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Royal Bank of Scotland (LSE:RBS) CEO, Stephen Hester bonus of £963,000 in shares has come under scrutiny from various parties.
To the anger of many Britons, the board of directors of the state-owned bank awarded Mr. Hester with the annual bonus which a majority of ordinary workers struggle to earn in a lifetime.
The move is particularly a sensitive matter because British taxpayers owe an 83% stake in the bank, after a devastating acquisition blunder that weighed down on the lender with billions’ worth of rotten debt.
Mr. Hester had not joined the bank when it almost went out of action. However, he has been generously compensated by the taxpayer at a time when the bank is still fighting to regain its’ lost fortunes.
Why Hester received the bonus
In its defence, the bank said that Mr. Hester is eligible for a bonus because of his competent leadership of the company.
UK Financial Investments Ltd (UKFI) said:
“As the largest shareholder in RBS, we have worked closely with the board to ensure that pay is aligned with the interests of shareholders and properly rewards long-term performance.
“Stephen Hester’s pay reflects the significant contribution he has made towards rebuilding RBS in 2011.”
Mr. Hester, who took over as the CEO in October 2008, is entitled for a bonus worth as much as £4.8m under the long-term incentive plan (LTIP).
The company made a net profit of £1.2 billion in the third quarter of last year compared with a £1.6bn loss in the same period in 2010.
The bank asserted that it showed restraint since its CEO was entitled to £1.5million. The bonus is 60% of the maximum he could have been awarded.
Public outrage
David Fleming, the Unite union national officer, said:
“How can a Royal Bank of Scotland senior banker who is responsible for sacking over 21,000 workers be rewarded in this way?”
Liberal Democratic minister Jeremy Browne said the RBS CEO is a “a public servant” and thus should not accept the award.
The Unite union voiced its comments asserting that it was “utterly disgusting and offensive.” The TUC described it as “utterly unacceptable.”
Members of Parliament were also annoyed – maintaining that RBS has not achieved its target for lending money to small firms set by Chancellor George Osborne.
Labour MP John Mann said: “It is a reward for failure. Giving him a bonus that just creeps under £1million is like sticking two fingers up at the taxpayer.”
Company spotlight
Royal Bank of Scotland is a banking and insurance holding company based in Edinburgh, Scotland. The bank operates different banking brands in the business banking, private banking, insurance, and corporate finance industries in North America, Europe, and Asia.
References
↑ BBC News
↑ Ninemsn
↑ Myfinance.co.uk
↑ The Guardian
↑ Bonjour Planet Earth
↑ Daily Mail
↑ Company homepage
