Here’s your starter for ten in our weekend slot where we throw up an idea or thought for debate…
Since the £963, 000 shares bonus for RBS Chief Executive Stephen Hester has been revealed there have been opinions pouring out from across the political spectrum.
When Ed Miliband accused David Cameron of a “failure of leadership” over it, Cameron promptly distanced himself from the process altogether, with George Osborne claiming it was due to rules put in place by Labour.
Boris Johnson seems to be against it, as is our usually economically liberal Defence Minister Jeremy Browne. And Nick Clegg has said he has “great sympathy” with the public’s opposition to the bonus.
So what do you think?
Is it justified performance related pay or profligacy with the pubic purse? Should Stephen Hester turn it down on principal or accept it for a job well done?
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28 Comments
No he should not
Very confusing and frustrating question forming-so to clarify:
Headline question: Should SH accept his bonus? No
Concluding questions: Is it justified performance related pay or profligacy with the pubic purse? not deserved
Should Stephen Hester turn it down on principal or accept it for a job well done? yes (he should turn it down!)
There are two entirely different questions.
1)Should the Board of RBS (not by the way the Government) have awarded him a bonus – clearly Yes. He has a contract which says that he is entiteld to a discretioanry bonus if he meet his objectives. He has clearly done so.
2) Should he have accpeted it. More tricky. Remember he had a perfectly good job at British land which he gave up to do this job, he agreed with the Board how and what he would be paid. He has met the conditions set down so why should he not get the agreed payment?
According to Vince Cable, shareholders should take more responsibility in deciding bonuses. The Government is the majority shareholder in RBS, hence the Government should have done what it is advising other shareholders to do!
Just to play devil’s advocate: He wasn’t in charge when the bank got into trouble, he came in and has so far steered it through quite a difficult time and his bonus is related to performance over a period of years into the future. It doesn’t seem totally unreasonable and is broadly in line with what the government seem to want to see going forward.
That the bonus is more than most people would earn over several decades is another question that I’m sure could exercise the economic & social liberals out there!
I’m undecided but it’s good to bear in mind just how important RBS’s performance is to the Treasury/taxpayer. I suspect it would be reassuring to know that Hester has loads of RBS shares he can’t cash til 2014.
Does he deserve it? I don’t know.
In this ‘bonus’ period the RBS shares have halved in value. We, as taxpayer/shareholders have lost money so how can the last year have been a success?The bonus is discetionary so it was possible to decide not to award it or defer it.
However,had he not got his bonus, he might well have decided to resign and, with his track record, would probably make more elsewhere. If he is, and the board clearly believe so, the best man for the job then such money is ‘peanuts’ in the overall debate on the ‘bonus culture’.
A point worth noting is Cameron’s ‘win/win’ situation….he bemoans the bonus but blames it (as everything else) on Labour.
Stephen Hester stepped into the breach, and took on what has been described as the ‘Poisened Chalice’ that RBS was. He has had to make difficult choices, BUT ultimately he has started to turn the bank around under his ‘Governance’. Setting aside the issue of the share price, he has returned RBS to profit, with pre-tax profits of around £2 billion – This in turn will see £2 – 3 hundred million in the coffers of Treasurey. I am sure, that under his continued leadership, and over the next 12 – 18 months RBS will become a viable entity which will allow the Government to dispose of it’s holding and re-coup taxpayers investment.
Based on MY assertion, I believe it is correct that a bonus was forthcoming – If Stephen Hester chooses to take this bonus, in all good faith it is deserved – However my concern is, if he does and then is ‘scapegoated’ he will walk away, then where does that leave the taxpayer? No competant or driven person IMHO, would be found or willing to take on the job. RBS would then become a ‘play’ thing for Treasurey Mandarins to indulge in, to play at being bankers and within a very short period, would be worthless and taxpayers would have no recourse, as there would be no-one willing to take the blame for its demise. RBS would just become a set of initials, bandied about in select committees trying to find out what went wrong, while those responsible would resort to hyperbole and obfuscation to protect their places on the honours list.
Should he choose to turn it down, then kudos to him – BUT it should be choice he makes not one that is forced on him, because of the effects it may have on him, his judgement or indeed a ‘false’ assumptions whipped up in a tabloid feeding-frenzy of his integrity.
The short term changes in th share porce should not affect whether he gets a bonus ( although they have lost RBS staff paid in shares in previous years around £1bn). He should not get a bigger bonus if the share process goes up, equally it should not affect his bonus if it goes down.
The important point is that although the government owns 80-odd percent of the company, they do so indirectly.
Politicians should be very wary of undermining the legitimacy of the law and breaking contracts by dictating pay policy, but board members should also be sensitive to the political atmosphere and their duty to retain public confidence.
Hester should assert his contractual rights and then make a voluntary gesture of goodwill to return the bonus in full or transfer it to a charitable foundation to demonstrate whose best interests he has at heart.
Debate’s over already. He just rejected it.
I’m not so much worried about the £1 million bonus. Mr Hester was not responsible for the Bank’s catastrophic failure pre-2008, he wasn’t even an employee then. By all reports he is doing a good job turning the bank around so the taxpayers can get their money back.
I’m not so worried about the £960,000 bonus (that is dependent on share performance anyway). Nor on the £1.2 million salary, nor the £400,000 pension support.
I’m far more worried about £4 million he’s apparently eligible to receive in further shares as part of something called a long-term-incentive-plan
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9043010/RBS-chief-Stephen-Hester-in-line-for-7m-payout-despite-bonus-cut.html
It’s bloody madness. You couldn’t make this stuff up.
It was the wrong question AGAIN. Just do not approve any bonuses. He gets paid for the job he is supposed to do. If he does not succeed he leaves. If he does he gets what he signed up for, and if there was a special share deal where he could buy shares at a special rate then he has made a profit – just like anyone in a proper cooperative or in John Lewis even.
Can the LibDems please get it into their naive heads that bonuses just do not work – ever! And they create the greatest sense on unfairness across the organisation. Surely it is about time we grasped this nettle, Dr Cable?
…………………………………The short term changes in th share porce should not affect whether he gets a bonus ( although they have lost RBS staff paid in shares in previous years around £1bn). He should not get a bigger bonus if the share process goes up, equally it should not affect his bonus if it goes down………..
Really? So it makes no difference if the boss presides over the halving of the value of a company or the doubling of its value? No wonder the reasoning behind the’ bonus culture’ is unfathomable..
@Andrew Suffield “Debate’s over already. He just rejected it”
And he should be applauded for having done so.
The Chairman, Sir Philip Hampton has declined his bonus, not Stephen Hester. The bonus should not be with held unless he has failed to fulfill the objectives laid down when Labour employed him. I have not heard anyone argue that he falls short on the job; the risk of failing to achieve a recovery in the company are so great that the bonus that he was promised by Labour should be paid.
Debates such as this – and the wider media frenzy – suit the banks perfectly by deflecting public anger towards the bonus of one or two individuals and away from the greater obscenity of government gifting vast unearned profits to private banks by allowing them – gratis – to levy interest on the 97% of the money supply they create from nothing.
Rather than echo the annual lynch mob mentality elsewhere, we should be proposing charging banks for credit creation or for sterling to be supplied only through the Bank of England – recovering the seignorage in full for the exchequer either way and allowing taxes on the productive economy to be reduced accordingly.
Million pound bonuses are, yet again, mere froth on the surface of this potential public revenue stream.
Stephen Hester, the CE of RBS is the top manager of a Sate run publically owned company.He should not accept his gratuitous bonus of £1M, at a time, of national austerity and when the UK is confronted with the worst national deficit since WW2.There is also a mounting bill to respond to the challenging HSE reports re-UK schools to tackle asbestos.
Further,there are nearly one million unemployed youngsters, between 18-24 years, at the peak of life ambition and now Spain and Italy have half of all young persons not in work or study. In Spain now there are 5.2 million unemployed : the exact population of Scotland.
Workers in firms up and down the country have accepted hefty paycuts in order to keep their colleagues in work while times are tough.
RBS is making redundancies with one hand while handing out massive bonuses with the other. That is wrong. If Stephen Hester and other leaders in similar positions cannot grasp that then they are not fit to lead.
They should move on and do something else.
There are plenty of shareholders other than RBS staff (whose cause is pleaded by Simon McGrath) who have little choice but to hold on to their shares and have very good reason to directly link Stephen Hester’s bonuses to the Company’s share price.
In November 2008, when the share price stood at around 53 pence, RBS’s newly appointed CEO announced that he wouldn’t be considering payments in excess of his salary until the share price reached at least 70 pence. It is a matter of public record that that the s.p. hasn’t seen more than 57pence since then. It currently stands at around 27pence.
Mr. Hester need only return the share price to the day of his arrival’s 53 pence and his £963,000 will be worth a lot more – in fact, nearly double.
Of course these share options may incentivise Mr. Hester to the benefit of shareholders and, ultimately, customers. However I suspect that last year’s decline, which has led to our stake in RBS diminishing in value by £14 billion, won’t be troubling him too much now it appears that the bank is preparing to buy him tranches of shares worth £4.5 million (or more according to an unsourced report in today’s Sunday Times) as part of a long-term pay plan.
Still, he’s not the only one making claims on this underperforming institution: that’s the inevitable “last roll” argument being used by those for whom the dice stopped rolling long ago.
Oh, what on earth could he do with that much money? It’s quite obscene when others are losing their jobs. I’m talking about all the emplyees of companies that have had to go into liqiudation because the banks can’t afford to lend them any money to cover temporary shortfalls, hundreds of small businesses. This is why jobs have disappeared and why so many young people have no job.
Of course he should turn it down. Until banks can actually support British businesses there IS no money for bonuses. That’s when Mr Hester will be seen to be doing his job properly.
Of course he should. His job makes him an easy target for those in the cheap seats but people with the expertise of Mr. Hester are few and far between. If he decided to quit today he could walk into a higher paying job tomorrow and his successor would almost certainly be less capable.
The level of pay and bonuses in finance is a scandal but until the govt grasps the nettle and reforms the whole corrupt system that is how it is. So, for now the govt should grit its teeth and stick to the contract it – or rather its Labour predecessor – negotiated. It would sit badly for a man charged with one of the most important jobs in UK banking being paid on a different scale from that currently prevailing – especially when it seems he is doing a rather good job – gearing down from 50x to 20x according to the BBC which is exactly the right direction of travel.
The whole debate is a major distration from the really important question – reforming out-of-control finance. Real political leadership would focus on keeping this in the spotlight and not letting the media set the agenda as usual.. What needs to be done, in general terms at least, is quite clear – a Glass-Steagall type act, breaking up the big banks, banning predatory practices, nationalising seignorage (see Andrew Duffield above) etc. On this we could hugely discomfort the Tories who are in danger of becoming a wholly owned subsidiary of the City.
We should also be working towards the principle of a fair day’s work for a fair day’s pay – and that means NO bonuses. On this I agree with John Carlisle (see earlier comment). Bonuses are a minefield of perverse incentives. How about making the directors of deposit taking institutions personnally liable in the event of a bankruptcy? i.e. no limited liability for them; that would concentrate their minds about risk taking.
and just as I was reading this a Gmail Toast popup up with an email from the BBC saying RBS’s Hester declines bonus
I sit corrected – saw “Chairman” go past in the news feed and got them mixed up. However, Hester has now also declined.
I wonder if RBS boss Stephen Hester is wishing he had taken up playing football at school rather than studying hard to achieve first class honours degrees in Philosophy, Politics and Economics. With wages for professional footballers topping £10m, Mr Hester would be forgiven for feeling a little under-appreciated in his role to return one of the UK’s largest hanging investments to profitability.
Watching from the economic stands I can see that rewarding the boss of a state owned bank with shares is by far the best way to ensure his loyalty to the cause. UK Chancellor George Osbourne and the Leader of the Opposition Ed Milliband have [IMHO] shown a short sightedness in siding with press driven public opinion instead of the national best interest. Let’s face it, they won’t be making such a fuss over Wayne Rooney’s pay will they ?
It’s embarassing for Labour that they’ve shown themselves willing to make pay and conditions the subject of whim, rather than contractual law. Millions of public servants will now have cause to fear them.
………………….Millions of public servants will now have cause to fear them………………..
Er, um…….. to fear which party?