RBS chairman Stephen Hester has refused his £963,000 shares-only bonus after a week of intense political and public pressure to do just that.
RBS chairman Stephen Hester has refused his £963,000 shares-only bonus after a week of intense political and public pressure to do just that.
The main argument against the huge bonus was down to the fact that RBS is 82% owned by the taxpayer and the sum is seen as ‘controversial’ at a time when the UK economy is teetering on the edge of another recession. However, despite the fact that he has had to refuse his near million pounds worth of shares it still seems like Mr Hester will be the only one left smiling at the end of this latest scandal.
The board at RBS have said that they will still award Hester 60% of the original £963,000 bonus. Maths has never been my strong point but that does not sound too bad to me. Labour have excelled themselves once again by leading the lynchmob in sharpening their pickaxes and lighting their torches yet it was a Labour government under Gordon Brown who agreed the bonus clause in Stephen Hester’s contract when he was appointed to the position. And the coalition government came dangerously close to interfering in the day-to-day running of RBS. As William Wright, investment bank analyst for Financial News, said: ‘It sets a very dangerous precedent for RBS.’
Shareholders, in this case the UK government, appoint a board, which in turn appoints and executive team to run the bank, and here we have a situation where the board agrees something, which has been signed off by shareholders and then they have been forced into a U-turn by political opinion.’
The coalition clearly did not want to get involved in the board activities of RBS but would have been forced to if Labour had held a vote on the issue in parliament. If the government had started making the decisions for the RBS board, albeit a publicly owned company, would it be expected to get involved in the business of private companies?
Anyone who peruses the Daily Mash website will know just how tongue and cheek the site is but in one amusing article it is hard not to agree with:
‘Experts said that in circumstances where idiot newspapers are not involved people tended to behave rationally and focus on whichever set of utter cretins drew up the contract in the first place.’
Dr Ruth Bender, from the Cranfield School of Management, has defended Mr Hester’s bonus.
‘We need to pay him that bonus because we can’t afford for him to leave and a million pounds isn’t very much to pay to retain him in a very demanding job which everybody says he’s doing very well.’
RBS is making money for the first time in 9 months and the balance sheet has been reduced by £600 billion since 2008. There are negatives such as dropping share prices and overall the bank is worth less than what taxpayers paid for it but Mr Hester clearly has a very difficult job to do and has done more good than bad.
The decision to turn down the bonus has undoubtedly been the right one: especially in the face of forced political intervention and such fervent public opposition. However, Mr Hester has the support of the banking sector, the RBS board and the government. He will still be paid a salary of 1.2 million pounds and he will still receive a bonus. Has it all been a fuss over nothing?
