The state-backed Royal Bank of Scotland (RBS) will hand its chief executive, Stephen Hester, an annual bonus of £963,000, it revealed last night.
RBS, which has been under huge pressure from the government to curb awards, said its decision was designed to “recognise tangible achievement in the business and protect the interest of our shareholders, including of course the UK taxpayer”.
It is handing Hester a bonus of 3.6m shares, or 60% of his maximum entitlement, on top of his £1.2m salary. The award is deferred so he will not receive it in full until late 2014.
He could have been entitled to £1.5m, but a public intervention by David Cameron has slashed the sum.
Liberal Democrat minister Jeremy Browne said last night that Mr Hester was 'a public servant' and should turn down the bonus.
Hester succeeded Sir Fred Goodwin as chief executive of the bank three years ago with a remit to sell off risky assets and make it profitable again. Sir Fred’s dangerous deal-doing precipitated RBS’s near-collapse and led to a £45 billion state bailout that left taxpayers’ holding an 83% stake in the lender.
Hester has made good progress in reducing the bank’s size but Britain’s weak economy and fallout from the eurozone crisis has sent its shares crashing by more than a third in a year. However, he became a figurehead in the government’s campaign against excessive boardroom pay.
The pressure for him to waive his bonus, as he did two years ago, increased when Antonio Horta-Osorio, the chief executive of Lloyds, another bailed-out bank, announced he wouldn’t take a bonus as he returned to work from two months of sick leave due to exhaustion.
”The board is aware of the difficulties in trying to reconcile the competing objectives of all our stakeholders,” RBS chairman Sir Philip Hampton said. “This is especially true on the issue of pay. Stephen Hester’s pay award reflects progress in the categories agreed with our shareholders as set out in the remuneration report. His pay is strongly geared to the recovery of RBS, which he was recruited to turn around, having played no part in its collapse. The priority is to re-shape a business that was far too big and far too risky, reducing legacy losses whilst improving performance in the group’s strong core businesses.”
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