The chief executive of Britain’s state-rescued Royal Bank of Scotland has bowed to intense political pressure and waived his annual bonus worth almost £1 million, the lender said yesterday.
A bank spokesman confirmed that Stephen Hester has decided to forego a bonus of €1.15 million in shares that was awarded last week, on top of his €1.45 million salary.
The huge award – amid government calls for pay restraint, ongoing austerity and economic gloom – sparked outrage among trade unions and the opposition Labour Party because RBS is 82 per cent state-owned following a huge bailout.
Labour had vowed at the weekend to force a parliamentary vote to call for Mr Hester to be stripped of the bonus, piling enormous political pressure onthe lender, while the bank’s chairman renounced his own bonus on Saturday.
The government welcomed Mr Hester’s decision to spurn the payment, which was proving a major embarrassment for the Conservative-Liberal Democrat coalition that has pledged to crack down on excessive boardroom pay.
“This is a sensible and welcome decision that enables Stephen Hester to focus on the very important job he has got to do, namely to get back billions of pounds of taxpayers’ money that was put into RBS,” said Chancellor of the Exchequer George Osborne.
However, the controversial issue will likely resurface because Mr Hester’s future bonuses could potentially reach £6.4 million under the terms of a long-term incentive plan.
Labour leader Ed Miliband, who last week accused British Prime Minister David Cameron of a “failure of leadership” over Mr Hester’s bonus, also welcomed the news.
“Stephen Hester has done the right thing,” said Mr Miliband.
“It is a shame that a feeble, out-of-touch David Cameron did not realise he should do the right thing and stand up for the interests of the British people.
“Labour was right to seek a parliamentary vote on this so that the people’s voice could be heard. But the debate about fair executive pay and responsible capitalism is only just beginning.
“We need a government that will tax bankers’ bonuses and bring responsibility to the boardroom.”
British Foreign Secretary William Hague added that the previous Labour administration had agreed the terms of the RBS incentive scheme.
Asked about whether he wanted to congratulate the Labour party for forcing Mr Hester to ditch his award, Mr Hague replied:
“Remember that the long-term incentive scheme was actually agreed in 2009 under the previous Labour government, so I don’t think they have that much to congratulate themselves about.”