Metro Bank PLC (LON:MTRO) is facing a shareholder rebellion over £21mln in payments made to a company owned by the wife of the lender’s chairman, Vernon Hill.
British fund manager Royal London Asset Management, which owns a 0.44% stake in Metro, said on Friday it would vote against the reappointment of Hill at the bank’s annual shareholder meeting on April 24.
RLAM will also reject the reappointment of audit committee chairman, Stuart Bernau.
READ: Metro Bank shares drop as fall in net interest margin overshadows swing to pretax profit
Metro has paid more than £21mln to InterArch, an architecture firm owned by Shirley Hill, since 2010, according to the bank’s annual report and accounts.
"We question whether Metro Bank’s audit committee has been sufficiently rigorous in its scrutiny of the payments made to InterArch," Ashley Hamilton Claxton, head of responsible investment at RLAM, said in a statement.
"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."
The fund manager also criticised the company’s attitude towards executives’ pay. It plans to vote against the advisory remuneration report and chairman of the remuneration committee, Howard Flight.
Metro Bank denies wrongdoing
Metro Bank said in a statement that it had taken the right steps to ensure contracts with InterArch were in the best interests for the bank.
“The audit committee has strong review and benchmarking processes in place, conducted by authoritative independent third parties,” it said in a statement.
The lender added that it consulted with shareholders before setting out its remuneration policy and believes the "performance measures used to calculate the executive directors’ variable rewards are transparent and clearly articulated".
Chairman's previous scandal at Commerce Bancorp
It's not the first time Hill has landed in hot water over business deals with family members.
Hill stepped down as chief executive of Commerce Bancorp in 2007 after regulators investigated the lender for dealings with businesses led by his family members, including InterArch.
Commerce Bancorp, which was founded by Hill in the early 1970s and later acquired by Toronto-Dominion Bank, revealed that it used a broker called Interstate Commercial Real Estate Inc. for all its real-estate deals in 2006.
A filing from the bank showed a brother and son of Hill were executives of Interstate Commercial and collected commissions of about US$770,000 and US$350,000 in 2006. The lender spent US$9.2mln on InterArch the same year.