Royal Bank of Scotland
CEO Stephen Hester’s decision on January 29 to forgo a £1 million bonus following intense political pressure only offers short-term relief for the bank. Hester waived his bonus after the opposition party in the UK, the Labour Party, tabled a House of Commons vote on the subject, but the coalition government itself also urged Hester to decline his payment. On January 29 the Work and Pensions Secretary Iain Duncan Smith said, “nobody would be happier than the government” If Hester turned down the bonus. The government, led by David Cameron, is leading an austerity drive which has cut public sector pay and which is also seeking to curb board-level remuneration. The state-owned institution is set to reveal the size of its investment banking bonus pool, as well as details of other pay awards to senior executives, all of which is sure to generate fresh controversy and to make RBS a less attractive place to work. The government meanwhile is bowing to public anger about well-paid bankers and on January 31 2012 stripped disgraced former RBS chief executive Fred Goodwin of his knighthood (Institutional Investor, 2012.)
Hester’s forgone bonus, consisting of shares that would have matured in late 2014, was only 60 percent of his full entitlement. According to the RBS board Hester’s pay is strongly geared to the recovery of RBS, which he was recruited to turn around, having played no part in its collapse. Mr. Hester’s £1.2 million annual salary may seem outrageous but his pay would still be quite modest when set against the sums he was being paid in his previous job as boss of a large property company, or against those earned by bosses of other large British firms-who earned an average of £3.9 m last year. The sum also looks modest when compared with the earnings of chief executives of other large banks. The head of Deutsche Bank, Germany’s biggest, was paid almost €9m (£7.7m) in 2010, according to the latest figures. JPMorgan, America’s biggest bank...
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