Monday, June 22, 2009

RBS boss set for £9.6m pay deal!

Stephen Hester, chief executive, RBS
Stephen Hester took over as RBS boss late last year

Royal Bank of Scotland is this week expected to approve a pay package worth up to £9.6m for its chief executive Stephen Hester.

The remuneration deal was agreed on Friday by RBS chairman Sir Philip Hampton and its leading shareholders.

One of the groups represented was UK Financial Investments, which manages the 70% stake in RBS held by taxpayers.

The package is made up of £1.2m in pay, up to £2m in non-cash bonuses and up to £6.4m in long-term incentives.

The long-term incentives will only be payable if share price targets are hit over the next three years.

It is important that the incentives are linked to the share price because the government is keen to sell its shareholding, which was bought at a price of about 50 pence a share.

In early trading on Monday, the shares were trading at 37p a share.

Mr Hester would only get the maximum remuneration if the share price were to hit 70p, which would give the taxpayer a profit of £8bn.

The problem, according to BBC business editor Robert Peston, is that Bank of England governor Mervyn King believes banks are still not lending enough money to fuel a recovery.

Lending more money would be risky and might not be compatible with big growth in the RBS share price.

Mr Hester took over as RBS chief executive late last year following the departure of Sir Fred Goodwin.

He had previously been chief executive of British Land and chief operating officer of Abbey National.

In April, RBS announced 9,000 job cuts, having made a loss of £24.1bn in 2008 - the largest loss in UK corporate history.


BBC NEWS REPORT.

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