Angry outcry against £12m offer to new RBS chief

Published on Monday 22 June 2009 22:52

SHAREHOLDERS have angrily condemned the three-year financial package offered to new RBS chief executive Stephen Hester, as it emerged its true value is £12 million.

The offer – originally thought to be 9.6m – is due to be rubber-stamped by the board of directors this week. But it has been described as a "return to the dark days" of banking which last year led the once-great British institutions to the government with a begging bowl.

Michael Lamoureux, who leads the RBS Action Group, described the deal as "frustrating", especially as he and fellow shareholders had to fork out 200p a share in the failed April 2008 rights issue, while shares need only to reach 70p for Mr Hester to get his full bonus.

The Scotsman understands the UK government has already nodded through the package. But a Downing Street spokesman yesterday insisted it was "an internal matter for the board", but said pay had to be based on performance.

And last night, RBS group chairman, Philip Hampton, said: "We now have support for a remuneration plan that ensures the majority of Stephen's reward is non-cash and based on his performance. This means his financial interests are strongly aligned to the interests of all our shareholders in the short-term and over the coming years.

"RBS has the largest balance sheet in world banking so it is critical that Stephen succeeds. If he does, the UK government will be able to sell its shares at a profit and all shareholders will benefit. The long-term incentives are worth little or nothing without a strong return to shareholders and there is no reward for failure in our remuneration policy."

Mr Hester will get the money only if the value of shares exceeds 70p, which would bring a profit of 8 billion on the UK government's 20 billion investment.

Behind the scenes it is also being argued that, because just over half the sum would be shares, it makes the pay settlement very different from the one enjoyed by Sir Fred Goodwin.

The market appeared to react badly to the news yesterday, dropping 1.24 per cent to just under 36p.