Royal Bank of Scotland chief executive Stephen Hester is set to be given a reward package worth up to £9.6 million, it has been revealed.
In a deal that will be watched carefully across the banking industry, Hester will receive £1.2 million in pay, up to £2 million in non-cash bonuses and up to £6.4 million in incentives dependent on the performance of RBS’s share price.
The remuneration package earned the approval of UK Financial Investments, the body that manages the 70 per cent taxpayer stake in the bank, on Friday. To be eligible for the maximum long-term incentives Hester would have to raise RBS’s share value to 70p, which would give the government an £8 billion profit on its 50p purchase price. On Monday morning the shares were sitting far below this, at 37p.
The package is far more generous than that of Hester’s counterpart at Lloyds Banking Group, Eric Daniels, whose bank is 43 per cent government-owned. Daniels receives a base salary of £1.035 million and similar long-term incentives that could take his total remuneration up to £5.4 million.
Hester’s award was described as “outrageous” by the RBS Action Group of shareholders, while unions also expressed anger at the decision.
"Reports that Stephen Hester will be awarded a £9.6 million package will be met with absolute disbelief by front-line staff in the finance industry," said Graham Goddard, deputy general secretary of the Unite union. "Staff and customers are sick of seeing senior bankers earn such huge financial awards when every week hundreds of hardworking and loyal staff are losing their jobs."
RBS announced 9,000 job cuts in April, having made a loss of £24.1 billion in 2008 – the largest loss in UK corporate history. Last week the bank’s former chief executive, Sir Fred Goodwin, agreed to reduce his controversial £703,000 annual pension by £200,000.