The Royal Bank of Scotland yesterday found itself embroiled in a fresh pay row as details of its chief executive's multi-million pound deal reached staff and shareholders.
The Royal Bank of Scotland yesterday found itself embroiled in a fresh pay row as details of its chief executive's multi-million pound deal reached staff and shareholders.
Many reacted furiously to Stephen Hester's £9.6m package, and shareholders branded it "outrageous" that he should take home such vast sums while making thousands of staff redundant.
Because the government owns a 70% stake in RBS the bank is now treated as a nationalised asset, meaning that Mr Hester is by far and away the best paid public sector employee in the UK.
Including bonuses, his gross pay could be more than fifty times the Prime Minister's salary and roughly double that of his nearest rival, Lloyds group chief executive Eric Daniels.
It is broadly in line with the lavish packages enjoyed by chief executives in private banks, with Michael Geoghegan at HSBC, for example, earning slightly more.
However, the new deal, expected to be confirmed this week after it was discussed on Friday, has surprised many in the financial sector.
Mr Hester told the Treasury Select Committee last year that pay in some areas was "way too high" and that he would work to ensure it was reduced.
Now he could be eligible for up to £9.6m if he can turn around the struggling bank's fortunes. Under the terms of the deal, yet to be finalised, he would be paid an annual salary of £1.2m, with around £2m in non-cash bonus payments each year and approximately £6.4m in long-term share and stock options.
To access the larger sums Mr Hester will have to ensure RBS makes significant improvements on its current 37.5p share price, hitting 70p to trigger the full payment. In addition, his bonuses for 2009 can only be redeemed after three years.
Before Mr Hester can take advantage of the full amount the bank will have to have made back around £15bn in profit for the UK taxpayer, effectively the largest shareholder.
There is also a "claw-back" clause, meaning that if Mr Hester is later deemed to have made bad decisions the money can be reclaimed by the bank even after he has pocketed it.
A similar clause, if in place, could have been used to retract some of the money paid to Sir Fred Goodwin.
Asked whether he approved of the pay deal, a spokesman for the Prime Minister said that it was a matter for the RBS board to decide.
However, he added: "In discussions, UKFI has been very clear that all rewards must be based on long-term sustainable performance of RBS.
"Our objectives in relation to RBS are to ensure that the value of the business grows so we can get the maximum possible return for the taxpayer."
Other commentators were appalled by the sums handed out to bankers in the depths of the recession.
Roger Lawson of the RBS Shareholders Action Group said: "It is absolutely outrageous that the government does not use its power to bring the remuneration of bankers in these companies down to a reasonable level. Do they need to pay him this much to make him work harder?"
Graham Goddard, Unite deputy general secretary, said news of Mr Hester's pay-out would be met with "absolute disbelief" by finance industry staff.
"It's nice work if you can get it. Unfortunately over the last few months thousands of RBS staff have lost the jobs which gave them just a fraction of Hester's pay,"
he said.
