RBS boss Hester's bonus could be much higher than £1million
By Ben Salisbury
It has been confirmed that Stephen Hester, the man in charge at 83 per cent taxpayer-owned bank The Royal Bank of Scotland (RBS), will receive a bonus of 3.6 million shares valued at £996,000 at Thursday’s closing share price of 27.7 pence, on top of his £1.2 million annual salary.
This is less than half of the bonus he received last year but Mr Hester, RBS and the government are facing strong criticism over the decision. The share price of RBS fell by 48 per cent in 2011.
Last year Mr Hester received a bonus of £2million but this was paid in shares, the value of which has halved since the bonus issue, which in effect means his bonus was around £1 million last year if cashed in now.
However, both years bonuses could in theory be worth much more than they are now if the banks share price increases in the future.
Last week David Cameron was asked if he would act to stop bosses of state-owned banks receiving £1 million bonuses. Mr Cameron said that he would. However, the make-up of Mr Hester’s bonus means this is not necessarily the case.
Mr Hester is being urged to refuse to take the bonus because critics point out that his current role is more of a public servant as he is managing an institution that is 5/6ths owned by the government. Public sector workers are facing a pay freeze and critics feel that Mr Hester is being given exceptional treatment despite not making any tangible difference to RBS’s business performance yet.
Mr Hester has helped to shrink the bloated balance sheet of RBS by selling off parts of the business and reducing its investment banking division with the loss of thousands of jobs.
Labour said that the pledges the government had made to curb executive pay were proved to be “worthless.” The government said that the bonus reflected the work Mr Hester had done “towards rebuilding RBS.”
Critics of the decision believe that Mr Hester and other top executives of the bank should receive the bonus after they have completed the job of re-building the bank, getting it back into annualized profit and raising the share price so that the shares can be sold at a profit so that the taxpayer, who bailed-out RBS to the tune of £45 billion, is repaid first.
The General Secretary of the Rail, Maritime and Transport workers Union, Bob Crow said: "The Royal Bank of Scotland is owned by the country. To give someone £1m and then to give them a massive bonus on top, while public sector workers get a pay freeze and their pension contributions go up, I have got to say that is a complete disgrace.”
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