RBS boss Stephen Hester rejects £1m bonus

http://www.bbc.co.uk/news/uk-16783571

 

Royal Bank of Scotland chief executive Stephen Hester has turned down his controversial bonus, worth nearly £1m.

 

BBC business editor Robert Peston said Mr Hester would renounce the £963,000 shares-only payment after succumbing to "enormous political pressure".

 

Chancellor George Osborne said it was a "sensible and welcome" decision that now let Mr Hester focus on getting back billions of pounds for the taxpayer.

 

Labour leader Ed Miliband said the RBS boss had "done the right thing".

 

Earlier, Labour said it would force a vote on the issue after Prime Minister David Cameron refused to block the bonus from the mostly publicly-owned bank.

'Out of touch'

 

It was Labour's decision to put Stephen Hester's bonus to a Commons vote that gave the RBS chief executive no option but to say he would not be taking £963,000 in shares.

 

As an RBS director put it to me, it would have been a great mistake for the semi-nationalised bank to fight Parliament to preserve rewards for its chief executive seen by many as excessive.

 

MPs were expected to vote against the bonus payment, and in those circumstances, it was untenable for him to pocket it. Or at least that was the conclusion that Mr Hester reached in conversation with the bank's chairman, Sir Philip Hampton.

 

That said, RBS's non-executive directors stand by their decision to award Mr Hester 60% of the maximum bonus he could have earned - because they feel he has strengthened the bank, and they argue that Mr Hester is paid less than his peers.

 

But when it looked as though MPs were going to vote against it, the general consensus amongst the directors was that the "game was up", he added.

 

Last week, the prime minister drew criticism after he said it was up to Mr Hester whether he accepted the bonus.

 

Mr Miliband said: "It is a shame that a feeble, out of touch David Cameron did not realise he should do the right thing and stand up for the interests of the British people.

 

"Labour was right to seek a parliamentary vote on this so that the people's voice could be heard."

 

Shadow business secretary Chuka Umunna said Mr Hester was already being adequately rewarded for his performance.

 

"He received £1.2m a year - that's 46 times the average salary of an average employee in this country - to do that job," he said.

 

"Usually you receive a bonus when you've done something above and beyond - exceptional, extraordinary."

 

"But many of the things that have been cited in terms of things that he's done for the bank are things that you would expect him to do."

 

But William Wright, investment bank analyst for Financial News told the BBC: "It sets a very dangerous precedent for RBS.

 

"It raises the level of political risk and political interference in the day-to-day running of RBS to what some people many consider to be intolerable levels.

 

"It raises very serious questions about who actually is running RBS day to day.

 

"Shareholders, in this case the UK government, appoint a board, which in turn appoints an 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."

 

Former Liberal Democrat Treasury spokesman Lord Oakeshott said Mr Hester's decision was "better late than never".

 

"I'm glad that eventually Stephen Hester has seen sense and seen the outrage of most people in this country, and Lib Dems who have been complaining bitterly about this for weeks," he said.

 

Bob Diamond Mr Hester's bonus would not look big compared with that of Barclays boss Bob Diamond, Mr Peston says

 

"I'm very sorry that David Cameron and George Osborne didn't see that, and have been defending the indefensible right up to today."

 

Mr Hester was appointed chief executive at the end of 2008 to replace Sir Fred Goodwin, after the bank had to be bailed out by the government, which now owns 82% of it.

 

RBS chairman Sir Philip Hampton had already announced that he would waive his payout.

 

He had been on course to claim 5.17 million RBS shares in February, but it is thought he told the bank's remuneration committee it would "not be appropriate" to take a £1.4m payout.

 

Robert Peston said RBS's directors now recognise it would have been better to delay Mr Hester's bonus decision until after it was revealed how much Barclays chief executive Bob Diamond received.

-------------------------------------------------------------------------------------------------------------

 

RBS shares are worth roughly 40% of what the taxpayer paid for them

 

RBS' balance sheet has shrunk by roughly £600m

 

RBS has shed this year over 4000 jobs

 

So, what on earth made Mr Hester or the board even think they were entitled to a bonus anyway...? The board of directors of a company's main function is to maximise shareholder wealth, I think it's pretty obvious that this isn't happening. I rather think that once the tax-payer is in a position to sell the 83% stake in the bank and make a return on the investment, THEN we can talk bonus.. And, let's bear in mind here, that Mr Hester and the board aren't exactly working for the minimum wage, the "basic salary" for Hester is over a million quid anyway (this being negotiatied by the previous Labour Govt), so not exactly crying into his pint (of Dom Perignon) is he....?

 

Of course, it'll be predictable to get the procession of people who will come out and defend Hester and say "oh, he's a risk taker"... Really..? What "risk" exactly is he taking personally..? Is it his money...? No, it's OTHER PEOPLES' MONEY.. Actually, to be more precise, it's OUR MONEY.... People try to make out that RBS is making a profit... Well, does this mean we can now pull out our stake...? Could it stand on its own two feet..? I somehow doubt it.. And this doesn't take into account the off-balance sheet debt that the tax-payer is on the hook for. Max Keiser has talked about "Zombie Banks" on his RT shows.. Well, that's precisely what RBS, Lloyds, et al, are, Zombie banks, the walking dead, feeding of the flesh of the tax-payer....

 

To be honest, I think for them to even talk about bonuses in a reality where the ordinary person is forced to suffer as a consequence of their irresponsibility, Ponzi Schemes and casino banking is at best, a tad insensitive and at worst, downright insulting.... I await what Bob Diamond is going to say about his bonus with interest... If you'll pardon the pun...

It must be wonderful to be so wealthy that you can afford to turn down a million quid knowing that it won't make a massive difference.

 

The "targets" set for Hester to receive his bonus would be seen by most of us mere mortals as simply doing his job. So why should he get a bonus? Most people aren't entitled to any sort of bonus. Even those who may qualify for a bonus can only get up to around 25% of their salary (if they are very lucky) and have to perform exceptionally well to achieve it.

 

Cameron and Osborne were both trying to claim last week that they had no power to block the bonus as it was a contractual obligation, a claim denied by Labour. However, there are millions of people - both in the private and public sector - who thought they had a contract that guaranteed them a pension based on their final salary. Their employer changed that unilaterally and there was bugger all the employees could do about it. Why couldn't the government take an equally heavy handed approach towards Hester's "contractual obligation"?

[quote name='Suedehead2' date='Jan 30 2012, 12:05 PM' post='3882

 

Cameron and Osborne were both trying to claim last week that they had no power to block the bonus as it was a contractual obligation, a claim denied by Labour. However, there are millions of people - both in the private and public sector - who thought they had a contract that guaranteed them a pension based on their final salary. Their employer changed that unilaterally and there was bugger all the employees could do about it. Why couldn't the government take an equally heavy handed approach towards Hester's "contractual obligation"?

 

 

That is indeed the, ahem, million dollar question.. Apparently, according to Ian Duncan Donut, it would "cause chaos" to interfere in the compensation arrangements of the big City Fat Cats, but he doesnt seem to give a shit about the chaos his "welfare reforms" are about to cause for wider society, including the Working Poor, the disabled, pensioners, etc.. Whether it's Blue Tories or Red Tories, the only thing they seem to be concerned about is how things affect that one Square Mile in the centre of London. No wonder more and more Scots, Welsh (and probably Northerners) want independence from Westminster... -_-