Royal Bank's Hester: Waiving not drowning
Stephen Hester, the chief executive of Royal Bank of Scotland, is to tell his board that he won't take a bonus for 2009.
His decision follows media speculation that he was in line to receive a bonus of £1.6m - although in fact Royal Bank's board will not decide his bonus entitlement for the bank's performance in 2009 until later this week.
Hester's decision will put pressure on Eric Daniels, the chief executive of Lloyds, to turn down whatever bonus he may be offered.
Any bonus taken by Hester or Daniels would have been controversial, because John Varley - his oppositive number at Barclays - last week declined to take a bonus.
Also Royal Bank is set to announce substantial losses when it discloses its 2009 results on Thursday.
Hester is not signalling any distaste for the principle of performance-based pay - and expects to receive bonuses in future years, if he hits the targets he has been set.
City analysts believe Royal Bank made a loss in 2009 greater than £5bn, both before and after accounting for tax - which is huge and unsustainable, but a reduction on the record £24bn attributable loss it made in 2008.
Hester was recruited in the autumn of 2008 to rebuild Royal Bank, after it was rescued by taxpayers.
According to a banking source, Hester believes that public hostility to the bank would increase if he were to take a bonus and would be counter-productive to his goal of steering Royal Bank away from politics.
He believes that Royal Bank must stop being a political football if it is to recover sufficiently to allow it to be privatised at a profit for taxpayers.
As I have mentioned before, Royal Bank - which is 84% owned by taxpayers - is due to declare bonuses of £1.3bn for its bankers.
This is less than half the size of the bonus "pool" announced last week by Barclays.
Royal Bank's bonuses have yet to be formally approved by the Treasury - although I am told that the chancellor and prime minister are likely to give their approval.
Although there will be criticism of bonuses to be paid by Royal Bank, Hester - whose salary is £1.2m - believes he has to pay "the minimum he can get away with" to prevent the defections of all his best investment bankers.
Hester and the bank's board have no doubt that It would be damaging for the interests of taxpayers - as shareholders in the bank - if Royal Bank's investment bank was seriously impaired by an inability to retain or recruit talent.