RBS boss could net £8m bonus in future

The chief executive of bailed-out lender Ulster Bank’s owners, Royal Bank of Scotland, already under political pressure to give back a £1 million (€1.2m) bonus for 2011, could get eight times as much in future under his current contract.

RBS chief executive Stephen Hester could theoretically receive an £8m bonus under a long-term incentive plan that gives him a maximum of 375% of his annual £1.2m salary, along with other share plans in place, based on RBS’ recent stock price of 28 pence.

RBS, 83% owned by the British government after a state bailout during the 2008 credit crisis, said this week that Mr Hester’s 2012 share award and long-term incentive plan would continue in line with a policy set out in 2010.

RBS declined to comment on the situation yesterday.

Anger over bankers’ pay has shown few signs of abating, with many still set for million pound salaries while elsewhere thousands lose their jobs in a weakening global economy.

In Britain, the salaries at RBS and Lloyds are particularly controversial since both banks were bailed out with £66bn of taxpayers’ money during the crisis. As well as its RBS stake the British government owns 40% of Lloyds.

RBS halved Hester’s stock bonus for 2011 to just under £1m from £2m in 2010.

It resisted calls to axe Mr Hester’s bonus altogether, although it waived a £1.4m bonus for its chairman Philip Hampton.

Senior opposition Labour politician Liam Byrne reiterated calls yesterday for Prime Minister David Cameron to intervene over Mr Hester’s bonus. “This is a bank that the government owns almost all of, the government is the biggest shareholder.

“Mr Cameron has been talking about how shareholders need to flex their muscles and have a bigger say in the way that executive pay is set,” Mr Byrne told Sky News.

“Fine — let’s keep you to your word, step in now and say that this bonus payment to Mr Hester is wrong and should be stopped,” the Labour MP added.

However, Conservative cabinet minister Iain Duncan Smith said intervention would be difficult, adding the RBS pay contracts had been set under the previous Labour government.

Mr Duncan Smith also reiterated Mr Cameron’s stance that it was up to Mr Hester to decide if taking the bonus was appropriate or not.

Mr Hester, a former Abbey National and Credit Suisse banker, joined RBS in October 2008 from property company British Land as RBS was reeling from its disastrous acquisition of Dutch bank ABN AMRO and the effects of the credit crisis.

Britain used some £45bn of taxpayers’ money to rescue RBS, leading to the eventual resignation of former head Fred Goodwin, who was replaced by Mr Hester.

Mr Hester was given a brief to restructure RBS and restore its fortunes, and his tenure has seen RBS cut more than 30,000 jobs.

Britain aims to eventually sell its state holdings in RBS and Lloyds back to the private sector.

More in this section

Puzzles logo
IE-logo

Puzzles hub

Visit our brain gym where you will find simple and cryptic crosswords, sudoku puzzles and much more. Updated at midnight every day.

Lunchtime
News Wrap

A lunchtime summary of content highlights on the Irish Examiner website. Delivered at 1pm each day.

Sign up
Revoiced
Newsletter

Our Covid-free newsletter brings together some of the best bits from irishexaminer.com, as chosen by our editor, direct to your inbox every Monday.

Sign up