The awarding of a reduced bonus just short of £1 million to the boss of state-rescued Royal Bank of Scotland sparked heavy criticism yesterday as Britain teeters on the brink of recession.
RBS announced late Thursday that boss Stephen Hester had been awarded an annual bonus of £963,000 (€1.15 million).
But the fact that it was less than half the £2 million he was given a year earlier failed to dent criticism of the payout.
The award was underneath the £1 million figure reportedly sought by Prime Minister David Cameron and because the payout is in shares and deferred until 2014, the value could go either up or down.
However, with the state-controlled bank struggling to recover, lawmakers and other key officials hit out at Mr Hester’s award, which comes as Britain sits on the brink of recession amid painful austerity cuts from the coalition government.
Trade union leaders also blasted the bonus, coming after RBS has slashed tens of thousands of jobs since its rescue at the height of the global financial crisis in 2008. The lender is now 82 per cent owned by the state.
The leader of the opposition Labour Party, Ed Miliband, said Mr Cameron should have stopped the bonus.
“This is a terrible failure of leadership by the Prime Minister. He’s been promising for months action against excessive bonuses, executive pay, and now he’s nodded through a million-pound bonus,” Mr Miliband told Sky News.
“He must now explain, not least to the British people, why he has allowed this to happen.”
Union leaders also expressed outrage.
“What planet does Stephen Hester and his banking chums live on?” said David Fleming, senior official at Britain’s biggest union Unite.
“Taking almost £1 million from taxpayers’ pockets as a bonus is utterly disgusting and offensive to every working person across the country.
“How can a Royal Bank of Scotland senior banker who is responsible for sacking over 21,000 workers be rewarded in this way?” RBS defended the size of the bonus, which will be paid on top of Mr Hester’s annual salary of £1.2 million.
“The board is aware of the difficulties in trying to reconcile the competing objectives of all our stakeholders. This is especially true on the issue of pay,” group chairman Philip Hampton said in a statement.
“Stephen Hester’s pay award reflects progress in the categories agreed with our shareholders,” he said.
Mr Hester had played no part in the bank’s collapse and subsequent bailout, he added.
According to the BBC, the government agreed to the bonus, fearing that a veto would have triggered the resignation of Hester and much of the RBS board.
RBS has slashed almost 34,000 jobs since the bailout in October 2008.
Lloyds Banking Group, which is 41 per cent owned by the state after it too received a bailout, revealed earlier this month that its boss Antonio Horta-Osorio had declined his 2011 annual bonus.
Portuguese national Horta-Osorio, 47, agreed not to take a potential award of about £2.4 million, shortly after he returned to work following a two-month break due to fatigue.
Following the announcement of Hester’s award, Britain was waiting to learn about the rewards due to the bosses at the country’s two biggest banks HSBC and Barclays, neither of whom needed state bailouts.
Reports suggest that Barclays’ chief executive officer Bob Diamond could be in line for a bonus pot of about £10 million.