The taxpayer-backed bank trims its chief executive's windfall to six figures.
This week, stories about big bonuses have been like buses: they've arrived in threes.
On Tuesday, I covered Vince Cable's plans to curb excessive company pay, followed by the aborted £2.5 million payout to the chairman of FTSE 100 firm Cairn Energy (LSE: CNE).
RBS = Reducing Bonus Size
The latest news about big bonuses comes from Royal Bank of Scotland (LSE: RBS), which is 83%-owned by our government, following £45.2 billion of taxpayer-funded bailouts.
Earlier this week, the news that Stephen Hester, chief executive of RBS, was in line for a seven-figure, £1 million-plus bonus caused a predictable storm of protest from politicians. First, Prime Minister David Cameron firmly stated that Hester should not be paid a windfall exceeding £1 million.
In the House of Commons, Labour leader Ed Miliband argued that the RBS CEO should receive no bonus. This cry was also echoed in the House of Lords by Lord Oakeshott, Liberal Democrat ex-Treasury spokesman, who complained that RBS had not met its small-business lending targets under Project Merlin.
In 2011, RBS set aside six million shares to pay Hester's 2011 bonus. At Thursday's closing price of 27.7p, these would be worth more than £1.66 million. Last year, Hester banked £2 million in shares as a bonus.
However, following a meeting by RBS's remuneration committee, Hester is set to receive only 3.6 million shares. These would add just under £1 million to Hester's salary of £1.2 million.
Also speaking in the Commons, Angela Eagle (Labour MP and Shadow Commons leader) blasted the coalition government, saying, "The board of RBS is thinking of paying their [sic] chief executive in one day more than someone on average earnings would make in a lifetime." Of course, Eagle should be familiar with Hester's contract, as the previous Labour government negotiated and agreed it.
What about other bank bosses?
Then again, it is well worth putting Hester's bonus into context, given that he runs a business worth close to £16 billion.
One of Hester's direct reports, head of investment banking John Hourican, is expected to pick up £4.6 million in RBS shares from a long-term incentive scheme. Also, Bob Diamond, the boss of banking rival Barclays (LSE: BARC) is rumoured to be in line for a bonus of £10 million for his efforts in 2011, which is nearly eight times his £1.3 million salary.
In addition, Antonio Horta-Osório, CEO of Lloyds Banking Group (LSE: LLOY), has waived his entitlement to a bonus of £2.4 million, following two months of absence due to stress.
Public protests
Of course, given ongoing falls in disposable incomes, the steeply rising cost of living, and the fact that the UK economy shrank by 0.2% in the last three months of 2011, any big banking bonuses are sure to play badly with the public.
Indeed, in an online poll today at the Daily Telegraph website, over half (52%) of respondents voted for Hester to receive no bonus at all, with a further 22% recommending a bonus below £100,000. A mere 15% of Telegraph readers voted for a bonus above the million mark.
In summary, almost 4½ years since the credit crunch arrived in August 2007, Britain's anger for fat-cat bankers has yet to subside!
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