The chairman of taxpayer-owned bank RBS defended the pay deal of chief executive Stephen Hester, claiming that, in market terms, the £7.7m package was towards "the lower end".
Speaking at the bailed-out bank's annual meeting, which also attracted protests from environment groups, Sir Philip Hampton said Mr Hester's widely criticised deal, made up of a £1.2m salary, £2m annual bonus, and a £4.5m potential shares windfall, was "competitive by market comparisons, but by many comparisons towards the lower end".
He added: "Bonuses are a cost of doing business. I don't know a way you can run any business while paying people much less than [their] competitors."
Sir Philip also admitted that RBS, which made a loss of more than £1bn last year, had paid £375m to 323 staff in risk-sensitive roles in 2010, but claimed this was "relatively low" compared with rivals.
"It is important to remember only a tiny minority were responsible for the problems RBS encountered, all of whom have now left," he continued.
Mr Hester himself used the meeting to criticise the interim recommendations made by the Independent Commission on Banking earlier this month, claiming that the proposal to create "firewalls" around banks' retail arms "doesn't make banks safer".
"It's not obvious to us that it is the right answer," he added. "The best way to make sure the banks are safe is the global Basel III reforms.
"It is not clear to me that the UK needs a special extra something."
Outside the AGM, protesters, dressed as bankers, doused themselves with "oil" to highlight the bank's links to oil extraction in Canada, while matters were not much calmer inside, proving shareholders still remain as angry with the bank as they were at last year's meeting.
One shareholder said that the bank's bonuses were "obscene", while another told the board: "You're not irreplaceable, you're paid too much. Can you and Stephen Hester answer how you can justify your bonus when, frankly, customer service is going down the toilet?"
However, despite the protests, shareholders rubber-stamped the remuneration plan, thanks largely to the backing from UK Financial Investments (UKFI), which manages the Government's 83 per cent stake in RBS.
UKFI said: "We see reforms to remuneration practices as vital to RBS's continued recovery and to our objective of protecting a value for the taxpayer as shareholder in the bank."