Outrage at RBS boss's bonus deal

27 January 2012 Last updated at 01:07 GMT Stephen Hester's bonus is on top of his £1.2m basic salary A £963,000 bonus in shares awarded to Royal Bank of Scotland boss Stephen Hester has been strongly criticised.

Lib Dem minister Jeremy Browne said Mr Hester was "a public servant" and should turn down the bonus while the Unite union said it was "disgusting".

Labour said government pledges to curb executive pay were "utterly worthless".

The bank is 82% owned by UK taxpayers and the company which runs it for the government said the bonus reflected Mr Hester's work 'towards rebuilding RBS'.

UK Financial Investments said the bonus, which is on top of Mr Hester's £1.2m salary, "reflects the significant contribution he has made towards rebuilding RBS in 2011".

For the past two years, part-nationalised RBS and Lloyds Banking Group have paid no cash bonuses of more than £2,000.

RBS has announced thousands of job cuts, although it recorded a £2bn profit in its most recent trading period, compared with a £1.6bn loss in the same period in 2010.

The Unite union said the bonus was "utterly disgusting and offensive" while the TUC described it as "utterly unacceptable".

The RMT's General Secretary Bob Crow said: "The Royal Bank of Scotland is owned by the country. To give someone £1m and then to give them a massive bonus on top, while public sector workers get a pay freeze and their pension contributions go up, I have got to say that is a complete disgrace.

"What a kick in the face to those people who deliver a public service for our people in this country."

'Constrained'

Following the announcement that Mr Hester would be receiving almost a million pounds in shares, UKFI said: "As the largest shareholder in RBS, we have worked closely with the board to ensure that pay is aligned with the interests of shareholders and properly rewards long-term performance.

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He has to act like a public servant, not like somebody who is there to line his own pocket”

End Quote Jeremy Brown Foreign Office minister "Stephen Hester's pay reflects the significant contribution he has made towards rebuilding RBS in 2011."

But Foreign Office minister Mr Browne told the BBC's Question Time: "There's a question of honour. Even if there's a contractual opportunity for him to have a bonus it doesn't mean he has to accept it."

Mr Browne said Mr Hester was paid more in three days than a soldier serving in Afghanistan received in a year.

"He should reflect on that. He is effectively a public servant in a bank which is almost completely owned by us the taxpayers," he said.

"He needs to think like a public servant who has a duty to his country, not just his own wealth."

Asked if he should turn down the bonus, the minister said: "No-one's forcing him to take this money. He could struggle on with £1.2m."

Following a speech on "moral" capitalism last week, David Cameron was asked whether he would act to stop the bosses of state-owned banks receiving £1m bonuses.

He replied: "The short answer is yes."

Last year, Mr Hester received a bonus of more than £2m and the prime minister said: "If there is a bonus [this year], it will be a lot less than it was last year."

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Anyone who thinks it is acceptable to award a bonus of almost £1m on top of a basic salary of £1.2m in these tough times is desperately out of touch”

End Quote Chris Leslie Shadow financial secretary Deputy Prime Minister Nick Clegg has said ministers are "constrained" by contractual arrangements agreed by the last government at the time of Mr Hester's appointment regarding his bonus.

But for Labour, shadow financial secretary Chris Leslie said Mr Clegg's claim was "false".

"The board decides bonuses on an annual basis - and the biggest shareholder at the bank is the government," he said.

"Nobody doubts that Stephen Hester has done some important things at RBS, but what this award shows is David Cameron's promises about reining in excessive bonuses at state-owned banks or using shareholder power have proved to be utterly worthless.

"Indeed, anyone who thinks it is acceptable to award a bonus of almost £1m on top of a basic salary of £1.2m in these tough times is desperately out of touch with millions of people who are struggling to make ends meet."

Shareholder power

Matthew Sinclair, from campaign group the Taxpayers' Alliance, told the BBC the government should block any bonuses for Mr Hester until the taxpayers' investment in RBS is repaid.

"It's incredible that we're seeing a huge bonus which should be reflecting performance in the interest of shareholders and that's you and me," he said.

On Monday, Business Secretary Vince Cable announced a series of measures designed to rein in excessive executive pay.

They included more power for shareholders to veto salary and redundancy packages, and encouragement for firms to increase diversity on their boards.

Labour said the proposals did not go nearly far enough, and should have included steps like including ordinary employees on remuneration boards.

A Conservative Party spokesman said Labour had failed to do anything to curb multimillion-pound bonuses during their time in government.

"It would clearly have been unacceptable for Stephen Hester's bonus to have been the same as last year. So we are pleased it is less than half of that this year," he said.

But TUC leader Brendan Barber said the bonus was "a very bad decision", especially at a time of public sector pay restraint.

"To be told that a banker supposed to be working for the public service is to be made an exception with this huge increase, it's utterly unacceptable."