Shareholder group welcomes RBS pay move

Royal Bank of Scotland boss Stephen Hester's move to defer part of his £9.6m (€11.14m) pay package for an extra two years was welcomed today by a shareholder lobby group.

The Association of British Insurers (ABI) - the body that represents around a fifth of UK investors - backed the decision to push back a potential £3.4m (€3.94m) worth of bonus shares until 2014 after it raised concerns.

Mr Hester's pay deal, consisting of a £1.2m (€1.4m) basic salary, attracted controversy, given the bank's hefty losses and more than 70% ownership by the taxpayer.

He had been due to receive a £2m (€2.3m) non-cash bonus each year and £6.4m (€7.4m)-worth of long-term share and option awards, dependent on targets being met.

However, his concession will see more than half of the maximum long-term awards deferred for another two years.

Peter Montagnon, director of investment affairs at the ABI, said: "This is a significant and welcome development.

"Large awards are fine if real value is created, but it must have a sustainable and long-term focus.

"This is why we suggested a deferral and why we are grateful to Mr Hester for listening. The focus is now clearly in building up a sustainable future for RBS in the interests of all stakeholders, including long-term shareholders, employees and the broader economy."

However there have also been criticisms that the decision to tie the chief executive's bonus mainly to the performance of shares could encourage risk.

The Unite union hit out at the payout, saying it would be met with "absolute disbelief" by finance industry staff.

The package was agreed last week within days of the announcement that disgraced former RBS boss Fred Goodwin had bowed to pressure and offered to hand back more than £210,000 (€243,778) a year of his pension payout, reducing the total yearly pay from £555,000 (€644,272) to £342,500 (€397,501).