RBS boss in line for €11.3m pay package

Royal Bank of Scotland (RBS) confirmed its chief executive Stephen Hester is in line for a pay package of more than £9.7m (€11.3m) if he leads a turnaround of the ailing lender.

RBS won support from UK Financial Investments (UKFI), which controls the Government’s more than 70% stake, for Mr Hester’s salary and long-term bonus arrangements at a meeting last week.

UKFI is thought to have backed the move because of links to the bank’s share price. This would have to pass a 70p threshold for the long-term bonus to be paid in full, by which point the taxpayer would have made millions in profits.

The stock is currently trading at around 37p after hefty share falls earlier this year in the wake of the Government bailout.

Mr Hester is in line for £1.2m (€1.4m) in salary, around £2m (€2.3m) in annual non-cash bonus payments and around £6.4m (€7.5m) of long-term share and stock option awards as well as pension and company car.

Long-term incentives would be based on a mix of targets and the RBS chief’s options would be paid for 2009 but would only be able to be redeemed after three years.

An RBS spokesman confirmed last night the deal had been agreed and finalised by the firm’s board.

Group chairman Philip Hampton said: “Over the last few months we have been consulting with shareholders on the most appropriate way to incentivise and reward RBS’s chief executive Stephen Hester.

“We now have support for a remuneration plan that ensures the majority of Stephen’s reward is non cash and based on his performance.

“This means his financial interests are strongly aligned to the interests of all our shareholders in the short-term and over the coming years.

“RBS has the largest balance sheet in world banking so it is critical that Stephen succeeds.

“If he does, the UK Government will be able to sell its shares at a profit and all shareholders will benefit.

“The long term incentives are worth little or nothing without a strong return to shareholders and there is no reward for failure in our remuneration policy.”