RBS chief may get millions of pounds in bonus even as share price falls
09 January 2012
The chief executive of Royal Bank of Scotland will be richer by another few million pounds with the bonus he will get for a year's work even as the share price more than halved.
Details of Stephen Hester's award have yet to be finalised, but what is amply clear is that the state-owned business is about to make another controversial payment. The UK government pitched in to save the collapsing bank in 2008, taking an 84 per cent stake at 50p a share, or £45 billion.
The share price fell from 49p last February to 20p today, leaving taxpayers to shoulder a heavy financial burden with fresh questions about executives helping themselves to rewards, long before the actual results were out. Hester, had been inducted with a mandate to clear up the mess left by the previous chief executive, Sir Fred Goodwin.
He received a hefty package of £7.7 million last year that left small investors at the RBS annual meeting bitter. According to one investor, the directors had "an inflated sense of their own importance".
Sir Philip Hampton, chairman at RBS has defended Hester's pay as he was "working like stink" to turn around the bank.
The bank's remuneration committee is expected to meet soon over the issue. Meanwhile, an RBS spokesman said no decision had been made and it was too early to speculate.
Analysts say the share price points to a pay package that would be lower than last, but would still prove to be politically awkward. Prime minister David Cameron yesterday announced plans for clamping down on executive pay, saying investors needed to take greater responsibility over the issue.
However, Cameron's claims over tackling fat cat pay have been exposed by revelations about what the RBS boss is set to earn this year. With Hester likely to take home £7 million despite the plummeting share price at the bailed out bank, which is mostly owned by taxpayers, the prime minister's claims yesterday about ending boardroom excess by giving shareholders the power to veto ''golden goodbyes'' and obscene pay if companies failed to perform rings hollow.
Cameron had insisted he would end ''crony capitalism'' that allowed executives at one corporation to set pay for those at another.
Labour MP John Mann was furious about what Hester could earn and said, if David Cameron let this go ahead it would show that all his talk was just a gimmick with no substance and that he did not intend to do anything about executive pay, especially for his friends the bankers.