RBS bows to pressure with £900,000 bonus for Stephen Hester

By SHÂN ROSS
Published on Thursday 26 January 2012 23:46

A HIGHLY controversial bonus for the chief executive of the Royal Bank of Scotland (RBS) has been capped at just under £1 million, the organisation announced last night.

RBS said Stephen Hester, who is on an annual income of £1.2m, will receive a share-based bonus for 2011 worth around £963,000.

It is less than half his bonus last year and comes after Prime Minister David Cameron made clear he considered a seven-figure sum would be unacceptable.

The bank said its board had allocated Mr Hester a 2011 annual performance award of 3.6 million shares based on RBS’s closing share price of 26.75p when the decision was made at a board meeting on Wednesday.

The bonus award is down from Mr Hester’s figure of £2m last year, but RBS said he still deserved reward for having made “substantial progress in making RBS safer”.

Philip Hampton, chairman of the 81 per cent state-owned bank, said: “The board is aware of the difficulties in trying to reconcile the competing objectives of all our stakeholders. This is especially true on the issue of pay.

“Stephen Hester’s pay award reflects progress in the categories agreed with our shareholders as set out in the remuneration report.

“His pay is strongly geared to the recovery of RBS, which he was recruited to turn around, having played no part in its collapse.”

The move is believed to be aimed at dampening the growing furore over financial rewards to Mr Hester and other high earners.

Last night, Labour said the scale of the bonus showed the government was “desperately out of touch” with voters and that its promises to rein in executive pay were worthless.

But Murdo Fraser, Conservative MSP, said the bonus issue could be traced back to the “stewardship of Gordon Brown and Alastair Darling”, who were responsible for putting the remuneration contract in place.

Earlier this week, trade unions criticised the level of Mr Hester’s expected bonus and highlighted the number of job losses – 30,000 over the past two years and a further 3,300 announced earlier this month – by RBS and pointed out its falling share price.

Senior sources at RBS had indicated over recent weeks that the bank wanted to pay Mr Hester a large part of the share bonus for which he is eligible.

Mr Cameron has made it clear he would regard a bonus of more than £1m for Mr Hester as unacceptable.

Yesterday, speaking at Business Questions, Shadow Commons leader Angela Eagle said the government must step in.

She said: “Perhaps you could explain why RBS, a state-owned bank, bailed out by the taxpayer, wants to give their chief executive a £1m bonus this year.

“The board of RBS is thinking of paying their chief executive in one day more than someone on average earnings would make in a lifetime.”

Mr Fraser said: “I welcome the step RBS has taken as a recognition of public concern over the level of bankers’ bonuses.

“But Labour are simply shedding crocodile tears on this issue, after all it was under Gordon Brown’s and Alastair Darling’s stewardship that the remuneration arrangements for Mr Hester were put in place.”

Labour shadow financial secretary to the Treasury Chris Leslie said: “Nobody doubts that Stephen Hester has done some important things at RBS, but what this award shows is David Cameron’s promises about reining in excessive bonuses at state-owned banks or using shareholder power have proved to be utterly worthless.

“Instead of fiddling at the margins of this issue, David Cameron should take proper action on excessive executive pay as well as agree to Labour’s call for a new tax on bankers’ bonuses this year to fund 100,000 jobs for young people.”

The decision on Mr Hester’s bonus comes after Business Secretary Vince Cable unveiled proposals to crack down on hefty salaries and bonuses, including binding votes for shareholders and improved transparency.

However, the RBS’s concession on Mr Hester’s bonus will not defuse the row over directors’ pay completely.

John Hourican, head of RBS’s investment arm, who will oversee a restructuring that will include around 3,500 job losses, picks up £4m in long-term incentive shares that he was awarded in 2009.

Meanwhile, Britain’s biggest banks are expected to unveil their bonus plans next month when they publish their annual results.

Antonio Horta-Osorio, chief executive of part-nationalised Lloyds Banking Group, announced he would forgo his annual bonus of up to £2.4m following his two-month leave of absence and a rocky period for the banking giant.

Elsewhere, reports have suggested Barclays boss Bob Diamond could receive a £10m payout in the forthcoming bonus season.

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16

occupylink

Friday, January 27, 2012 at 05:59 PM

According to the Telegraph newspaper, this bankster is getting £7.38m, not the stated £900,000 mentioned in this article. 7.38m. It says "his total pay package for last year including his £1.2m salary and £420,000 pension could reach £7.38m.". The Telegraph articel adds insult to injury. "If Mr Hester were to receive his maximum LTIP grant it would take the total value of the awards made to him since he took over as chief executive in October 2008 to about £27.5m." We at Occupy Edinburgh think that £27.5m for being a public servant, when bank excesses have caused massive cutbacks is unfair, We will go on with our campaign, now matter how much Scotsman journalists attack us and support the greedy banksters.

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15

occupylink

Friday, January 27, 2012 at 05:38 PM

Interesting that the Scotsman has poured hatred and scorn on us at Occupy Edinburgh, while gloating about this. It is certainly a victory for the banksters, but the war is not over. The timing of kicking us and other Occupy groups around is no coincidence. I suspect the big bosses and journalists in the media will be lining up for their bonuses also. After all our defeat is a jpurnalist victory - the power of the press. As you news people say it, the public fully supports these bonuses and thinks the top banking people should get a lot more - why not a billion instead of a million?. We in the Occupy Movement think differently. The banks are only as good as the deposits they have in their customer accounts - yes, that's YOUR account. When these greedy people have cleaned out ALL the money in your account, don't come crying to us. These executives and their journalist friends will not be crying either - they will be laughing - laughing at you and laughing at the Occupy Movement.

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14

freeesian

Friday, January 27, 2012 at 12:27 PM

Perhaps the way for the us general plebs to deal with this is if all those against this, close their accounts and move your cash elsewhere.

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13

Aristotle

Friday, January 27, 2012 at 11:24 AM

With an annual salary of £1.2m why would anyone need a bonus? You do your job for which you are paid and that should be the end of it. A well done job should be rewarded by personal job satisfaction. What should be concentrated on is those not up to scratch in their jobs - they should either face a cut in pay for failure or be paid off but current employment laws make this all but impossible hence a lot of dead wood dragging businesses down.

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12

samcoldstream

Friday, January 27, 2012 at 09:45 AM

Its a commercial decision for RBS but the wrong one. Bill Gammell of Cairn Energy had his share bonus halved for selling off a Rajasthan oil field and making a profit of £1.5 billion when the shareholders decided he had received a good enough bonus.

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11

ItsTime

Friday, January 27, 2012 at 09:41 AM

Havent heard what Alex Salmond thinks about this issue. What would he do as leader of an independent Scotland? Will he be askign advice from hsi Chief Economic Advisor the former head of RBS and man who appointed Fred Goodwin?

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10

Ancient Wisdom

Friday, January 27, 2012 at 09:32 AM

Hester has done the job he was asked to do at the price agreed. Why villify the man? Film stars spend more on earrings (see today's Daily Mail) and with a lot less justification.

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9

Blantyre Bill

Friday, January 27, 2012 at 09:02 AM

A £900,000 annual bonus seems a lot of money to me. Is it because I'm poor?

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8

ItsTime

Friday, January 27, 2012 at 08:58 AM

#5 So presumably you think he should be given £10M? We all saw how much Fred was rewarded for his efforts, even are being found out as useless and bankrupting his own bank - hsi pension was doubled !! As for Hestor although he may be competent I am sure he is also benefiting from the general improvements in the financial sector which are of course just fuelled by the many injections of public cash and quantative easing. Money for old rope.

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7

Red Barchetta

Friday, January 27, 2012 at 08:17 AM

Agre with RMT - all this talk that Hester is a civil servant and should be paid less than the Prime Minister is nonsense. He's turning the Bank around, raised £billions in disposals of non core businesses and will eventually return a profit to us taxpayers. Pay him a competitive rate that will retain him and his senior team - and unions and politicians should stop meddlin'!

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6

gus1940

Friday, January 27, 2012 at 08:08 AM

Comment removed by moderator

5

RMT

Friday, January 27, 2012 at 08:06 AM

I really cant believe that there are so many out of touch with reality. Hester could walk away tomorrow and earn much more in the private sector and there would only be one loser the British public with its investment in RBS. Its about time the politicians got off his back and provided some support and encouragement to help get the economy moving forward again rather than going for easy sound bites. In reality there are very few people capable of doing this job which keeps tens of thousands of people in work, income from which helps regenerate the economy and certainly few who would do it for this reward. Straght reward to a pre-agreed formula seems fine - it would make more sense to be looking at the share option discounts that many of the executives are able to "negotiate" amongst themselves for themselves!! Fred et al?

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4

Charles Linskaill

Friday, January 27, 2012 at 12:09 AM

The Bonus may have been capped at £1 million, But this is still a ridiculous amount of money to give anyone who are already getting paid for their job, and more money that any of us would ever have in a lifetime.

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3

wee-scamp

Friday, January 27, 2012 at 12:08 AM

And with this bonus goes any hope that Cameron really did mean to rebalance the economy. Bankers rule.

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2

wmacgregor

Thursday, January 26, 2012 at 08:23 PM

David Cameron said not that long ago "We are all in this together". Does David Cameron think we are all stupid? He clearly does. These executives are slowly but surely sucking the economy dry and no one seems to be able to do anything about it. At the same time we see a considerable number of lower level employees in these businesses being laid off. Where is the savings being made at the top level? There seems little point in trying to justify making people redundant on a cost basis and then paying themselves huge out of proportion salaries and bonuses.no matter how it is paid. If the economy gets worse, as seems likely, how much more of this insult to human dignity will the public be prepared to put up with before their patience finally snaps?

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