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RBS chief rejects bonus after outcry

Monday 30 January 2012 – by Karina Whalley

The Royal Bank of Scotland chief Stephen Hester has bowed to political and public pressure by refusing to accept a bonus of shares worth £963,000 (€1,151,000/$1,510,000) for 2011.

The bank, which is majority owned by the UK taxpayer, has come under fire for planning to pay almost £1.5bn to employees, despite RBS shares having slumped over 40 per cent in 2011.

Hestor’s refusal follows the bank’s chairman, Sir Philip Hampton, waiving his payout of 5.17m RBS shares worth £1.4m (€1.79m/$2.4m).

UK Chancellor George Osborne has backed Hestor’s decision, saying it was “sensible and welcome” and added: “[This] 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.”

The UK’s Labour party leader, Ed Miliband commended the RBS chief for having “done the right thing”.

Hester faced calls from unions, politicians and the public to turn down the controversial bonus last week. Labour had also urged the government to block the award last week, however UK Prime Minister David Cameron said the contract should be honoured and pointed out that the payout had been cut in half compared to last year.

Related articles:

UK slammed on Hester’s £1m bonus

Lloyds chief waives £2.4m bonus

UK study: Bank bonuses ‘bounce back’

EU watchdog denies fresh bonus probe

Banks ignored on EU bonus calls

RBS announced a 3,500 cut in jobs recently and failed to reach government lending targets for providing enough credit to small and medium size businesses.

Despite this, the bank’s remuneration committee decided last week to award Hester 3.6m shares in the bank, which are worth almost £1m (€1.2m/$1.57m). If Hester had accepted it, the payout would have consisted entirely of deferred shares subject to holding conditions, ensuring that they cannot be redeemed in full until late 2014, the bank said.

The bonus would have supplemented Hester’s £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 the bank chief received in 2010.

The all-share payout was approved at RBS’s annual general meeting by 99.2 per cent of shareholders, including the UK Financial Investments group, owned by the government and responsible for managing its investment in the bank.

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