Bonus belt tightening at RBS
08/02/2012 15:09:00
Bonuses will be scrutinised by RBS following its recent confrontation with the public and politicians over top executive’s bonus pay. The bank has set up a team to look at how the pay packages for senior executives should be modified to avoid further aggravation about pay awards that are disproportionately high or that do not reflect performance.
The chairman of RBS, Sir Philip Hampton, said he is considering whether bonuses for top staff should be stopped altogether. Sir Phillip admitted, ‘Essentially, particularly in the investment banks, shareholders have done pretty badly and employees have done pretty well. That needs to be corrected.’ He said this after a period of sustained pressure from newspapers and politicians helped convince Stephen Hester and Sir Philip to waive their bonuses for 2011. These bonuses would have been worth approximately £1m and £1.4 million.
RBS, which following its bailout is now 83 per cent owned by the government, knows more controversy is in the pipeline. In the coming days it will need to address at least two more contentious issues. According to people close to the government RBS is under pressure to keep its overall bonus pool for its investment bankers, which reached nearly £1bn last year, below £500m this year. There is also likely to be questions of its maturing long-term incentive plans (LTIPs) for other top bankers. The 21 million restricted shares granted to investment bank boss John Hourican in 2009, which are now worth more than £6m is a prime example.
Sir Phillip said that while the salaries received by Hester and his team appeared to be very high, they were not particularly when compared with other bankers and top businessmen. When Mr Hester first took the job, there was a widespread belief within government and the bank that 2012 would be the year when the re-privatisation of RBS would begin. However with share prices not coming close to the value of the government’s £45bn capital injection it doesn’t look like this will happen before the next election in 2015. Therefore the bank will not be viewed like any other, and pay deals for top executives shall continue to come under intense scrutiny from both politicians and the public alike.
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