RBS boss Stephen Hester rejects £1m bonus


Ed Miliband: "The government has got a completely tin ear when it comes to understanding what people are feeling"

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Royal Bank of Scotland chief executive Stephen Hester has turned down his controversial bonus, worth nearly £1m.

BBC business editor Robert Peston said Mr Hester would renounce the £963,000 shares-only payment after succumbing to "enormous political pressure".

Chancellor George Osborne said it was a "sensible and welcome" decision that now let Mr Hester focus on getting back billions of pounds for the taxpayer.

Labour leader Ed Miliband said the RBS boss had "done the right thing".

Earlier, Labour said it would force a vote on the issue after Prime Minister David Cameron refused to block the bonus from the mostly publicly-owned bank.

'Out of touch'

Robert Peston said the board felt Mr Hester had earned the bonus for the way he had made RBS a less risky organisation.


It was Labour's decision to put Stephen Hester's bonus to a Commons vote that gave the RBS chief executive no option but to say he would not be taking £963,000 in shares.

As an RBS director put it to me, it would have been a great mistake for the semi-nationalised bank to fight Parliament to preserve rewards for its chief executive seen by many as excessive.

MPs were expected to vote against the bonus payment, and in those circumstances, it was untenable for him to pocket it. Or at least that was the conclusion that Mr Hester reached in conversation with the bank's chairman, Sir Philip Hampton.

That said, RBS's non-executive directors stand by their decision to award Mr Hester 60% of the maximum bonus he could have earned - because they feel he has strengthened the bank, and they argue that Mr Hester is paid less than his peers.

But when it looked as though MPs were going to vote against it, the general consensus amongst the directors was that the "game was up", he added.

Earlier this month, RBS announced it would cut 3,500 jobs from its global banking division.

The cuts will mean RBS has removed 11,000 employees from its staff, almost halving its 2007, pre-credit crunch headcount of 24,000.

Shares in the bank have fallen 36% in the last year, falling 2% on Monday's open.

Shadow business secretary Chuka Umunna said Mr Hester was already being adequately rewarded for his performance.

"He received £1.2m a year - that's 46 times the average salary of an average employee in this country - to do that job," he said.

"Usually you receive a bonus when you've done something above and beyond - exceptional, extraordinary."

"But many of the things that have been cited in terms of things that he's done for the bank are things that you would expect him to do."

Mr Hester was awarded only 60% of his bonus, which is judged on five categories. These are: strategic direction;

business delivery and financial performance; stakeholders; risk and control; and capability and development.

But William Wright, investment bank analyst for Financial News told the BBC: "It sets a very dangerous precedent for RBS.

"It raises the level of political risk and political interference in the day-to-day running of RBS to what some people many consider to be intolerable levels.

"It raises very serious questions about who actually is running RBS day to day.

"Shareholders, in this case the UK government, appoint a board, which in turn appoints an executive team to run the bank, and here we have a situation where the board agrees something, which has been signed off by shareholders and then they have been forced into a U-turn by political opinion."

Former Liberal Democrat Treasury spokesman Lord Oakeshott said Mr Hester's decision was "better late than never".

"I'm glad that eventually Stephen Hester has seen sense and seen the outrage of most people in this country, and Lib Dems who have been complaining bitterly about this for weeks," he said.

Bob Diamond Mr Hester's bonus would not look big compared with that of Barclays boss Bob Diamond, Mr Peston says

"I'm very sorry that David Cameron and George Osborne didn't see that, and have been defending the indefensible right up to today."

Mr Hester was appointed chief executive at the end of 2008 to replace Sir Fred Goodwin, after the bank had to be bailed out by the government, which now owns 82% of it.

RBS chairman Sir Philip Hampton had already announced that he would waive his payout.

He had been on course to claim 5.17 million RBS shares in February, but it is thought he told the bank's remuneration committee it would "not be appropriate" to take a £1.4m payout.

Robert Peston said RBS's directors now recognise it would have been better to delay Mr Hester's bonus decision until after it was revealed how much Barclays chief executive Bob Diamond received.

"Mr Hester's bonus would not look big in comparison," he explained.


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  • rate this

    Comment number 884.

    At school he was unexceptional but that is no disgrace in itself. He no doubt was caught up in the greedy world of late eighties banking and is a product of the Gekko economics without the criminality. He has risen to the top of it and is picking up the pieces. He is probably doing his best and deserves some credit for that. A far better solution would be for him to sue Goodwin for his bonus.

  • rate this

    Comment number 883.

    Good grief! For the time being, this incident represents little more than a disappointing display of bowing to sentiment where a good CEO has been made a scape-goat, but with the current hatred of successful people and Capitalism, what next?

    We'll all be reading The Communist Manifesto by Karl Marx and wondering whether it was such a bad idea after all.

  • rate this

    Comment number 882.

    LABOUR was in power when they had the chance to dictate the terms for the bank CEOs at the time of the bailout. They failed to do so and now hound the current government for failing to act. Whatever the rights or wrongs of this case, shame on you Labour for claiming a victory when you failed to act. Now others are having to deal with your detritus. Hypocrites!

  • rate this

    Comment number 881.

    Can we all start a media petition to oust/reduce pay of poor-performing School Heads, Teachers, Hospital Bosses, Council Heads, etc, etc.... Oh, no.... The Union Bosses gnash their teeth when these things are brought up.... What a silly country we live in!

  • rate this

    Comment number 880.

    ... and on a final note. He knew full well when he took on the role that a) the Government was the majority shareholder, b) that its was an extremely politically volitile position and c) the general public are suffering a great deal. What did he expect?

  • rate this

    Comment number 879.

    Today's society likes to bite the hand that feeds them. If it weren't for people such as this man, it wouldn't be £1m bonuses making the headlines, it would be that billions of pounds had been lost, and thousands had been made unemployed with RBS going into liquidation. Sadly the wider British society is the creed of ignorance and I wouldn't blame him if he resigned.

  • rate this

    Comment number 878.

    `Usual envious posters, today, with their fatuous comments about being able to run RBS and being prepared to do so for a teacher's salary etc. Complete twaddle!
    Mob justice is rarely pretty and shame usually follows when the consequences are seen - body on a rope, share price fall, etc.
    Of course Labour won't feel shame - they don't do it!

  • rate this

    Comment number 877.

    @FauxGeordie "You may have noticed the direct bailout of £45 billion for these world bestriding geniuses. Or the guarantees/loans/£200bn QE - All gone for ever. You must have seen - it was in all the papers.
    What would you say was a 'bad' or 'incompetent' job?"

    The individual concerned was not part of the banking establishment that caused these issues so not fair to play that card.

  • rate this

    Comment number 876.

    Growing inequality, environmental decline and "teetering" economies mean the world must change the way it does business, a major UN report says

  • rate this

    Comment number 875.

    832.Total Mass Retain
    "That was dealt with by my remark: "High risk borrowers, by definition, are not best judge of ability to pay"."

    So you are quite happy to blame someone else whilst taking no responsibility for you own actions. We really need to stop whinging and get on with things. China, et al, are chomping at our heels and we need the best at the top to succeed, whatever the price.

  • rate this

    Comment number 874.

    He looks well-fed.

  • rate this

    Comment number 873.

    Couple of points

    1. He stood to get a current payout of as I understand it zero anyway. By paying a bonus in shares he would make money if the share price went up which in turn would be good news for the tax payer. Usually a 3 year wait to get anything?
    2. He was hired in 2008. Remind me, who was in power then? Who owned RBS then? Who is now baying for blood? The word hypocrites comes to mind

  • rate this

    Comment number 872.

    Stephen Hester has turned down his controversial bonus. There are 8 other directors on the RBS Board of Management - each receiving basic salaries comparable to Mr Hestler.

    How much have they awarded themselves in bonus payments? What, now, is their position with regard to such payment? - Anyone like to comment?

  • rate this

    Comment number 871.

    827. sammypaws
    As I have already said, some bankers had their part to play in the mess but so too did the feckless borrowers taking out loans that they knew they couldn't afford to pay
    The structures were changed so those taking on the bad debt made money at other investors expense.
    Blame the feckless if you like but this was corporate greed on a massive scale.

  • rate this

    Comment number 870.

    @ 822 Sixp

    I agree wholeheartedly that greed was the problem. The greed of people borrowing money that they knew they could never repay. I don't think the banks were out knocking on doors to see if people wanted loans. Maybe it's about time that people took responsibility for their life choices and stopped trying to find someone else to blame for their own stupidity and recklessness.

  • rate this

    Comment number 869.

    Hester would be quite entitled to resign his position given that the shareholders i.e. us and our representatives goverment/M.Ps have failed to support him. That would have crashed the share price and what top quality replacements would want the job?

    He could walk into a job in Singapore/Zurich/Hong Kong
    etc on his record and have none of the hassle he has had here.

  • rate this

    Comment number 868.

    And these are the same people who are telling you that your future pensions are “unaffordable”.

  • rate this

    Comment number 867.

    Couldn't be more clear: the link between banking & finance & the Conservative party. One can see why Flashman is reluctant to alienate his principal donors. If only it all wasn't so ruddy obvious I'd probably feel a lot less angry about this debacle.

  • rate this

    Comment number 866.

    it is good to see Ed Miliband standing up for the hard working British people. Given his high principles perhaps he will now turn his attention to union barons who live off the same hard working people with their inflated renumeration packages, subsidised housing, etc. He should insist they freeze their pay and if they fail to do so ban their contributions to the Labour party.

  • rate this

    Comment number 865.

    "Don't be daft, the taxpayer didn't bail out RBS. Labour had to borrow the money to recapitalise the banks as they had already spent all the taxes"

    Mind-shatteringly wrong

    Who did the politicians give the money to? Oxfam? The poor?

    An industry which exists because of taxpayer support resulting in huge hardship. But not for those IN the industry, who continue to skim and abstract our cash


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