Scott Reid: Stephen Hester is worth his pay – if only the public were able to see it

Published on Sunday 29 January 2012 00:00

STEPHEN Hester has become a convenient whipping boy for the banking sector and its “excessive” bonus culture.

Here’s a chief executive of a largely taxpayer-owned institution who has taken the axe to thousands of workers, hoisted the “for sale” sign over chunks of the business and presided over a tumbling share price. That the Royal Bank of Scotland boss owns a country estate, hosts lavish balls and enjoys the thrill of the hunt merely seals his fate as the archetypal City fat cat.

And for that he stands to pick up a bonus worth a smidgen under £1 million at RBS’s closing price on Friday.

Such seeming largesse in the face of austerity cuts, pay freezes and mass lay-offs has provoked fury.

Calls for action have come from across the political spectrum. Yet, Prime Minister David Cameron has made it clear the coalition government will not use its 82 per cent majority holding in RBS to block the bonus award.

Hester may yet waive his entitlement, of course, as he did two years ago. If Sir Philip Hampton has indeed given up his shares reward then that may form part of his thinking.

Since taking the helm in 2008 after the bank’s bail-out Hester has proven he can grasp the nettle. He has managed to turn around a supertanker that at the height of the crisis looked destined for the bottom of the ocean.

Yes, jobs have had to be sacrificed, but these decisions are never taken lightly by any senior executive. A sharp fall in the RBS share price has largely been as a result of the Eurozone crisis – something that cannot be laid at the feet of a British banking boss.

What Hester has successfully overseen is the slicing of some £600 billion from a bloated balance sheet. Despite continued criticism, the bank has also largely met its government-imposed targets on lending to businesses.

As the head of one of Britain’s biggest companies and with a job remit that is challenging to say the least, Hester is rewarded handsomely. But, amid his peer group, he is certainly not overpaid.

Indeed, I doubt there would be the same level of fevered outcry if Hester was paid a higher salary than his basic of about £1.2m, with no separate bonus. It’s the B-word that appears to leave a bad taste in the mouth.

However, it is right to incentivise those with such responsibility. The bonus being awarded to Hester comes in the form of shares, not a suitcase full of fivers, which cannot be cashed in until 2014, at the earliest.

Public anger at bank pay, though often misdirected, means there is growing political pressure to clamp down on corporate excess in general. That pressure has extended to the institutional investors who call the shots when it comes to voting through remuneration reports.

But, as Otto Thoresen, the head of the Association of British Insurers, makes clear today, those big shareholders will not get involved in the “micro-management” of individual directors’ pay packets. To regain public trust, the boards of the big PLCs must now “up the ante” on transparency.

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expat

Sunday, January 29, 2012 at 01:36 PM

To read this article you would think that Hester was some sort of super exec, when in fact , as in most companies, the best ideas and decisions are taken by persons lower down the pecking order all Hester does is put his signature to them. It is a fallacy to say that no one could do the job on a lesser salary, of course they could. It is a network run by executives placing themselves onto remuneration committees and " you scratch my back " syndrome coming into play. If people think that, sacking thousands of employees and selling off tranches of the business for less than market value, then see the share price halve is worthy of nearly a million pounds I despair. The city is getting like the premier league, the same old faces going from failure to failure picking up there severance packages on a seemingly endless roundabout.

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SimonHurrll

Sunday, January 29, 2012 at 11:45 AM

But with the increasing hidden debts coming to light as in the alleged £100 Million loss on the Ensus bioethanol plant in Teesside coming to light this will not go down well with the City.

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Grierson_Green

Sunday, January 29, 2012 at 08:05 AM

Excellent article - he should get his bonus. I an a moderate sized shareholder and want the share price up and finally dividends to be paid. If the goverment keep frightening away guys like Hester RBS will start hiring cheap options. (thold saying - pay peanuts you get monkeys). If he and his top men get paid in shares it is in their own interest to get the share price up. As the article said the Eurozone crisis was hit all shares , especially banking. RBS was at the dizzy heights of 58p recently (only for a couple of days) but was hovering 50p or there about for a while before the Irish and Greek problems arose. That wa from a position of 10p at thr depth of the Goodman departure. Hester can help us the tax payer, shareholder and RBS get back to some kind of normality.

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