RBS chief Stephen Hester is forced to give up £1m bonus
After days of pressure Stephen Hester last night decided to waive his bonus
ROYAL Bank of Scotland chief executive Stephen Hester last night decided to waive his controversial £1 million bonus.
The announcement came just hours after the Labour Party said it would force a House of Commons vote calling for Mr Hester to be stripped of the payout.
Mr Hester, who was appointed chief executive at the end of 2008 to replace Sir Fred Goodwin after the bank had to be bailed out by the government, is said to have been concerned he was becoming a “pariah” of the banking sector.
The decision comes after a weekend of intense pressure on Mr Hester after the bank’s chairman, Sir Philip Hampton, announced he would waive his payout.
Sir Philip, chairman of RBS since 2009, had been on course to claim 5.17 million shares in the financial institution in February, but it is thought he told the bank’s remuneration committee it would “not be appropriate” for him to take a £1.4 million payout.
Mr Hester was awarded £963,000 last week in a short-term bonus equalling 3.6 million shares sparking public outrage.
Speaking about announcement, Labour leader Ed Miliband said: “Stephen Hester has done the right thing. It is a shame that a feeble, out of touch David Cameron did not realise he should do the right thing and stand up for the interests of the British people.
“Labour was right to seek a parliamentary vote on this so that the people’s voice could be heard. But the debate about fair executive pay and responsible capitalism is only just beginning. We need a government that will tax bankers’ bonuses and bring responsibility to the boardroom.”
The decision was welcomed by Chancellor George Osborne, who said: “This is a sensible and welcome decision that enables Stephen Hester to focus on the very important job he has got to do: namely to get back billions of pounds of taxpayers’ money that was put into RBS.” Shadow business secretary Chuka Umunna who criticised the payment said it was “a very welcome move” by Mr Hester.
He added: “He is responding to public concern and criticism about the level of renegotiation in the bank, in particular in relation to his position.
“For somebody to listen and respond, we, of course, would not criticise that. He is doing the right thing.”
He went on: “It’s a shame that the government, having gone around lecturing shareholders in other large companies to take an active role in bringing about wage restraint, chose to sit on its hands in this case and that it took so long for there to be a public clamour and row of this order for the change in position that we have just witnessed to take place.
“It says something, if you like, of the government talking the talk but not walking the walk.”
Reacting to Mr Hester’s decision, former Liberal Democrat Treasury spokesman Lord Oakeshott said it was “better late than never”.
He added: “I’m glad that eventually Stephen Hester has seen sense and seen the outrage of most people in this country and Lib Dems who have been complaining bitterly about this for weeks. I’m very sorry that David Cameron and George Osborne didn’t see that, and have been defending the indefensible right up to today.”
Just hours before the announcement last night, Labour said it would stage an Opposition Day debate the week after next to heap pressure on the government over the payment.
Labour had also said the government, which owns 82 per cent of the bank, should stop the payout. However, ministers had said that would mean “ripping up” their relationship with RBS and putting tens of billions of pounds of public money at greater risk.
The Prime Minister had sidestepped calls to block Mr Hester’s award, saying: “It is a matter for him.”
Speaking at Chequers over the weekend before Mr Hester decided to turn down the bonus, Mr Cameron had said: “It’s obviously his decision. My decision is to make sure the team at RBS get on with the job of turning the bank round, and we made our views very clear on the bonus and that’s why it was cut in half compared to last year.”
Also, speaking before the latest announcement, Cabinet minister Iain Duncan Smith said there would have been “chaos” if the government had overruled RBS over the bonus.
He said “nobody would be happier than the government” if Mr Hester decided not to take it, but it was “up to him”.
Chief secretary to the Treasury Danny Alexander had also earlier insisted that ministers were “protecting the taxpayer” by allowing the bonus to go ahead. Stepping in to directly control the arm’s-length operation of the bank would have potentially triggered bigger financial risks, he said.
“All the options had been looked at. The judgment we had to make was, should we go further, as many of us would like to, and say: ‘Let’s have no bonus at all; have the government take control directly of RBS’, and therefore causing potentially much bigger financial risks to the taxpayer.
“In the end, the calculation, from the point of view of protecting the taxpayer, is it was better to ensure that that didn’t happen to RBS.”
Mr Alexander said there are “tens of billions of pounds” of taxpayers’ money tied up in the bank.
However, it also emerged yesterday that a double bonus scheme that existed could greatly inflate Mr Hester’s £1.2m annual salary to a possible £8m over the coming years.
The bank chief is entitled to both short-term bonuses and long-term incentive bonuses based on factors such as performance and meeting targets.
The £963,000 he was awarded last week was a short-term bonus equalling 3.6 million shares, relating to the 2011 calendar year.
Short-term bonuses are capped at 200 per cent of his annual salary, so his last payout, which he has not turned down, was not as large as it could have potentially been.
The long-term scheme is based on the previous three years, so Mr Hester is approaching the point at which it can come into effect.
It is thought the long-term bonus could potentially reach £6.4m. Mr Hester’s combined salary and bonus earnings could therefore reach £8m, but it is unlikely that maximum target will be met.
But he was accused of trying to “have it both ways” by shadow business secretary Chuka Umunna.
The MP said: “It is staggering that ministers should have allowed themselves to get into such a quandary over the Hester bonus, given they knew it was in the offing for many months and would be a matter of immense public interest.
“Ministers infer there would have been ‘chaos’ and that the board of RBS would have resigned … Instead, the chairman of the board has responded to mounting public criticism by giving up the £1.4m worth of shares he was due to receive himself next month.”
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Comments
There are 44 comments to this article
Page 1 of 3
Maggie B
Wednesday, February 1, 2012 at 09:30 PMWhile I agree that excessive bonuses are paid to executives at any level in business, those who relinquish their bonus - even though this might be the result of public pressure, are to be commended. Stephen Hester wasn't responsible for the bank's downfall. So why make him the fall guy? He is trying to get the bank back on an even keel. And, if he is successful IN THE LONG TERM, then surely he should receive a bonus: at the end of his term. However, there needs to be a limit. The public are sick and tired of seeing failed executives who have brought companies to their knees, retire with millions of dollar payouts. There needs to be an incentive for executives with the appropriate business acumen, to succeed. But, by the same token, if the company is brought to it's knees - all bonuses should be withheld. You don't reward naughty children...
duelaynomore
Tuesday, January 31, 2012 at 02:08 AMOK No 41 your time's up !!! Can we have less individual name calling and more discussion on the topci please. Some people have declared there work status, perhaps to clarify a point. Others, who have not stated their part in the economy, just make allegations from their anonymity.
Pa broon
Monday, January 30, 2012 at 05:44 PMThis guy Hester will leave RBS sooner rather than later as his contract is not being honored. The bank will become a poisoned chalice which no one will be willing to take it on, and the Tax payer will struggle to get their money back. It seems that as a nation we are quite eager to cut off our nose to spite our face. Lets remember he isn't one of the guys who wrecked RBS. He left a perfectly good job to sort out the mess his predecessor and Labour left behind.
ItsTime
Monday, January 30, 2012 at 01:08 PM#40 Even hedge funds benefit from the maintance and indeed inflation of asset prices due to taxpayer subsidies by means of quantutive easing, fiscal guarantees and of course direct baliouts to the banks. You are a beneficiary of all this public largesse. Pampered is exactly the right word - the banks should have gone bust, sharehiolder value should have been reduced to zero. As it is the government bought into RBS at a about 50p and I beleive the shares are lying at about 27p. So much for the superhuman Hester and his ilk. The shareprice has more to with general economic conditions than that of hedge fund managers that are just highly paid gamblers. You add very little to the economy of our country. You are a parastite.
Sauzee
Monday, January 30, 2012 at 11:56 AM#38 You are arguing in generalist terms. I work for a hedge fund who are 100% private owned. The ownership and various structures in place for other institutions is utterly irrelevant to me. The use of the phrase "pampered" evidences both your agenda and also lack of understanding of the real world, certainly as regards financial services. So I do and can refute 100% your feeble comments.
ItsTime
Monday, January 30, 2012 at 11:47 AM#28 I was Labour that agreed to Hestors contract and recompensation package. Labour also hand-picked the board members that approved the notion of only awarding him 60% of the bonus that he was due under Labour's contract. Just another indication of Labour's hypcoriscy and crocodile tears.
ItsTime
Monday, January 30, 2012 at 11:43 AM#37 You missed the word "arguably" so I suspect you are quite annoyed. However you didnt, and cant, refute the fact that financial services are operating in a pampered world - supported by teh taxpayer by means of bailouts, quantitive easign and trading garuantees. Money for old rope.
Sauzee
Monday, January 30, 2012 at 11:36 AM#35 Neither important nor excellent but hard-working and professional. As a proprietary trader, I invest Bank's money as opposed to shareholders' funds and or State backing so your flimsy populist assumptions are wrong. As for the comment about "well paid monkey punching a few buttons.." clearly not bitter, eh ?
B K
Monday, January 30, 2012 at 11:34 AM#31 "wee-scamp Monday, January 30, 2012 at 10:24 AM The problem with the CEOs of most banks is that they're bankers." The problem is that the two clowns Goodwin and Hornby weren't. Neither had any qualification (or obviously ability) in banking they were just a pair of chancers and gamblers who got it wrong.
ItsTime
Monday, January 30, 2012 at 11:27 AM#26 Your exaggerated view of your own importance and excellence is amusing but mostly ill-concieved. Any money you made for your bank was generated from the money you were given to play with by investors,luckly backed up by massive currency dilutions and garauntees paid for by the humble taxpayer. Arguably you are just a well paid monkey punching a few buttons.
Sally Longlegs
Monday, January 30, 2012 at 11:26 AMIt does appear to be wrong this size of bonus but he was brought into the bank to get it back on the straight and narrow and accepted the job. He is now being hounded and should resign. He will get a better paid job easily. And who will now take up this poisoned chalice? I hear a certain Gordon Broon will be looking for a job.
searchanddestroy
Monday, January 30, 2012 at 10:54 AMArise Sir Stephen it seems that for a multimillionaire £963,000 is a pretty good deal for a knighthood. Of course he had to refuse this but will get it all back with interest for diffusing this row. "Welcome to the Layer Cake son".
noodle doodle
Monday, January 30, 2012 at 10:51 AMThe damage was done when heston got there, this is like fining the new manager of Gretna for the old team going bust
wee-scamp
Monday, January 30, 2012 at 10:24 AMThe problem with the CEOs of most banks is that they're bankers.
trenchchat
Monday, January 30, 2012 at 10:20 AMIf I was an SNP member I would want a rebate on my membership fee. Now we hear that Salmond really does want to be part of the United Kingdom. So we keep the Queen, the pound and control of our interest rates from London most of the armed forces bases, a huge standing army, membership of NATO and the EU, all the Royal Palaces and hangers on etc, etc. What's the point? - this is sham independence surely?
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