If targets are met to trigger bonus, taxpayers will benefit

Published on Monday 22 June 2009 22:52

IN THE eye-popping world of boardroom largesse Stephen Hester's payment is towards the top end.

But most in the City accept he has a colossal job in turning around the listing oil tanker that is Royal Bank of Scotland.

And his package is dwarfed by the near-60 million complex potential bonus schemes over five to ten years for Sir Martin Sorrell, chief executive of the WPP advertising giant.

Mr Hester, arguably, also has a tougher job than Michael Geoghegan, chief executive of the currently far more financially robust HSBC, who gets a basic salary of 1.1m and a long-term incentive of 7.5m.

Eric Daniels, chief executive of Lloyds Banking Group, another bank with a strong taxpayer shareholding, is on a total projected package of 5.25m.

This is made up of 1m in basic salary, plus a possible 2.25m in annual bonuses and 2m as a long-term incentive.

Simon Willis, banking analyst at NCB Stockbrokers, said: "Hester's package may seem shocking at first. But … for Hester to see that long-term incentive payment triggered, he would have to get the RBS shares through 70p. That would mean a taxpayer profit of 15 billion. In that context, 9m does not seem a lot."

Peter Montagnon, director of investment affairs at the Association of British Insurers, said he had "a lot of sympathy" for RBS's situation, especially given that this was a one-off arrangement and that the bank has promised to conduct a review of its overall policy.

"However, we have to be continually aware of the different priorities of UKFI, which has a clear interest in a profitable exit, and the interests of long-term investors who will stick with the bank for the future," Montagnon said.