RBS chief's £3.5m pay adds fuel to row over 'excessive' profit

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The Independent Online

Fred Goodwin, the chief executive of Royal Bank of Scotland, was paid £3.5m in 2003, up about £1m from the previous year, the high street bank will tell shareholders next month.

The revelation of such a large pay increase is sure to add to the furore surrounding the bank, whose record £6.1bn profit last week was widely condemned as excessive.

It is also likely to make RBS's annual shareholder meeting in late April one of the key events of the season for corporate governance campaigners, as government sources indicated at the weekend that "fat cat" pay would be closely monitored by officials at the Department of Trade and Industry.

Mr Goodwin's remuneration has been swollen by an incentive scheme put in place after RBS swallowed NatWest in 2000, and which the company will insist had been thoroughly understood and approved by shareholders at the time. Because RBS has outperformed the majority of its banking sector peers, Mr Goodwin is set to receive a bonus at or close to the maximum allowable - twice his salary.

Bringing in further incentive schemes, Mr Goodwin is thought to have earned bonuses worth three times his salary, which was £832,000 in 2002. A total remuneration package of about £3.5m will restore his position as the best paid executive at the bank, above Lawrence Fish, head of the group's US retail banking division Citizens, who took home £3.3m last year.

It will also put Mr Goodwin high on the list of the UK's best paid executives and earn him a place at the eye of the "fat cat" pay storm. Last week, RBS attracted political and consumer group brickbats, as well as shareholder bouquets, for a pre-tax profit of £6.1bn, the highest ever for a UK bank. One industry source said: "If Fred Goodwin gains, RBS shareholders are gaining hand over fist."

At the time of its announcement, Mr Goodwin - nicknamed "Fred the Shred" after he slashed jobs following the NatWest merger - angrily rounded on the consumer lobby's accusations that RBS and the other major banks were profiteering at the expense of consumers who have been taking on a mountain of debt.

Patricia Hewitt, the Secretary of State for Trade and Industry, is expected to say this week that she has decided against legislation on executive pay, a year-long consultation exercise having found the idea to be impractical. Proposals to restrict contractual notice periods to one year or to phase pay-offs have also been rejected.

She will, however, insist that executives restrain their pay awards and it is understood that the DTI is setting up a special monitoring unit to examine how well companies respond to shareholder concerns on pay.