RBS boss defuses row by agreeing to give up £1.6m bonus

The cold wind of public disapproval appeared to have touched the hearts of Britain's wealthiest bankers yesterday when the chairman of the Royal Bank of Scotland agreed to go without his £1.6m bonus.

Stephen Hester's friends were quick to say that the RBS chief executive had every right to expect to be rewarded for his work in turning the bank around, after being hired in November 2008 to sort out the mess left behind by the previous board. He had renounced his bonus only to avoid the risk of the bank being embroiled in political controversy again.

"This is all about de-politicisation," one said. "He is aware of the public's feelings about banks and felt that to increase the hostility towards RBS would be counter-productive."

A series of treasury interventions which saved RBS from bankruptcy means that the Government now owns about 84 per cent of the bank, which is still making heavy losses. Its next set of results, which will be posted on Thursday, are expected to show a shortfall of about £5bn.

Even without the bonus, Mr Hester, his wife, and two children, who live on a 350-acre estate in Oxfordshire and have a Swiss chalet, will not be short of readies. Mr Hester had already made what most people would regard as a hefty fortune before he moved to RBS from Abbey National.

He has said that he asked only for the "going rate" to take on the new job. That turned out to be a basic pay of £1.2m a year, and a deal which will earn him £9.7m in three years if he can push up the bank's share price sufficiently.

Mr Hester is the son of academics whose combined salary is about a tenth of what he now receives without the bonus. His father is a chemistry professor and his mother a former doctor of psychology. Appearing before a Commons committee last month, Mr Hester admitted: "If you ask my mother and father about my pay they'd say it was too high."

The announcement that he was excluding himself from the bonus pot yesterday came just hours after a public warning from the Business Secretary, Lord Mandelson, that it would go down badly with the Government if he awarded himself one.

Lord Mandelson said on BBC1's Andrew Marr Show: "I would say to RBS ... and to their chief executive, Stephen Hester, who is a rather strong and rather able man but 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.'

"What we have said to them is that their priority is repairing their balance sheets and getting their capital back in place and lending again fully. The bonus pool they have indicated is very much at the lower end of the banks."

Mr Hester's sacrifice follows a similar decision last week, when Barclays' chief executive, John Varley, and president, Bob Diamond, announced they were forgoing their bonuses for the second year in a row in an attempt to pacify clients and shareholders hit by the recession.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine