payout from the year before. Katie Murray, the group chief financial officer, would see her potential payout increase by 25 per cent.

NatWest has proposed introducing a short-term incentive plan and replacing its long-term incentive plan with a restricted share plan, which would have fewer performance metrics and make payouts more certain.

“We are concerned by the increase in overall incentive opportunity and the introduction of an RSP absent a compelling strategic rationale for this type of award structure,” Glass Lewis said in its statement. “We recommend shareholders vote against this proposal.”

The bank’s shareholders will vote on the plan at its annual general meeting on April 28.

Rose’s £1.1mn salary makes her one of the lowest earning UK bank chief executives.

“The board believes that this is the appropriate time to normalise our Executive pay policy and to bring it in line with other UK banks” Howard Davies, NatWest chairman said in a statement.

“The changes we are proposing will result over time in a more competitive policy for our most senior leaders with a significant proportion of their remuneration continuing to be paid in shares, thereby directly aligning management with the interests of our shareholders,” he added.

Executive pay has often been a point of contention at the bank’s AGMs, with former chief executive Ross McEwan’s £350,000 pension package drawing criticism from shareholders in 2019. Another former CEO, Sir Fred Goodwin, was forced to pay back part of his £16.9mn pension pot following a political backlash in 2009.

Last week NatWest bought back about 5 per cent of its shares from the UK government for £1.2bn, reducing the Treasury’s voting rights in the lender to less than 50 per cent for the first time since 2008. The off-market purchase of almost 550mn shares, equivalent to 4.9 per cent of the stock in issue, meant the Treasury has been left with a 48 per cent stake in NatWest.

The UK lender bought the shares for 220.5p, significantly below the 502p per share that the government paid in 2008 to bail out the bank.

The British government has owned the majority of NatWest, which used to be called Royal Bank of Scotland, since it was rescued at the height of the financial crisis with a £46bn bailout.

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