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When Stephen Hester took on the job of running a nationalised bank did he really think that bonuses were going to be a big part of his pay package?
Surely a man of his intelligence should have predicted that with the inevitable austerity and economic pain that would follow the banking crisis, receiving mega bonuses would be hugely unpopular?
I can’t see why Hester has the brass neck to walk into this controversy – unless it is just to demonstrate that a gulf still exists between the City and the rest of the country.
The strongest argument against RBS board’s decision to award its chief executive a £963,000 share bonus is that his base £1.2 million salary should really be enough.
Yes, Hester is doing really well in deleveraging RBS and scaling back its bloated balance sheet that, amazingly, still equals the UK gross domestic product.
Neither should he be criticised for cutting thousands of jobs, that had to be done, or for RBS’s (RBS.L) battered share price, which falls with every tremor from the eurozone.
The fact is Hester is turning RBS around and in doing so is no doubt meeting most of his targets – even if small businesses scream the bank will not lend them money.
Yet surely there was always a strong element of public service in taking on this job which should have led to more restraint on remuneration? The board will say the bonus is half last year's level but that really doesn't wash when the majority of the population, which owns 81% of RBS, is seeing pay fall and living standards squeezed. Moreover, the bonus is in shares so, although Hester's payout could fall, it could rise to, above the prime minister's limit of £1 million.
It may have been the sick leave that prompted his counterpart at Lloyds, Antonio Horta-Osorio, to waive his bonus, but Hester should have taken a hint and accepted a far smaller bonus in the circumstances. The board, which is said to have threatened to resign if the government overrode it on bonuses, should have seen the bigger picture too.
We wanted a poacher to turn gamekeeper, but let’s face it we wanted a bit of hero too. Hester is a good banker, but no hero.
Unfortunately, now the decision has been announced we should probably move on as an escalation of the row could damage RBS and put its recovery in jeopardy. The government has failed to exercise its power as a majority shareholder in this case, let’s hope it can encourage fund managers and other shareholders to do better with its plans to give them a vote on executive pay.
Meanwhile, the country needs a debate on the whole issue of 'fat cats'. Top performers need rewarding but should there be a limit to how much you can earn? Hester may be in the firing line but his pay package looks modest against some of the payouts we've seen over the years.
Comments (107)
It would be more appropriate if the existing contract of employment was to be replaced with new terms that included a huge bonus when to be paid on the day that RBS is returned to the private sector. Until then no bonus payments for Mr Hester or any other greedy staff who still want to be rewarded for failure.
12:18 on 27 January 2012
He should have refused his bonus. Unfortunately now, its a bit late as he would be accused of doing it under protest due to public pressure rather than because he feels it just. Its a bit like Obama should have refused his peace prize award which was totally unjustified especially in the light of his current achievements, which are negligible. Had he refused his prize he would have gained immense kudos for modesty and humility. If Hester had refused his bonus immediately he could well have boosted the banks standing and share price. It takes integrity to refuse money. Maybe he doesnt have it.
12:24 on 27 January 2012
All this talk about bonuses, but what are their salaries; one should consider these things in the context of full remuneration should we not?
12:36 on 27 January 2012
If you pay peanuts you get monkeys. If you want the best (and he is doing a great job) then you have to pay for them. An executive of this stature and calibre demand and warrant high pay. There is too much small mindedness and obsession with beating up the rich in the Britain right now. We're headed back to 1970's Britain under the useless labour government then and god help us all if that happens. Reward success not those that feel everyone else owes them something, which they certainly don't.
12:38 on 27 January 2012
and not only that but profitabilty of the bank and what the public holding receives of that, in return.
12:41 on 27 January 2012
The face is the mirror of the soul
12:46 on 27 January 2012
I feel sorry for Mr Hester, imagine his pay slip. Income tax of about £400,000, National Insurance about £50,000. He'll be lucky to come out with half a million, that's barely £42,000 a month. Bankers do make PAYE contributions, don't they. I am sure they would want to make a full contribution, not salt it away into crafty trusts, offshore accounts or companies etc etc.
12:52 on 27 January 2012
Not clear on how anyone can justify asking for more than say £1m total, even at the top in terms of responsibility etc, even if he is the highest calibre monkey available!
Let's face it Hester must spend a fair proportion of his day considering where to invest his scrapings from what is effectively the public purse!
12:52 on 27 January 2012
If the tax payer wants to be able to get their money back, they have to put someone who can manage the changes required at the top. People with this skill are scarce and not cheap. Hester seems to be doing a good job of it so far, so why not a bonus? Tax take for gov probably prettyy good too.
12:54 on 27 January 2012
I can remember when you were expected to do a good job on the wages you got, if you did not you were sacked. Makes my pension of a £102 pw a bit sad.
13:03 on 27 January 2012
Give him the money that was agreed when he took on the job. He is at the top of his profession and can command that salary elsewhere. It would have been better to pay him at the end of his tenure when he had completely finished the job though. Blame that on the person who agreed his contract.
Nobody seems to bat an eyelid at those people who get paid upwards of a million a month just for kicking a bag of air about.!! Oh that they had the brains and ability of Stephen Hester ;-)
13:22 on 27 January 2012
What happen to the sense of duty to the company, employees and country? In the past, captain of industries awards are tied to the fortune of the companies and they tend to look after the well being of employees. Now, each man for themselves, take as much as you can, in as short a time as possible! Reward should be given when properly earned, not while the company is kept alive by the rest of the population. Share holders should also take note, feeding fat cats also bleed away your hard earned monies that is invested in these companies.
13:25 on 27 January 2012
Hey, a job's a job. Why do we beat up this bloke because he's a banker! Have a look at shares / bonuses paid out to directors of Tesco, BAT, Topshop etc. without creating any headlines. We should be paying to get the best bloke possible to turn around RBS, it will be worth billions to the UK if the government can break even when it sells it's share. Too many Daily Mail readers out there needing someone to hate.
13:26 on 27 January 2012
Most high-earners would be expected to do the job they are well paid to do without receiving a bonus, let alone one of skyscraper proportions.
Bonuses have become obscene, does it no longer matter that it is 80% tax-payers money too !!
13:28 on 27 January 2012
If Stephen Hester has grown the company and increased the profits then he`s entitled to a bonus,if not then it`s a definite no.
This past year has seen neither so if he possesses any scruples whatsoever he would decline it or is he one of the so called fat cats?
If any of the board members don`t agree with this then they should join the Fred Goodwin fan club but without a pension.
13:32 on 27 January 2012
Its funny listening to the politians stating he should be rewarded like a civil servant. How much was Hector Sants' of the FSA, about £700,000. So about right. In all seriousness contract should be re-written to reward full privatisation of Bank at a profit to government.
13:49 on 27 January 2012
No man is worth a million pounds a year. especially bankers who caused this world problem.
There are lots of very able people who can re-organise a bad organisation without being put on a godlike pedestal.
13:59 on 27 January 2012
Roger - your argument that no man is worth a million pounds a year hardly stands up. Look at all the mostly mediocre footballers who get paid up to £5million and more. No doubt he has a contract and was certainly not to blame for the fiasco. Let's face it, he was going to be criticised whatever his bonus. There appear to be positive signs of reconstruction and down-sizing at RBS so let him get on with the job.
14:08 on 27 January 2012
Don't pick on Hester, it's up to the Business Secretary to introduce legislation on the structure/roles of remuneration boards. However, if he delivered all his targets I have no problem with the payment.
However, look at the bonus payments earned by Whitehall Civil Service mandarins, then you will weep.
14:58 on 27 January 2012
Anthony,
As I said, no man is worth £1million a year.......................
Roger
15:20 on 27 January 2012
Sorry, Hester is not turning RBS around. He is but part of a team which is struggling to do that. Yes, he takes final responsibility for that, but that is what he is paid to do with his salary. Why, oh why, do directors have to be paid enormous bonuses to do what they are recruited to do. I believe in the good old days when you got a salary for the job and a modest bouns of up to 30%max if you did it well.
15:22 on 27 January 2012
Roger - a man who plays football once a week is certainly NOT but a top man in a worldwide business that employs 100,000 people in many countries may well be worth £1million
keith - 'A modest bonus of up to 30% for doing the job well' -surely the salary is for doing the job well and a modest something over basic salary is justified for exceptional performance. I recall having an exceptional year once and was delighted with the extra 5% on top.
15:58 on 27 January 2012
I am informed that if we do not pay the 'going rate' bankers will leave the country for pastures new.
But surely this argument applies to all skilled and talented workers in all fields of working life? I am informed that we currently have to import doctors, nurses, tradespeople with skills etc in order to enable society to function. Perhaps if we offered the indigenously educated and trained people huge bonuses for doing their job they might also be tempted to stay? Perhaps I should offer my local plumber a million squids a year bonus just to be available and they would then remain in this country? Or is this just a form of social blackmail?
Will the last able person leaving the country please switch off the lights, assuming that they are still functioning.
16:29 on 27 January 2012
Sorry Anonymous 1. If you call £1.2 M peanuts, you should take a cold shower.
Investment banking is not rocket science, it is just a bit of "entre-gent" (knowing your peers and the politicians around, and how to cajole them into accepting some ideas, a relatively easy job if you happen to sit on their own board of directors or if you contribute to their party) and just having your people,those lower-levels working in your banks, do the research work.
Oh, yes, I hear you say, these guys have to take tough decisions. OK, so why is it that a brain surgeon who has to take decisions involving life or death of a patient is not paid 1.2 M? The usual feeble excuse is that those guys are bringing wealth to the country. Do you really think Britain is presently a rich country? The top 1% certainly is, and I claim that if anything, a lot among them, have moved us to the mess that is the present situation, and are not sharing the consequences of their mistakes (oops, I wanted to say. stupidity!).
16:29 on 27 January 2012
Why a bonus for doing what one is paid for? Surely this is the wrong way round- it should be a penalty for failure. In days gone by if you did not do the job you got the sack. As for meeting targets, invariably these are structured in such a manner as to be interpreted in whatever way is necessary to meet the objectives, i.e. more money. As for a remuneration committee of non execs who decide the pay of the Executive Board Room, of course they are independent but,- well who decides the salaries of the non exec Directors? Couldn't possibly be the Board surely, otherwise there might be a conflict of interest- or perhaps more accurately a mutual interest.
Now, how can we in the Board Room save money? Oh I know we'll sack thousands of front line staff. Of course the customers will get poorer service and wait longer for everything, but who cares, the balance sheet looks much better. Remember that great chap Beeching? He knew how to reduce running costs, just shut down half the railway lines and stations, then get rid of the consequential surplus staff. That's the way to cut costs- in fact shut the whole lot down and costs will be nil- ah, but hang on a minute if we do that will there be any need for Board rooms and top managers. Hum, perhaps that's too radical?
16:31 on 27 January 2012
I notice that Hester's bonus was okayed by the Board of Directors and this seems to show that the back-scratching by those who all piss in the same pot goes on. This is just another example of sheer greed and I doubt whether Cameron and his buddies will be able to stop it.
16:35 on 27 January 2012
If he he has set the right course and is not just saluting our political Islanders, then this bonus rock is for me, no problem!
17:00 on 27 January 2012
The problem with performance bonuses at this level and lower is that they turn into box-ticking exercises where the person's objective is to achieve the bonus rather than do a good job, the two are not mutually exclusive but are not necessarily the same thing either.
17:16 on 27 January 2012
No. No bonus. What for? For doing his job? His excessive salary pays for that. I thought 'we' owned RBS? So how did 'we' agree to this?
17:18 on 27 January 2012
my old man used to say that a banker was a necessary evil! and that still holds today. Bankers salaries and bonuses are the headline topic I have lost money on all the Banks including RBS so unlike many of the public who have lost nothing as yet, directly, they talk but invested nothing. Had the banks been allowed to pay back a regular payment towards the taxpayer contirbution would have been more prudent than the present constraint inflicted on the banks with a longer legislative correction and controls.
This problem has its roots in America and Lehmans was the begining Fred the Shred deserves his knigthood for contributions pre 2004 how much income was generate in this period by RSB the takeover of National Westminster etc.
Having seen the story as perceived by TV stories The Amro debacle was created by the other unnecessary evils the Solicitors who overlooked the "GET OUT CLAUSE Thats what has ruined RSB a company like TSB will come again particularly when Vince Cable is removed
17:42 on 27 January 2012
This Country needs to practice the methods of Kelvin MacKelvies statement to the Levison Inquiry another waste of money!
17:46 on 27 January 2012
Never heard so much whining, the man is just selling his labours for the market rate. I assume there were performance targets against which his bonus was measured and calculated. The time to question a bonus is when it is being agreed, not after it has been earned.
It would be interesting to know what next years bonus will be for an on target performance.
17:48 on 27 January 2012
Of course he deserves the bonus. The scheme was clearly shown in the annual report in great detail last year and voted on at the AGM with over 99% votes in favour and 99.87% votes in favour of his re appointment as a director. If anyone is unhappy with his arrangements that was the time to gripe not at the end of year when he has earned it under the rules of the scheme.
I dont recall Miliband and the other lefties making a fuss back then
18:25 on 27 January 2012
As the many comments illustrate, you can argue a case either way on this issue of a bonus for Mr. Hester. For what it matters, I have no objection if he has met the necessary corporate targets as agreed in his contract. I am much more interested in the return of RBS to rude health, and getting a total return on 'my' taxpayer bailout; if that requires the chief to be accordingly rewarded, so be it.
Sorry Mr. Lumsden, but your piece is nothing but quasi-moral and political noise. I can make those judgements quite easily myself. What I expect from Citywire is pretty straightforward -- is RBS a sound investment or not?
18:40 on 27 January 2012
"Sorry Mr. Lumsden, but your piece is nothing but quasi-moral and political noise." How true!
Citywire always follows the media masses hooting and panting on political matters like leaders of the troupe in the jungle canopy. It is a total distraction on what purports to be a financial website, although if considering an investment it does pay to anticipate the unbelievable idiocy of the political classes. I drop into the site now and again just for the fun of it. I much prefer ZeroHedge.com for serious analysis on macro economic matters.
19:08 on 27 January 2012
The market has no morals - sadly.
When was the bonus "earned". I would suggest that it was when the contract of employment was negotiated: whatever happened after that was irrelevant.
19:19 on 27 January 2012
Hester was taken on as a "good pair of hands" AFTER RBS failed to recusitate and cleanse RBS. He is doing OK. Solely looking at the share price of RBS as a measure is naive - external factors play a major part in driving bank share price up and down just now. If Heston were to walk, then RBS would be twice as deep in the mire - think of all the bad signals going out. For Boris Johnson to come on the media bad-mouthing Heston and his bonus is nothing more than populism - something that Boris is doing almost daily in order to dig away the ground under cameron. Boris is a cheap-jack that has never yet borne serious responsibility, and time will demonstrate that. He has got his Mayor of London job in the main to be able to snipe at Tory party policy and to bolster his inevitable bid to lead the Tories. Summary: let Heston absorb his bounus in share: he will be spurred on even more to push up the RBS share price. Let mop head Boris be used to clean floors!
19:26 on 27 January 2012
We should have employed a MONKEY. Think of the money we would have saved in wages and bonus'. We could have saved about £2million and the monkey would have protected our billions of pounds, taxpayers money.
Please god will some one invent a system which prevents humans being able to post diatribe on things they don't have a clue about :(
20:03 on 27 January 2012
If Heston is doing a good job , in the worst possible environement , we should be grateful and leave him to get on with what has to be done.
If we wish to control his remuneration package then the last government needed to nationalise RBS and control the Board , it didn't . Leaving public opinion to influence management of the Bank is a pointless distraction and is unlikely to benefit anyone.
20:29 on 27 January 2012
Anonymous1 - I wouldn't call a £1m salary peanuts. Maybe it is to you. And even if it was, your words aren't true at that level. Look at how much the highly successful head of John Lewis gets paid.
Rob Walker - I think most people don't like any of these huge bonuses not just this one.
Has he done a good job? I don't have details of exactly what he's done. But as a shareholder (via the government) I'm told that the value of my investment has halved during they year he's been paid the bonus for.
If someone insists on having that sort of bonus, that's not the kind of person I want running a company. It is a sad reflection on society if someone considers £1m pay not enough. There are plenty of capable people who could do an equally good job for less money.
Why not have a law that senior managers can only earn a set multiple of the average pay in the company and the bonus can't exceed the average bonus paid as a percentage?
I wonder if the branch staff at NatWest and RBS got 80-90% bonuses this year for the work they've done - we're all in this together.
21:01 on 27 January 2012
Some days ago the Prime Minister said the share holders should try to reign in CEO of banks and other excessively paying companies, the main shareholder in RBS is the Government and could not do much to stop the bonus it just shows that shareholders have very little they can do about bonuses and wages. Cameron back to the drawing board again with more reseaches on most topics you comment upon before letting them out. As for Hester and the board now that they have got their bonus reduced or not, is the time to start deliveringwith some positive results and justify the bonuses. Please not just throwing people out of their jobs.
21:01 on 27 January 2012
What a load of nonsense Stephen Hester is not a one man band even a talented individual such as Stephen cannot take in all the complexities of running a multi-national bank such as RBS. He has an army of experts to guide, advise and inform him to enable his decision making. If he went off ill tomorrow for a prolonged period as did an opposite number in a rival bank things still carry on.
Cameron had no problem ripping up previous agreements for civil servants remuneration and pensions so why does he blame the last government, clearly they are in favour of Steven Hester bonus.
22:36 on 27 January 2012
As I said above - these bonuses are "earned" at the point of entry into the system. This discussion is much wider than one individual's "bonus" - whatever that may mean. As invsb said "did my cashier at my local branch" (or words to that effect) get a bonus because he or she gave me a good service as a daily customer at my local branch?" Answer NO. Eg: you only get a bonus if you are one of the privileged few who can negotiate it at the point of entry on the basis that you are "worth it" or are a part of the CARTEL. (see the cosmetic industry strap lines) in this abstract market place (or I'll go to another country - threat - oh I'm so afraid. Christine Lagarde -one of the few that had the balls (as a woman) to say at the time - 2008 - of these "threats" from the industry - let them go, what have they done for us other than to get us in the proverbial shit?)". Smacks of the mafia to me - and look what's happened to Italy as a result.
23:00 on 27 January 2012
The taxpayer (us) owns 80%, Do you honestly believe that we would sanction a bonus to anyone that has lost our money, NO. If the bank has made that much that it can afford bonuses, then I suggest you give it to the people that bailed you out.
23:08 on 27 January 2012
Total Shareholder return has been negative for the period he has been in charge so how can he be rewarded?
There is nothing to date to be rewarded for. Has he turned round RBS? I dont think so, has he reinstated dividends? certainly not, has he watched a plummeting share price? sure so what are you rewarding -lasting another year as a fat cat?
As for irreplaceable, in a company the size of RBS with 10's of thousands do you not think you could find someone of his IQ and ability if given the chance. No not irreplacable
23:40 on 27 January 2012
mr mcgee, please excuse me if I drop you off my recomended for investment advice list.
00:23 on 28 January 2012
Agreed that the clown has no idea of contracts, except how to contract peoples money TG his govt he has been given the order of the boot but he has left many acolytes behind, who, if that can be possible are even thicker and equally dishonest, with on exception, than he was on expenses, red ed. A babe in arms still suckling........................, to little avail.
On the basis of other bwankers, Hester is being remarkably restrained. Still over paid and over here.
The crime, prevalent in many parts of the ftse is that all are being fraudulent and too closely connected to each other on remuneration committees, criminal fraud and conspiracy on a massive scale.
Let us not forget it was the idiots of the day that went chasing after him, so let them foot the bill now being presented. They set the stage for what was bound to happen, criminal incompetence and the incompetent network, and we have Randy Mandy, no ennobled, who should have done time x 2 for mortgage fraud and then expenses fraud.
Now how many years would lock away Balls/Cooper for? Hopefully at least 20, with no pensions, other than basic state.!?
01:08 on 28 January 2012
The payments made to senior bank executives (salary & bonuses) is as mad and morally offensive as the payments made to the English premier league football players.
Westminster has to give that some thought.
02:20 on 28 January 2012
Staff that were recently announced and cut, by RBS Bank are ones ultimately paying the cost for this award with their lively hoods.
Agree with Mr McGee, commented Jan 27, 2012 at 23:40. Surely some amongst staff, whom would have welcome the opportunity to rectify the damaged done to RBS? even take pride in this achievement..?
Shows that RBS Bank Chief is a better negotiator than his bosses were in Downing street. Nothing wrong with that.
Bank Chief KNOWS that his new and now Second boss is to face same elections , It remains to be seen as inheritors and majority shareholders of RBS Bank. That the new occupiers of downing street, are any better negotiators, than the RBS Bank Chief ?
Weather RBS succeeds or not, RBS Bank Chief, has perfectly properly made his reward for himself .
Consider now, what incentive is there left for this RBS Bank chief to want to succeed.? Clearly Bank Chief's now new and second boss is a afraid to tackle this.
Since there are no penalties, and no evidence of wrong doing provided that damaged RBS. Bank went cheap and so got picked up very cheap by who ever wanted it for whatever their purpose and interests, according to market perception and conditions. in this instance Performance is irrelevant.!
05:42 on 28 January 2012
I think we are missing the point here. RBS is very similar to British Leyland. The question should be, does Britain actually want this type of bank?
The 2nd tier banks are far more interested in Britain's high street businesses and customers, have far more innovative services, they are lending more, and seeing business growth.
If Mr Hester worked for these kinds of banks, whjch focus on the country's needs I'd be somewhat more supportive.
08:48 on 28 January 2012
It is the ethics of bonuses that worry me as much as the theft from shareholders.
Bonuses can be likened to a form of corruption, similar to practices in many african and far east countries.
These greedy directors are setting a very bad example, causing divisions in our society and feeding fuel to the socialists and anti-capitalists.
People are paid salaries for their jobs, and most of us expect no more.
09:57 on 28 January 2012
His terms and conditions of employment were known in advance, are known now and if he succeeds he gets a bonus. The bonus is now payable. No argument no problem. If we dont like it (we own the bank) sack the man and try and find someone else of his calibre to lead from the front. I suspect there will be few takers with the wingealot crowd baying at their heels The banking crisis was caused entirely by the last labour government. The implementation of their policies and their determination to give money to everyone who had not earned it. Listen to people and what they are saying. I am entitled, I have a right, I am not going to work for less than, I want a house to keep as many chidren in a etc, etc. It has got to end. There are people in the world who work hard for 50p a day and a bowl of rice. We import the goods they manufacture, buy them and then wonder why our country is in the state it is. This man is doing his job for a lot less money than he can earn elsewhere. He is the 50p a day worker who is unapprecitaed, reviled and belittled but who will ultimately succeed. Wake up pay for effort and success.
10:00 on 28 January 2012
Even if the bonus was agreed, halving the share price, missing lending targets and losses are not exactly a good basis for paying anyone £1m extra.
10:22 on 28 January 2012
The last labour government threw around 50 billion pounds into saving RBS. That costs the taxpayer about a billion pounds a year in interest charges.
If Hester can get the bank off the taxpayers hands in 3-5 years that 1 million bonus looks cheap.
10:51 on 28 January 2012
The Government should stop this riduculous briefing of the media against the City and RBS and Lloyds in particular as they are in the process of being turned around. This continuous sniping is the result of a weak fatuous Government clearly ill equiped to get this country moving forward needing the City as a smoke screen. it is worth remembering that we the shareholders were on a profit until Vince Cable George Osborne and Vickers started ther politically motivated meddling into the workings of our financial system. They are cl;early out of their depth and thus should leave hester and osario alone to get on with it
11:06 on 28 January 2012
The rest of the world is paid a salary for which we are expected to do a good job. That is what you are paid for. If you do a bad job you are sacked. Why do these greedy sods want (not need) obscene amounts of money? greed pure and simple greed...the pillars of our society? They will die sooner of later and be able to take none of it with them.
11:58 on 28 January 2012
Ian Hind
I disagree with your comments, flexible payments including bonus payments based on company and individual performance targets is absolutely the way to go. Imagine what the alternative is, a higher fixed salary of say 2 million regardless of performance. Yes you can fire him then but firing and hiring at that level is an expensive and time consuming matter, not to mention the destabilisation within the company. Surely someone in authority negotiated and agreed his compensation terms which were presumably competitive and in line with market conditions. Why should the fact that the tax payers have now become majority shareholders be any different to other shareholders in other companies who have delegated the task of appointing a chief executive to experts. Come on, you can't all run RBS, the only power you should have is at the AGM when you can vote down resolutions and the management. Leave it alone for the rest, there are more competent people to do that job. Otherwise it will turn into a nationalised bureaucracy unable to compete with others.
12:00 on 28 January 2012
White Stick Follower, makes some interesting observations.
If memory serves me right, before Northern Rock was nationalised, Richard Branson offered 25p per share, for the business, lock, stock, and barrel, (including its toxic debt)
It was a public company. Why did the Govt. interfere?
Intstead they took control at huge national expense, and then adding insult to injury, sold the profitable parts to Branson anyway. AT A LOSS, leaving us the taxpayer, saddled with the delinquent debtors.
Government meddling only makes bad businesses worse. If statutary insolvency procedures had been followed, RBS and Halifax would have been put into administration and all the directors, sacked on the spot. The government should have used the money it set aside to protect depositors, not directors golden handshakes, and pension pots. The appointed receivers would have sold off the parts of the banks which were still viable, I.E. branch networks, complete with current accounts, deposit acounts, and mortgages not in arears. Shareholders would have received the residue, and creditors holding sub-prime mortgage securities would have got nothing. A lot of employees would have been made redundant. The only difference would have been that the chief administrator, would have not expected to receive a million pound salary plus a million pound bonus to sack them.
Some people argue that Hestor is a skilled and experienced banker. I would not disagree with that assesment, but given the actions he has taken to improve the balance sheet, it could be said that although an architect requires a degree in civil engineering in order to build a skyscraper, the same qualifications are not needed by a demolition contractor.
P.S. What has happened to Deborah Hyde? Does she still work for Citywire. I have not seen any pieces written by her lately. I used to like her giving me a bit of backlash!
12:03 on 28 January 2012
Of course he deserves the money.
He is producing results.
Through his leadership he has so far managed to reduce the bank indebtedness by hundreds of millions.
Through doing this he has helped underpin a huge investment in the bank that is owned by us, the taxpayers.
Compared to top football players the amount he earns is peanuts, in fact I think that we bought the guy cheap, It is probably the only great deal that the last government ever did.
The 'bonus' is paid in shares, this means that unless he pulls it off and the share price rises he will earn relatively little, thus he has every incentive to do so.
Seems to me that most of the people who are are bent on politicising this dire situation probably are incapable of running a p#@%up in a brewery.
Oh what silly people we are, yet again the politics of envy puts us in the turkeys voting for Christmas category.
Why can we not see that no matter what it takes this bank needs properly sorting out and this is the guy who is delivering.
We the tax payers are on the line for tens of billions here, some of the more hysterical attitudes now being voiced are pathetic and ultimately financially suicidal.
If the Treasury were to appoint a raft of civil servants to run RBS, when they had finally managed to destroy the business tens of thousands of people would be out of work plus all those not directly employed but working for support services.
As well as this because of the power and the size of RBS in the British economy, the economy would soon collapse with rioting on the streets which could then lead to all the other horrors attendant upon this - look at the state of Syria for instance.
Even so, II really do object to the recent fashion of company directors who with little justification raid company funds in order to line their pockets at the expense of the shareholders, it is no more than legalised theft.
Time, methinks, that shareholders became more active and the institutions becoming more adversarial in their attitudes.
12:22 on 28 January 2012
Anthony Palmer wrote
Jan 28, 2012 at 11:58
"The rest of the world is paid a salary for which we are expected to do a good job. That is what you are paid for. If you do a bad job you are sacked. Why do these greedy sods want (not need) obscene amounts of money? greed pure and simple greed...the pillars of our society? They will die sooner of later and be able to take none of it with them."
Here we go again, in denial about differences in skills, abilities, leaders and followers. A fixed salary only package at high executive levels does not work, it is too high in lean times and not enough in good times to reward the ones carrying the responsibility of steering the company. Flexible compensation is the way forward. No other scheme works better in the capitalist model or are you suggesting we go to the communist model which in itself was rife with corruption, favours and privileges.
12:56 on 28 January 2012
Pertan.
There is no point arguing with people like this.
A deal is a deal.
If any government starts welching on done deals it then brings into question the credibility of the whole system.
It could for instance reduce gilt edged stock and investment in NS&I to junk status,
The future payment of all State linked pensions would be in doubt, as would Government contracts as they would not be worth the paper they are written on - in fact the country would be reduced to anarchy.
No wonder Cameron is saying that it is up to the RBS remuneration committee to make the decisions.
14:49 on 28 January 2012
This story has generated a lot of adverse comment but we need to be careful not to jump to conclusions - bear in mind that no-one apart from Hester, the RBS board, and a few others will know the full details surrounding his bonus in shares.
Clearly the RBC board, who are presumably a canny lot, felt the bonus was fully justified. However I expect it has probably been structured it in a way better described as a golden handcuff - a means of ensuring Hester remains at RBS for a given number of years (before getting access to the shares) and, in the meantime, it gives him a huge incentive to strive even harder to improve the share price.
When all is said and done this deal may turn out to have been a stroke of genius. Be positive, just think of all the GCT he might have to pay into HMRC's coffers upon eventual disposal!
16:26 on 28 January 2012
I think it needs clarifying exactly what Stephen Hester's brief was, when he agreed to manage RBS.
His brief was to "shrink" the business. This plan was worked out by a Govt. advisor who himself was managing another bank which had avoided the whole sub-prime debacle. The advisor was asked whether he would take an executive post. The Govt. knew they would have to offer him a very lucrative remuneration package to get him to leave the job he was already in. Despite the offer of a huge salary and bonus package he still turned it down. The job was then offered to Sir Phillip Hampton on the same terms, who agreed to become Chairman. Hester was then appointed as chief exec' on similar terms. However in response to widespread public outcry and disapproval of such disproportionate emoluments, Hampton voluntarily waived his right to the bonus element of his remuneration. The amount involved was 5. 17 million shares which today would be worth somewhere in the region of £1. 4 million.
David Cameron is quite right in his stance that a contract, is a contract, and should be honoured accordingly, but he, along with many others, is politely suggesting that Hester should do the decent thing and forego the bonus.
It must be remembered (Hester) has not enriched anyone in the exercise of his duties. On the contrary, his has enpoverished thousands of employees who have lost their jobs, and shareholders who have seen their investment lose 50% of value under his tenure. I'm not blaming him for the companies demise, he has had to take difficult and unpopular decisions, to stop the rot so to speak, but you could hardly describe RBS as a success story entirely created by the efforts of one man.
My source of information was the London Stock-exchange website, but I understand that the story was previously published in Telegraph Newspapers.
17:04 on 28 January 2012
A lively dialogue with supporters in both camps ('Give it to him'. 'No don't'!) What no one seems to have commented upon is, if he is so valuable and unique a man for this job, what happens if he dies or becomes grievously ill? Does he have a deputy ready to take over? If so who is he and how talented is he? Does he need extra training or exposure to Stephen Hester's approach to his task to take over seamlessly? Could he do it as well? Does Stephen Hester give him ungrudging help and support to develop his abilities or does he keep him in the dark to ensure he is not a threat to his job?
I happen to think that Stephen Hester is just one man in a big team all striving to deal with the problem that is RBS. As such he deserves adequate reward, but so do the others who support him. Having myself been in a role where planning for the future was involved, I see little special in the solutions he has chosen to pursue. Many reasonably talented people could have come up with a similar plan, given the undoubted quality in the reports, policy recommendations and financial modelling that would be placed before him for his consideration and Board agreement. Don't forget, these are not 'his' policies, they are the Board of Director's agreed policies. All the minds there contribute. He is obviously a good team player as none have resigned or been dismissed. One may therefore conclude that his brother directors are also competent individuals. So, I would ask, could the current Board, with his deputy in place, keep up the good work? If so, then he is neither as unique nor as irreplaceable as sycophants would have us believe.
One final comment on all this talk of 'rewards'. Will Stephen Hester's lifestyle be changed by one jot or tittle if he forgoes this bonus? I suggest not and, if so, I further suggest that the matter of having a job where a bonus is expected whatever your results is more in the nature of proving the recipient is (to borrow from the 'The Bonfire of the Vanities') 'a big swinging dick'.
Perhaps a discussion of the bonus culture will continue over the months and influence whether bonuses should be written out of such contracts of employment except under the most stringent of terms, or whether indeed their terms should be published openly so that the nation can judge whether the man is worthily receiving the additional reward (although ‘business confidentiality’ might require this to be after the event).
Finally, comparing his remuneration with a footballer's is chalk against cheese. A footballer is judged against the imperative of getting 'bums on seats', and attracting TV contracts and bond investors for the business (which is no longer about providing enjoyment of the game but an investment vehicle). This banker is paid to do a particular job for his bank and the nation. I have a nagging concern that even clean Mr Hester is one day going to feel a further round of complaints when it is noticed that the bank’s share price has increased just at the time his bonus shares are to be given to him - will that be judged as luck or devious manipulation?
18:31 on 28 January 2012
Whilst it may be true that monklys get paid peanuts anyone who regards RBS pay and bonus as peanuts is kidding themselves as to fair renumeration for 12 months work. It is however pointless telling the likes of Hester that he should give up his bonus anyone who believes that with RBS shares at 27p that these sort of earnings are reasonable for penny share taxpayer bailed out banks. It is hardly a demanding job when all said and done.
20:04 on 28 January 2012
Latest head line, relevant to this debate
Sir Philip Hampton, RBS chairman rejects £1.4m bonus due in Feb
BBC News.
20:34 on 28 January 2012
Let the man and his Team deliver value back to the shareholder. He didn't write his own contract.
For Ed Milliband to castigate Cameron, the way he has, is hypocritical, given it was Brown / Darling that signed off on his contract..........or am I misguided?
RBS needs the best people, hopefully they have one in Mr Hester
21:07 on 28 January 2012
The contract leaves it entirely up to the remuneration committee.
This guy has sacked 3500 people, lost £750 million, failed to meet his lending targets, and presided over a 38% drop in share price.
His salary is £1.2 million.
His bonus is broadly equivalent to the salaries of all the people he's sacked.
Two questions: What is he expected to do for £1.2 million?
How does his perfomance represent him performing 80% better than exected for £1.2 milion?
Bonuses should be paid from profits. Not added to losses
10:05 on 29 January 2012
Just a few points.
On a deal is a deal. I don't think he has a contract that says if you do this, you get £1m. It seems clear from the discussions and the reports on the remuneration committee meetings that that committee had a lot of flexibility on how much to award him. If you work in the private sector you'll know that bonus payments are very subjective and so I would suggest (although I don't know) that the amount he was given was up to that committee not written in his contract.
On capitalism. It's not a choice of huge bonuses for people or extreme communism. Surprisingly there is a choice inbetween. Indeed the huge bonuses shows what we've got is not capitalism, but as someone mentioned earlier, a cartel. The point of a capitalist system is that high rewards leads to others entering the market and bringing those rewards down. So if executive pay got higher, more people would learn the skills and join the market leading to pay going back down again. The system we have stops that happening, leading to excess rewards to a few, which is against capitalist theory and bad for the economy as it takes money out of the productive system and could be rewarding people who aren't as good as new people entering the system.
On Stephen Hester's performance. None of us know whether he's done a good performance. So those saying, give him the money as he deserves it don't know if he does or not. All I'm told is the share price has halved, which doesn't suggest the market thinks he's doing that well. He's also not the only one who can do the job. No doubt this was all being said about Fred Goodwin before the credit crunch (only man who can do the job, deserves his bonus etc). As someone said, amazingly when these people leave, someone else comes along and still does the job, often better. There's lots of talent out there.
10:19 on 29 January 2012
There is a point being missed here. The question being asked cannot be answered unless the conditions and the amounts payable or how the remuneration committee awarded the bonus is established.Everything else is guessing or making assumptions without knowledge. The other point is that presumably Hester has been hired to put RBS on the right footing for the longer term by taking long-term strategic decisions and actions, not for a short-term boost. Many contributors here are expecting short-term results, the very thing that led to the mess in the first place, bankers went after short-term gains by taking on high risk transactions. There may have to be losses suffered in the short-term in order to get it right, including job losses - no pain, no gain. I am surprised that people who have been in executive positions who know what it takes to turn things around aren't more vocal. Possibly they are waiting for the outcry and rhetoric to die down. I applaud Hester's decision to forego the bonus, not because he couldn't have defended it but probably because its a distraction he can do without and time will tell and reward him appropriately. He's doing what he should do, get on with the job.
11:05 on 29 January 2012
Recap on what was previously mentioned refering to government blocking the payout.
Is the payout taxable income? Why would government prevent that?
12:15 on 29 January 2012
Pertan - or perhaps we just disagree with it. Why offer a short-term bonus if it's for long-term performance. OK it's in shares, but it's offered. Why not wait till we know whether what's he's doing is right and will work and then reward him if necessary. That's the problem. The other issue is why isn't this policy applied across the business. If a cashier does well they don't get a 90% bonus. Why do we think these bonuses work well for executives but not for anyone else? As I wrote before, it's a sad situation if someone doesn't feel that £1.2m salary a year is sufficient to do a good job.
14:22 on 29 January 2012
invsb
Lets not go again into why a cashiers pay is differently structured to that of a CEO not only in amount but the way and the manner in which its payable. Receiving the bonus in shares says it all. Presumably the remuneration committee and the Board feels that Hester has met the criteria which was established for his bonus, you don't seem to think so. Either you are sitting on that committee or have inside knowledge or simply guessing. A cashier is not expected to guide and turn around a company, the CEO is.
14:40 on 29 January 2012
Cannot believe all this nonsense. If the guy has delivered on his targets then he is entitiled to be paid his bonus.Personally cannot stand politicans who just lie and move the goal posts to suit there own political agenda. Bit rich for Milliband to cry foul when Brown and co agreed the contract and to then say it was always up the renumeration committee to agree bonus is also misleading.ALL large plc's have remu committee's but they do not agree contracts which UKFI will have been involved with. I really hope Hester holds his nerve and keeps his bonus.
14:44 on 29 January 2012
Pertan - These committees are usually made up of board members of other companies. It would be interesting to see cashiers' pay if it was decided by other cashiers :-). What am I supposed to have guessed? I've never said I know anything, I'm just stating my opinion like anyone else. I've said simply that you were talking about long term rewards but this is a short-term bonus. If we want to reward people for long-term performance let's wait till there's long-term proof of it rather than hand it over now. There are a number of bonuses that have been paid to bankers - I'm sure we can think of a few names - that we can't get back now because they were paid too soon. Have fun Pertan. ciao.
17:15 on 29 January 2012
What so many subsrcibers are forgetting is that the bonus is in deferred shares. These cannot be exercised until well into 2014 and are subject to clawback. When it comes to that time all will be able to see how well Hester has done. If RBS becomes bust and into some form of Gov't controlled administration then his bonus would most likely be worthless. On the other hand the exercise price will be around today's market price and if the shares do well in that time due to Hester's actions then his bonus in cash terms could be worth very much more. It is an incentive for him to achieve with the prospect of a very large carrot at the end.
17:33 on 29 January 2012
Didn't Hester deliver a profit this year from a loss last year?
Hasn't he commenced recapitalisation of the Bank through disposal of peripheral businesses ( not easy when you are known to be distressed ).
As for the depressed share price RBS is broadly in line with most other European banks which reflects their level of exposure to bad debt and contagion from the ongoing financial crisis initiated by politicians and central banks. Now Hester has taken another £900 K. in shares we have every reason to hope for a marked improvement in the share price.
He has allegedly threatened to walk if his contract is not delivered. Leave him to get on with the task , the real villain in this saga is Goodwin who should be pressured to ackowledge his culpability not with apologies but a reduction in the ridiculous severence arrangements he was allowed to screw out of the board.
17:58 on 29 January 2012
invsb
Anthony Tinslay's comment says it all, yet you insist on calling it a short-term bonus. Responsible remuneration committees include compensation experts or take advice from such professionals, looking at amongst other factors difficulty of the tasks and challenges, market rates, what is appropriate for the circumstances etc. Are you suggesting all executive pay is excessive? Not by any chance a cashier yourself.
17:59 on 29 January 2012
""Yet surely there was always a strong element of public service in taking on this job""
There is what he agreed at the time and in the contract; nothing else.
19:54 on 29 January 2012
Latest head line, relevant to this debate
RBS Bank Chief rejects £963,000 shares-only bonus payment offered him.
BBC News.
23:16 on 29 January 2012
Disgraceful that public pressure can force him to reject bonus. He had a contract with RBS.
Will mob rule now determine pay for all CEO's?
23:28 on 29 January 2012
Over and over we are told that this or that CEO must get the market rate, if millions are not paid in salary we will not get anyone who is any good.
Where are the up and coming stars, lower down the rungs? Is it not possible to talent spot a younger person of great promise, at a much lower salary?
08:03 on 30 January 2012
Mrs. Blocker
Why this fixation on salaries? its insignificant in comparison with the big picture which is what we should be concerned with. Would you rather someone who earns 200.000 and makes a mess of it? One should focus on the real problem, fixing a bank that employs thousands, get it onto a healthy footing for the longer term. Do not pay incentives that reward short-term performance, learn to become a shareholder and ask the questions that really matter. Cutting the CEO's salary is going to do nothing for the company.
10:07 on 30 January 2012
Mrs B,
The issue for me is the morality of the huge bonus culture, and the incestuous remuneration committees.
You are quite right, CEOs are not indespensible, they and the directors only think they are which is outstanding arrogance.
I am not against giving these people high salaries commensurate with the responsibility, but in effect awarding themselves huge bonuses on top is a form of corruption. Shareholders are diluted, employees demotivated and millions resentful.
No wonder huge resentment has built up against them.
I hasten to add, I am not a socialist, I just think this is very wrong particularly in the current economic difficulties when everyone else has had to cut back.
10:10 on 30 January 2012
A contract is legally binding unless it is with our Government. our spinelss politicians are terrified of public opinion lest it may adversely impact their capacity to keep their snouts in the State trough. Lets have some action on politicians pay pension and perks and for that matter the BBC. Cable and Osborne managed to They managed to wipe £20bn of RBS' share price and they are doing a good job? At least Fred the Shred had ambitions the grow the bank. time to really question how much we the taxpayer get for our money from the public sector me thinks. Pay more to the soldies nurses, police firemen and binmen much much less to the BBC, politicians and county councillors.
10:25 on 30 January 2012
Re joe stalin
I see why the USSR turned out badly. Your post was an incoherent rant.
Fred "the Shred" destroyed RBS in trying to expand.
You say "our spinelss (sic) politicians are terrified of public opinion"...they are employees of the public.
Did Cable & Osborne wipe £20bn of (sic) RBS' share price? Didn't market forces have a big hand in that?
Sometimes I think freedom to express opinions is against our interest, Joe!
11:31 on 30 January 2012
Hmm, A very healthy debate, thanks to Citywire. IMO. A victory for common sense in the end. I am sure no harm has been done to Stephen Hester. In fact his credibility and respect by the general public has been enhanced by his decision, and lest not forget, he also has his back-up golden parachute in the form of a bonus which could be even bigger under RBS executive long-term incentive scheme.
This is the leadership everyone craves. If people at the top cannot demonstrate restraint, how can they expect their work-horses to pull into the collar when they crack the whip.
As regards the bonus itself, it has been revealed that it was in fact awarded in recognition of short term results. It would appear that the Board gave scant regard to the component parts of those results, namely, selling profitable insurance businesses, and RBS bank branches in England, and Natwest branches in Scotland. If they had turned their attention to income generation from organic growth they would have discovered that their wasn't any. Does it take exceptional entrepreneurial skills to sell the quarter-cut, veneered, office desk that was inherited from uncle Fred?
13:02 on 30 January 2012
Our shares were trading at a profit before Cable and Osborne decided to start gold plating the regulation pertaining to our banking system. If you care to look at the charts you wil observe that the share prices began to tank as markets began to take on board that these two gentlemen posed a genuine risk to the recovery of what was left of our financial system.Sure Fred blew up RBS but remember it was an issue of timing so in that respect everybody is always right in hindsight are n't they? Perhaps you have also forgotten that RBS and Barclays were competing for the same "lemon".
13:09 on 30 January 2012
Re JoeStalin
"Our shares were trading at a profit"
That makes no sense at all...absolutely none. The share price tanked LONG before Cable and Osborne were involved...they fell from £20+ in late 2006 to about £6 "overnight".
http://www.lse.co.uk/ShareChart.asp?sharechart=RBS&share=royal_bank_scot
All banks took a hit soon after.
13:20 on 30 January 2012
Just heard bbc news that RBS boss has declined bonus, Government to look at structure of bonuses.
They could not stop this one so what could they do to curb others?
What I would like to know is: With all the money that is owed by different countries to other countries etc etc, which country or individual is owed the most?
13:44 on 30 January 2012
Re Malcolm Roberts
This may help..click around it to see.
http://www.bbc.co.uk/news/business-15748696
Also:
http://www.economicshelp.org/blog/334/uk-economy/uk-national-debt/
14:02 on 30 January 2012
come on mr slack I think you know what I am talking about thy halved in August last year when vince and gideon backed the Vickers report.
15:15 on 30 January 2012
Oh I see...when the once £20+ share fell a further few pence..really tanked man!
(Though a fall from 20p to 10p would affect £100's worth as much as £20 to £10).
15:23 on 30 January 2012
I would say anyone who can dig RBS out of the monumental mess left by Goodwin and presided over by Brown's FSA must be worth a £1mil bonus and more depending on the value of the recovery. The Politics of Envy and Grievance is currently rife . There are however ,plenty of other Targets to go for MEPs for starters, all the Fat Cats in the BBC; who in their right mind would pay Paxman a £1million per annum?,and there are plenty more like him. What about all the untaxed Perks from fine dining and wining in the House of Commons? Come on then lets have it all out on the Table. There are Gravy Trains galore in Politics. How can Mandelson suddenly afford an £8mil Mansion? How can Blair get away with only paying £315000 Tax on a gross take of £!5 Mil? , and so it goes on by Hypocrits United to a man they are pocket liners themselves. They attack Bankers because they divert attention and are easy to whip up hatred against as the populace does not understand the complexities of the internatiopnal financial markets
16:42 on 30 January 2012
I agree with both, Joe Stalin comment on Jan 28, 2012 at 11:06, and TruffleHunter on Jan 27, 2012 at 19:08
Joe and Truffle, have hit it on the head.
Mr Lumsden,
Weather RBS Bank Chief and Chairman are good banker, only future events will tell,
But you're Question regarding being Hero's most defiantly Yes!.
Their recent actions and decision which was theirs alone and only theirs, are noble dignified and to be well noted and remembered and should not go Un-rewarded. Enough said.
19:48 on 30 January 2012
Graham B says it for me!!
We are so insular as a country.
What happens to RBS if Mr Hester & his seniorTeam were to resign? Would that be right for RBS, the country and where would it leave the amazing, Ed Milliband. He becomes more rediculus every time he speaks.
I am getting more worried as to where this bash the ptoential wealth creators, is leading. What about getting Gordon Brown in to run RBS
Polititians need to take a step back form trying to micromanage business, as most of them have absolutely no expeirence in business.
21:51 on 30 January 2012
Latest head line, relevant to this debate
Executive loses his knighthood, Fred Goodwin, heavily criticised over the bank's
near collapse.
Source BBC News.
18:47 on 31 January 2012
What we have here is gross political posturing playing to the gallery of grievance and envy. The naked hypocrisy shown by these pygmy politicians knows no boundaries. Look no further than the Government front bench Cameron and Osborne can look four ways at the same time, instead of defending Capitalism from the Marxist Milliband , they resort to mud slinging, insults in one breath ,followed by promises to change the damage done to British business. Until we get rid of these ignorant incompetent clowns and replace them with Business people who understand the British Financial Services industry, it will go the way of all our other businesses which have been destroyed by the marxist who live off politics in our midst.
12:01 on 09 February 2012
Re Graham Barlow
"What we have here is gross political posturing" etc.
What an utterly childish person you must be.
12:16 on 09 February 2012
Mr Slack, resorting to name calling is water of a duck's back with me, but if I were you read the Editor's Leader in to-day's Daily Telegraph, you will find my views are not exclusive to me. I doubt though, you would find that interesting.
14:07 on 09 February 2012
Rob Slack - no need for personal insults whether you believe what is written or not. The whole point of a discussion group like this is to have varying and opposing views and it does not matter whether any contributor is Right Wing, Marxist, Clever, Dull. Ignorant Low or High Knowledge. Just as long as they write what they feel without abuse, rudeness or silliness.
14:13 on 09 February 2012
It would be even better if they could all spell and had some acquaintance with English grammar.
14:25 on 09 February 2012
I commented on :
".... by these pygmy politicians knows no boundaries..... Cameron and Osborne can look four ways at the same time, instead of defending Capitalism from the Marxist Milliband ,"
My comments were justified.
14:34 on 09 February 2012
NO Mr Slack - You referred to another contributor as "an utterly childish person"
That is not warranted for the reasons I set out unless of course it takes one to recognise one although I am sure that does not apply
18:43 on 09 February 2012
Re Andrew Tinslay
"unless of course it takes one to recognise one "
What an utterly childish person you must be.
18:55 on 09 February 2012
Well Mr Slack you have clearly proven what sort of person you are.
Try to concentrate on the real subject matter - it might be more interesting to all
20:10 on 09 February 2012
I'd like to...without the annoying intervention of GB and you. Bye Bye.
20:23 on 09 February 2012
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