The all-stock award of 3.6 million shares, whose value was based on the closing price on Jan. 25, will be deferred until 2014, Edinburgh-based RBS said in a statement yesterday. Hester, 51, took a 2 million-pound bonus for 2010, his first since replacing Fred Goodwin in 2008. He made 1.22 million pounds in salary last year.
Executives at RBS, Britain’s biggest government-controlled lender, have been urged by Prime Minister David Cameron to show restraint on pay at a time when real household incomes are falling and public spending is being squeezed. Cameron this month said Hester’s bonus should not exceed 1 million pounds this year.
“Hester came in to clear up the mess and is steering RBS (RBS) in the right direction,” said Tom Rayner, an analyst at Exane BNP Paribas in London who rates RBS “neutral.” “Hester is not Fred Goodwin. It’s a dangerous game that is being played here as he could just walk away.”
RBS shares fell by 48 percent last year as Europe’s sovereign debt crisis eroded revenue from its securities unit. The Edinburgh-based bank announced about 4,800 job cuts earlier this month and said it plans to sell or close its cash equities, mergers advisory, corporate broking and equity capital markets operations. John Hourican, who leads RBS’s securities unit, is in line for a payout of as much as 5.8 million pounds this year as part of his 2009 share award that vests in April.
‘Out of Touch’
Chris Leslie, the opposition Labour party’s spokesman for finance, said Hester’s award showed that Cameron’s promises to rein in excessive bonuses at state-owned banks “have proved to be utterly worthless.”
“Anyone who thinks it is acceptable to award a bonus of almost 1 million pounds on top of a basic salary of 1.2 million pounds in these tough times is desperately out of touch with millions of people who are struggling to make ends meet,” Leslie said.
A spokeswoman for Cameron’s office declined to comment on Hester’s compensation. Cameron’s Conservative Party said that Labour failed to curb bonuses when it was in power.
“It would clearly have been unacceptable for Stephen Hester’s bonus to have been the same as last year,” the Conservative Party said in an e-mailed statement. “We have been very clear that at RBS and in other banks the bonus pool has got to be considerably lower than it was last year.”
Lloyds Banking Group Plc (LLOY) CEO Antonio Horta-Osorio said on Jan. 13 he won’t take a 2011 bonus following his nine-week absence for exhaustion at the 41 percent government-owned lender. The payment could have been as much as 2.39 million pounds, according to company filings.
Morgan Stanley CEO James Gorman’s 2011 pay was cut by 25 percent to $10.5 million from the previous year while JPMorgan Chase & Co. held CEO Jamie Dimon’s pay steady at $23 million, two people familiar with the plans said earlier this month.
Britain has an 82 percent stake in RBS after bailing out the bank with 45.5 billion pounds of capital during the banking crisis in 2008 and 2009.
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