Metro Bank chairman Vernon Hill is facing the prospect of an embarrassing shareholder rebellion after an investor hit out at more than £21m of payments from the lender to his wife’s architecture firm.
Royal London Asset Management has warned it will vote against a raft of resolutions at Metro Bank’s annual general meeting on 24 April, including the re-election of founder and chairman Mr Hill and the lender’s remuneration report.
The fund manager, which holds a 0.44 per cent stake in Metro Bank worth £13.6m, said it would also vote against the re-election of the heads of both the remuneration and audit committees.
Shirley Hill’s firm InterArch was paid £4.6m in 2017 alone, linked to architectural design services for Metro Bank, as well as a branding, marketing and advertising agreement that was renewed in January.
It brings the total amount paid to InterArch to £21m, based on accounts filed between 2010 and 2017.
Royal London’s head of responsible investment Ashley Hamilton Claxton said: “In a year when large corporate failures dominate the headlines, boardrooms should pay especially close attention to related party transactions, such as the payments by Metro Bank to InterArch, owned by the wife of the bank’s chairman, for design and branding services.”
Metro Bank’s audit committee said in its annual report that contracts with InterArch were at “arm’s length” and were “at least as beneficial as those which could be obtained in the market from an alternative supplier”.
But Royal London claimed the payments were particularly concerning given Mr Hill’s history of family business dealings.
“We question whether Metro Bank’s audit committee has been sufficiently rigorous in its scrutiny of the payments made to InterArch,” Royal London said.
“Our concern about these transactions is heightened by the history of related party transactions between the chairman and members of his family, while he was serving as a director in the US.
“In light of this, we’ll be voting against the reappointment of both the chairman and the chair of the audit committee at Metro Bank’s AGM this year.”
In 2007, Mr Hill resigned from US-based Commerce Bancorp after the lender faced scrutiny by regulators over allegations of business deals with the chairman’s family members.
Royal London also raised concerns about transparency around performance targets for executive pay.
Metro Bank’s annual report detailed a remuneration package totalling £496,667 for Mr Hill in 2017, up from £405,000 a year earlier, while chief executive Craig Donaldson took home £1.5m, an increase on £1.3m for 2016.
“Metro Bank’s attitude towards pay looks opaque at best,” Royal London said.
“The company has failed to disclose performance measures on which executives are being judged by, and thus remunerated on, despite a previous commitment to disclose these.
“We’ll therefore be voting against the firm’s advisory remuneration report, along with the chairman of the firm’s remuneration committee.”
Metro Bank has expanded rapidly since its launch in the UK and plans to open 12 branches in 2018, expanding its branch network further west to Bristol and Cardiff and north to Birmingham and the Midlands.
Metro Bank said in an emailed statement: “InterArch provides architecture, design and branding services to the bank. The audit committee has strong review and benchmarking processes in place conducted by authoritative independent third parties to ensure that the terms are favourable for the bank. This process has been in place since Metro Bank’s inception and is disclosed in our annual report.
“We consulted with shareholders ahead of setting out our remuneration policy and believe the performance measures used to calculate the executive directors’ variable rewards are transparent and clearly articulated.
“The balanced scorecard used to calculate variable rewards for executive directors, as well as all colleagues, includes: financial, risk management, customer outcomes, and people and culture.”