ROYAL Bank of Scotland has been accused of obstructing democracy after snubbing calls for it to create a shareholder committee to help improve corporate governance at the firm.

Organisations representing private investors want the Edinburgh-based giant to give shareholders a vote on the proposal for a committee intended to give them more effective oversight and influence over its management.

They claim private investors have been the biggest losers from the collapse in the value of the company’s share price since the financial crisis.

The bank was left requiring a £45 billion bailout from the Government in 2008, after its breakneck expansion under Fred Goodwin went disastrously wrong. Taxpayers still own 73 per cent of the firm.

On Monday RBS said its legal advisers reckoned the resolution for a shareholder committee was inconsistent with the law and the company’s constitution.The resolution from 168 shareholders was coordinated by ShareSoc and the UK Shareholders Association.

ShareSoc yesterday accused RBS of denying shareholders their right to a vote on a plan directors might not like on a flimsy technicality.

“ShareSoc will not permit this unreasonable obstruction of shareholder democracy to stand,” the organisation said.

“It is a basic principle of Company Law that shareholders can requisition resolutions which must be put to a vote of shareholders. If the directors do not like a requisition, then they can advise shareholders to vote against it. But they should not be using tenuous technical excuses to avoid putting it to shareholders.”

ShareSoc is consulting lawyers about the proposal, which it believes has wider ramifications than RBS. The corporate governance regime is under renewed scrutiny in the UK.

The Government published a Green Paper on the subject in November, when Theresa May said the actions of some big firms she did not name had damaged public confidence in big business.

ShareSoc chairman Mark Northway said: “It is disappointing that, instead of leading from the front on corporate governance, RBS have instead chosen to try to thwart this initiative. This behaviour by the directors of a company that is majority owned by the UK Government underlines the broad reticence of UK boards to address the breakdown of the agency model and the rights of shareholders.”

Under the agency model shareholders have to rely on the directors of companies or institutions such as fund managers to represent their interests.

RBS, which is led by chief executive ross McEwan, declined to comment yesterday.

On Monday the bank made clear it supported the idea of forming a wider stakeholder committee not limited to shareholders.

Its chairman Howard Davies said then: “Acknowledging past mistakes and recognising the part that RBS must play in reform, we continue to develop our culture and priorities.”

He added: “We believe that RBS would benefit from strengthening the voice of our employees, customers and wider stakeholders.”

The UK Companies Act imposes a statutory duty on firms to treat different groups of shareholders fairly.

The proposed resolution for the shareholder committee said it should include representatives of large shareholders and a representative of retail shareholders.

ShareSoc believes the proposal is in keeping with the Government’s desire to improve corporate governance standards.

In a paper in support of shareholder committees issued in December ShareSoc said it promotes the interests of private shareholders, who represent a substantial proportion of the shareholders in most public companies but whose views are generally disparaged.

But it said shareholder committees would improve the lot of all investors in public companies. Committee members should be representative of a broad section of the shareholder base.

In the Green Paper the Government said it wanted to ensure executive pay is properly aligned to long term performance and to give a greater voice to employees and consumers in the boardroom.

It mooted the idea of establishing a senior Shareholder Committee to scrutinise remuneration and other key corporate issues such as long term strategy and directors’ appointments.