RBS chief Stephen Hester urged to waive £1m bonus

THE chief executive of the taxpayer-funded Royal Bank of Scotland (RBS) was today facing mounting pressure to follow the bank’s chairman and waive his bonus of almost £1 million.

News of a double bonus scheme that could greatly inflate Stephen Hester’s £1.2 million annual salary to a possible £8 million over the coming years has fuelled calls for him to forgo a shares bonus worth £963,000.

A stark contrast came to light yesterday when it was announced the bank’s chairman Sir Philip Hampton had decided to decline a £1.4 million 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 the shares to which he is entitled.

He was given the scheme when he was appointed at the 83% state-owned bank as part of a three-year long-term incentive deal.

An RBS spokesman said: “Sir Philip Hampton will not receive the 5.17 million shares he was awarded in 2009 when he joined RBS.”

Mr Hester 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% of his annual salary, so his last payout 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 £6.4 million. Mr Hester’s combined salary and bonus earnings could therefore reach £8 million but it is unlikely that maximum target will be met.

Prime Minister David Cameron yesterday sidestepped calls to personally block Mr Hester’s award, saying: “It is a matter for him.”

Speaking at Chequers, Mr Cameron told journalists: “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.”

He warned installing a new top team at the failed bank could be even “more expensive” than it is now.

“I think we need to get the facts straight,” he said.

“The fact is Stephen Hester was brought in by the last government, a contract signed by the last government to turn round RBS - a bank that had got itself into a complete mess.

“The Government has made its views known and that is why his bonus was cut in half compared to last year.

“But we do have to bear in mind that the alternatives to what’s happening now could be even more expensive if you had a whole new team coming into RBS.”

Labour leader Ed Miliband led calls for the Prime Minister to take action, insisting he had “another chance” to change his mind at the RBS Annual General Meeting.

He said: “Freezing the pay of a nurse or hospital porter, while allowing a publicly owned bank to pay million-pound bonuses is the last nail in the coffin of this Prime Minister’s claim that we’re all in it together.

“Having spent weeks boasting he would block bonuses, David Cameron refuses to even publicly explain why he has changed his mind.

“My message to him is - you’ve got another chance.

“At the AGM in April the Government as the majority shareholder in RBS will have to decide how to vote on the bonus. They should vote it down.”

Chief Secretary to the Treasury Danny Alexander said: “All of us would prefer if we lived in a country where you didn’t have this culture of bonus entitlement and as a Government we are doing big things to change it.”

He told the BBC’s Sunday Politics with Andrew Neil: “We’ve used our influence to ensure that the bonus paid this year is less than half of that paid last year. You’ll see something similar when the RBS brings out its full bonus pool.

“What I’ve said is I want to see overall bonuses being far, far lower than they were last year.

“But look, my job in government is to be the person who is responsible for ensuring that taxpayers’ money is used wisely and that the taxpayer is protected, and that results in some difficult decisions on public spending and on other things too.

“In this case, 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 taking control directly of RBS, and therefore causing potentially much bigger financial risks to the taxpayer?

“And 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, given that there are tens of billions of pounds of your money and all your viewers’ money tied up in this.”

Asked if he considered stopping the bonus, Mr Alexander said: “We looked at all the options in terms of how we should deal with this situation.

“We gave a very strong steer as the Prime Minister and the Deputy Prime Minister have said to RBS we wanted to see a big change this year, we’ve had that, a reduction by more than half of the bonuses paid.”