RBS Group chairman, Sir Philip Hampton rejects £1.4m bonus
Saturday, 28 January 2012 03:14
Sir Philip Hampton, the chairman of the Royal Bank of Scotland (RBS) has announced that he will not accept the £1.4 million share bonus he was due to receive next month.
Sir Philip told RBS’s remuneration committee that it would not be appropriate for him to accept the 5.17 million shares he was due to receive as a bonus for 2011.
The decision is in part designed to deflect attention from the bonus that has been agreed for RBS’s chief executive, Stephen Hester, which has drawn criticism from all political parties since the announcement that Mr Hester will receive a share bonus worth £963,000 based on the current share price of RBS.
The Prime Minister, David Cameron said that the government will not block the award to Mr Hester. This is despite comments by Mr Cameron recently that the government could block the bonus.
In November Mr Cameron said: “The British government has a seriously large shareholding in RBS and will let its views be known.”
Asked last week if the government could stop Mr Hester’s bonus, Mr Cameron replied: “The short answer is yes.”
However, UKFI the body that looks after the taxpayer’s 83 per cent interest in RBS and has been involved in the negotiations with RBS’s remuneration committee was unable to persuade them to reduce Mr Hester’s potential bonus to below the level worth £963,000. This is less than half the bonus he received last year.
During negotiations over this years’ bonus it is reported that Mr Hester and the bank’s board might threaten to walk out if the government did attempt to block it.
The Chancellor, George Osborne is very keen that Mr Hester should complete the job of restoring the performance of RBS and raising its share price. He believes that it would cost the taxpayer even more money to bring in a new team.
RBS Group Chairman, Sir Philip Hampton, said: "The Board is aware of the difficulties in trying to reconcile the competing objectives of all our stakeholders. 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.”
Mr Hester’s bonus is calculated by assessing his performance in five key areas that were agreed when he was brought in in 2009 to turn the banks performance around and correct the problems that led to the crash and subsequent £45 billion bail-out by the British taxpayer.
Mr Hester is assessed on the success of the strategic direction of the bank, its financial performance, how much it lends to businesses including small and medium-sized businesses (SME’s) under the Project Merlin agreement, control of the bank’s balance sheet and capability and development. The assessment criteria were agreed under the previous Labour government in 2009.
Assessing his performance in relation to some of these categories is difficult as targets are not specific. Critics believe that Mr Hester should receive a bonus when he has completed the job and when the taxpayer has recouped its investment after the sale of shares when they reach a level that allows them to be sold at a price that repays the taxpayer.
Mr Hester’s bonus is not payable for three years and the final amount will be dependent on the share value of RBS at that time.
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