RBS takeover to net US directors $1bn

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The Independent Online

Executives at Charter One will receive up to three years' salary and bonus if they lose their job as part of the acquisition of the Ohio-based bank by Royal Bank of Scotland.

Executives at Charter One will receive up to three years' salary and bonus if they lose their job as part of the acquisition of the Ohio-based bank by Royal Bank of Scotland.

Charles "Bud" Koch, the chief executive of Charter One, could take home almost $6m (£3.3m), while Mark Grossi, a vice-president, would receive $3.65m. Mr Koch's younger bother, John, who is also a vice-president, would be entitled to the same amount.

Overall, almost $1bn of the $10.5bn RBS is paying for Charter One - which focuses on mortgages and savings products for the less well off - would go to employees.

Staff own shares worth $500m, while a further $400m is held in stock by its five executive directors. The five would see a string of benefits triggered by the deal. This could include all of their share options - a practice which is contrary to good corporate governance in the UK, where shareholders prefer that only a proportion of options are made exercisible by takeovers. Mr Koch alone could make $50m from options.

Filings with America's Securities and Exchange Commission also show that RBS's shareholders would have to pick up the tab for the tax which would be incurred on the golden parachutes.

That would be a further payment to Mr Koch - one of the family who founded Charter One 70 years ago - of $7.6m, while Richard Neu, the chief financial officer, would receive $9.9m.

All five directors are also on rolling five-year contracts, which RBS would probably have to renew if it decided to keep them on. They are entitled to the termination payments even if they are sacked two years after the takeover.

While Mr Koch will take up a non-executive position with RBS, he could still be entitled to a termination payment because he is losing his job as chief executive.

RBS refused to say yesterday what the exact termination payments would be, with further details expected when the merger documents are published in the next two months. But previous settlements between US directors and UK companies have proved lucrative for the individuals involved.

William Aldinger, the head of Household International, which was bought by HSBC, received about $20m as a termination payment, even though he has been kept on to run the business by the bank. His package is worth in total up to $37m over three years and he has the use of a private jet. HSBC has also agreed to cover the dental care of Mr Aldinger and his wife for life.

RBS already has experience of what the rates of pay are in the US. Larry Fish, the head of Citizens Financial, which will integrate Charter One into its business, received £1.86m last year, second only to the remuneration of Fred Goodwin, RBS's chief executive, who was paid £1.9m.

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