RBS boss Hester to waive £1.6m bonus
ROYAL Bank of Scotland chief executive Stephen Hester has decided to waive the bumper £1.6m bonus to which he is contractually entitled for this year, amid a fierce torrent of populist anger over remuneration in the banking sector.
The news comes after Barclays chief executive John Varley and president Bob Diamond set the bar for UK?bank executive pay last week by agreeing to relinquish their discretionary payouts for the 2009 financial year.
Hester, who earns a fixed salary of £1.2m, is understood to have consulted RBS chairman Sir Philip Hampton at length in private since the Barclays announcement, to weigh up the advantages of giving up the payout.
The pair have now concluded that relinquishing the £1.6m all-equity deferred bonus would send out the correct political message while also defusing anger over the pay pool for the bank’s employees.
Staff are expected to take home up to £1.3bn in bonuses after RBS’s results on Thursday, when the bank is expected to post a pre-tax loss of around £5bn-£6bn. The payout ratio at RBS’s investment bank would be about 28 per cent of revenues, against 30-40 per cent for most competitors. The government, which controls the bank, is set to give the payouts a green light.
Hester’s decision follows calls from business secretary Lord Mandelson yesterday for him to exercise restraint over his personal pay package.
Speaking on the BBC’s Andrew Marr show, Mandelson said Hester was a strong and able man, but one whose “performance and delivery has not yet been tested”.
“If further down the line in years to come he has done well and he has turned round RBS he deserves something back for it and I would be the first to say so, but not now,” Mandelson added.
The government is now increasing the pressure on executives at Lloyds Banking Group and HSBC to follow in the footsteps of their peers. Lloyds, which reports on Friday and is expected to post a loss of £4bn-£5bn, is in line to award its chief executive Eric Daniels a combined salary-and-bonus payout of £3.4m, while HSBC is currently in talks with shareholders over a planned increase for chief executive Michael Geoghegan, taking his remuneration from £1.1m to around £1.4m.
Hester, 49, the ex-chief executive of British Land, joined RBS in October 2008 after its bailout. He has always insisted that paying staff competitive rates of pay is necessary to retain the talent necessary to turn the group around.