RBS will urge shareholders to 'trust us' after pay climbdown

Bank will also attempt to avoid repeat of storm over chief executive's comments

Royal Bank of Scotland will bow to shareholder demands to make it tougher for executives to receive their full bonus entitlements. On Wednesday Sir Philip Hampton will tell shareholders at the bank's annual meeting that its remuneration committee is working on a revised package for executives. However, they will not be given any details and will be asked to back the RBS remuneration report and trust that directors will come up with a significantly tougher set of performance targets.

It is understood that the bank is also seeking to avoid a repeat of the storm that engulfed it at last year's event, when chief executive Stephen Hester railed against what he called the "politicisation" of the bank, which is 84 per cent owned by the taxpayer. This time Mr Hester, who has since expressed regret for the remarks, will avoid making controversial comments after the meeting has closed.

Mr Hester's package – worth a maximum of £10m were he to hit all his targets – created huge controversy when he was appointed to lead a turnaround of the institution following its multi-billion bailout by the taxpayer, caused by a string of risky loans together with the disastrous acquisition of parts of the Dutch bank ABN Amro.

The company had been planning to set the lowest "trigger point" for the first 5 per cent of the shares vesting under its "long-term incentive plan" (LTIP) at 50p. Shares in the bank, which have rallied recently, closed at 55.8p on Friday. Critics have long argued that the plan is based too much on the share price and does not call for sufficient evidence of long-term concrete improvement in the loss-making bank's finances. They argue that the focus on share price targets could motivate executives to take undue risks with the aim of boosting the short-term stock price at the expense of long-term improvements. The Government paid an average of 50.5p for its stake in Royal Bank, and is therefore theoretically in profit. However, it has warned that a sell-off of the shares will take some time and will likely be completed by a series of one-off placings with institutions, although opposition parties have suggested alternatives which could involve the public.

The focus on share price has raised shareholders ire and led Keith Skeoch, the vocal investment chief at Standard Life Investments, to write to City minister Lord Myners calling for changes in the scheme. Half the awards from the current LTIP are linked to the bank's economic profit, with 25 per cent based on total shareholder return, including a consideration of rivals' performance, and the final 25 per cent solely linked to share price. Mr Hester waived his bonus this year.

PIRC, the corporate governance watchdog, has also urged investors to vote against the bank's remuneration report. UK Financial Investments, which manages state investments in banking, is likely to vote in favour but a significant vote against RBS by other holders would come as an embarrassment to the Government. Their support will be crucial if the state is to achieve a successful disposal of its holdings in RBS.

RBS is not the only company likely to face a debate over its pay-plans. PIRC has also urged investors to vote down Barclays' remuneration report on the grounds that performance targets are "insufficient stretching". Lloyds, also part state-owned, has received an "amber top" warning notice from the Association of British Insurers while HSBC's plans to hike chief executive Michael Geoghegan's pay have also generated controversy.

News
news

Lincoln MP Karl McCartney 'denied all knowledge' of the Twitter activity

News
Michael Buerk in the I'm A Celebrity jungle 2014
people
News
The author PD James, who died on 27 November 2014
people

Detective novelist who wrote Death comes to Pemberley passed away peacefully at her home, aged 94

Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
filmDirector said film would 'never have been financed' with ethnic minority actors in key roles
PROMOTED VIDEO
News
ebooksNow available in paperback
Life and Style
tech
News
people
Life and Style
tech Manband spurn Spotify to stream album exclusively with Google
News
Irradiated turkey and freeze dried mash potato will be on the menu this thanksgiving
video
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
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

Recruitment Genius: Senior Execution Trader

£30000 - £250000 per annum: Recruitment Genius: A global Rolling Spot FX, Comm...

Citifocus Ltd: ACA - Financial Reporting

£Attractive Package: Citifocus Ltd: Chartered accountant (ACA or CPA), must be...

Ampersand Consulting LLP: UI Designer/ User Interface Designer (UI, User Flow, Design)

£6000 - £60000 per annum + Bonus and Benefits: Ampersand Consulting LLP: UI De...

SThree: The benefits of Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Day In a Page

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

In pictures: There's a Good Girl exhibition

The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

UK firm Biscuiteers is giving cookies a makeover

It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
Can SkySaga capture the Minecraft magic?

Can SkySaga capture the Minecraft magic?

It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
The King's School is way ahead of the pack when it comes to using the latest classroom technology

Staying connected: The King's School

The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
Christmas 2014: 23 best women's perfumes

Festively fragrant: the best women's perfumes

Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
Arsenal vs Borussia Dortmund: Alex Oxlade-Chamberlain celebrates century with trademark display of speed and intuition

Arsenal vs Borussia Dortmund

The Ox celebrates century with trademark display of speed and intuition
Billy Joe Saunders vs Chris Eubank Jnr: When two worlds collide

When two worlds collide

Traveller Billy Joe Saunders did not have a pampered public-school upbringing - unlike Saturday’s opponent Chris Eubank Jnr
Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?