Monday 23 April 2018

RBS chief's pay set to win approval

RBS Chief Executive Stephen Hester. Photo: PA
RBS Chief Executive Stephen Hester. Photo: PA

Holly Williams

The controversial £7.7m pay package awarded to Royal Bank of Scotland's boss is expected to be given the all-clear by the UK government today despite a widespread backlash over the deal.

UK Financial Investments (UKFI), which manages the government's bank assets, is reportedly planning to give its backing when shareholders cast their vote on RBS pay plans at the group's annual meeting in Edinburgh.

The move could see RBS, which is 83pc owned by the taxpayer, attract further public outrage after details of chief executive Stephen Hester's pay emerged last month.

It was revealed that he was awarded an additional £4.5m potential shares windfall on top of his £2m annual bonus and £1.2m salary for 2010, which was not originally revealed under the Project Merlin agreement with the government to rein in pay.

RBS also admitted it paid 323 code staff - those deemed to be in risk-sensitive roles - £375m last year.

News of the awards came after annual figures showed the bank remained in the red last year, with losses of £1.1bn in 2010.

Advisory group Pirc has already slammed the group's executive pay plans and is recommending shareholders oppose the remuneration report at the AGM.

It said new long-term incentive awards of up to 400pc of salary were "excessive" and noted that RBS pays above average for both its highest paid director and average executive salary.

MPs on the Commons Public Accounts Committee also attacked Mr Hester's pay at a hearing last month.

Mr Hester told the committee his reward was "at the low end" of pay in the industry, "albeit at the high end of society" when asked to justify the deal.

However, UKFI is understood to be planning to give its seal of approval, having been consulted in advance of the award.

UKFI's only vote against the bank's remuneration report came in 2009 in a protest over former chief executive Sir Fred Goodwin's pension deal.

The bank is the first of the major players to hold its annual shareholder meeting this year.

It comes just weeks after the key interim report from the Independent Commission on Banking (ICB), which revealed plans to ring-fence retail operations from investment banking.

The proposals were met with some relief in the City, stopping short of a full-scale separation of retail and investment arms.

The more moderate plans gave a boost to RBS shares as the bank appeared to have escaped the worst case scenario.

But there will still be sizeable costs involved if the ICB plans go ahead, while the impact of the ICB's aims to increase the capital ratio set aside by banks to at least 10pc may also be up for discussion at the AGM.

Shareholders may likewise focus on the outlook for a return of the taxpayer's stake in RBS back into the private sector.

While the ultimate decision lies with UKFI, Mr Hester was reportedly discussing the possibility of a partial sale this year during a recent round of meetings with major shareholders.

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