Page last updated at 16:26 GMT, Sunday, 21 February 2010

RBS boss Stephen Hester to waive '1.6m bonus'

Stephen Hester
Mr Hester may deserve a bonus, but not yet, the business secretary says

Royal Bank of Scotland chief executive Stephen Hester, will not take his bonus this year, the BBC has learned.

He was reportedly to get shares worth £1.6m though the RBS board was not making a final decision until its results were announced later this week.

Business Secretary Lord Mandelson had said Mr Hester - who has a basic salary of £1.2m a year - should forgo this year's bonus until he proved his worth.

RBS is 84% taxpayer-owned and is set to post losses of about £5bn for 2009.

This would be down from losses of £24bn for 2008.

BBC business editor Robert Peston said it would have been controversial if Mr Hester had taken any bonus.

"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," our editor said.

"He believes that RBS must stop being a political football if it is to recover sufficiently to allow it to be privatised at a profit for taxpayers."

'Not tested'

Mr Hester was brought in to run the bank after its government bailout.

Lord Mandelson told the BBC he was "a rather strong and rather able man but whose performance and delivery has not yet been tested".

Robert Peston
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
Robert Peston
BBC business editor

"If further down the line in years to come he has done well and he has turned round RBS he deserves something back for it and I would be the first to say so, but not now," Mr Mandelson said.

He added: "What we have said to them is that their priority is repairing their balance sheets and getting their capital back in place and lending again fully."

The bank is set to announce it will pay a bonus pool of about £1.3bn to its investment bankers - a figure which it is negotiating with UK Financial Investors - the government body which oversees the taxpayers' controlling stake in the bank.

This was "very much at the lower end of the banks," Mr Mandelson said.


Last week Barclays, which did not take any direct state help during the financial crisis, said its total bonus payouts for staff had been reined in to £2.7bn.

However it had reported an £11.6bn profit - and chief executive John Varley and president Bob Diamond turned down bonuses for the second consecutive year, given "intense public interest and concern" about bankers' pay.

Earlier this year Mr Hester told MPs that he would not pay his bankers "a penny more [in bonuses] than we need to".

He also defended his bank's policy on bonuses, saying that he earned the "going rate" for his job, but added that even his parents thought he earned too much.

The singer and activist Billy Bragg has threatened not to pay his taxes in protest against the bonuses being paid out by Royal Bank of Scotland (RBS).

Lloyds Banking Group - also part-owned by taxpayers - is also set to release its results this week.

Our business editor said that Mr Hester's decision would put pressure on Eric Daniels, the chief executive of Lloyds, to turn down whatever bonus he may be offered.

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