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UK slammed on Hester's £1m bonus

Friday 27 January 2012 - by Andrew Hickley

 The UK government has been slammed after it emerged that Royal Bank of Scotland chief Stephen Hester will receive a bonus of almost £1m (€1.2m/$1.6m) for his efforts in 2011.

Arlene McCarthy, vice chairman of the European Parliament economics committee, argued that the coalition government should have "made an example" of the bank, which is majority owned by the UK taxpayer, by blocking Hester's payment.

If the government is serious about changing the culture of excessive pay and bonuses it should have obstructed the payment, McCarthy argued on Friday.

"RBS's record in 2011 is dire - their shares have slumped more than 40 per cent meaning that taxpayers face losses of around £23bn (€27.5bn.$43.2bn) on the 81 per cent stake held by the Government.

"Thousands of jobs have been lost with another 3,500 announced recently. RBS has also missed its lending targets to ensure enough credit for small and medium size businesses," McCarthy said.

"It is clear the government has the power to ban these bonuses but bottled out. The public will simply not understand why it failed to act to protect taxpayers' money."


The bank's remuneration committee had decided to award Hester 3.6m shares in the bank, totalling £963,000 (€1.15m/$1.8m), the bank said on Friday.

The bonus will supplement his £1.2m (€1.43m/$2.24m) yearly salary, though it is lower than the all-share bonus worth just over £2m (€2.38m/$3.14m) that Hester received in 2010.

Bank bonuses have proven a thorny issue in the UK after the financial crisis, with public outcry at the sector epitomised by the backlash against Hester's predecessor, Sir Fred Goodwin.

Goodwin has been allowed to keep both his pension and his knighthood despite steering the bank to the brink of collapse.

Under draft proposals launched by the government earlier this week, banks' remuneration committees will have more power to veto new executive pay deals.

Firms will also be required to introduce clawback policies allowing them to recoup bonuses, while remuneration reports will be made easier to understand.

The country's 15 biggest banks will also have to disclose how much their executives stand to earn under draft measures released in December.


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