Royal Bank of Scotland chief executive Stephen Hester is to receive a £963,000 bonus for last year, the bank’s board confirmed today.
The annual performance payment will be awarded in shares, on top of Hester’s £1.2 million salary for 2011.
The bank – which is 83 per cent owned by the taxpayer – said that the incentive payout reflected “substantial progress in making RBS safer, rebuilding performance in many businesses and improving customer service and support.”
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The board said it had allocated Hester 60 per cent – equivalent to 3.6 million shares – of the share award set aside for him in 2011. The shares are deferred and cannot be cashed in until 2014.
It added that Hester’s salary and related benefits remained unchanged from those put in place when he joined RBS in 2008. Last year, Hester’s bonus was calculated to be worth more than £2 million.
“The board is aware of the difficulties in trying to reconcile the competing objectives of all our stakeholders,” said RBS Group chairman, Philip Hampton.
“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.”
However, news of Hester’s bonus has been met with criticism from some quarters, particularly as the government remains the largest shareholder in RBS.
The TUC described his annual performance award as “utterly unacceptable” while Liberal Democrat minister Jeremy Browne said Hester was “a public servant” and should turn down the payment.
Shadow financial secretary, Chris Leslie, said: “Anyone who thinks it’s acceptable to award a bonus of almost £1 million on top of a basic salary of £1.2 million in these tough times is desperately out of touch with millions of people who are struggling to make ends meet.”
Following a speech on “socially responsible capitalism” last week, Prime Minister David Cameron responded to rumours about a possible £1.5 million bonus for Hester, saying: “If there’s a bonus, it will be a lot less than it was last year.”
For the past two years, part-nationalised RBS and Lloyds Banking Group have paid no cash bonuses of more than £2,000 to staff.
RBS – which has made thousands of job cuts over the last three years – reported a £2 billion profit for its most recent trading period, compared with a £1.6 billion loss for the same period in 2010.
