Hester’s £3.3m wages not enough, say RBS investors

Stephen Hester

Stephen Hester

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ROYAL Bank of Scotland chief executive Stephen Hester is not being paid enough, some of the bank’s biggest investors have told MPs.

Despite his £3.3 million package this year, representatives of some of RBS’s largest private-sector shareholders claimed Mr Hester’s pay did not represent the “commercial rate” for the job he is doing.

Richard Buxton, head of UK equities at asset manager Schroders, told the Treasury select committee at Westminster that the RBS boss’s pay had become a “political football”.

He said: “He can’t at present be paid a commercial rate for doing that job.”

His comments were backed up by Robert Talbut, chief investment officer of Royal London Asset Management, who said: “Its [RBS’s] ability to retain a commercial management team is going to be severely inhibited if [the bank’s managers] do not believe they are going to receive a significant market rate.”

Mr Hester said last week the pressure on him over his pay was “unfair” and that he had been “within inches of quitting” his role in charge of the 82 per cent state-owned bank after a row over his bonus earlier this year.

He had been due to receive an all-share bonus worth £963,000, but waived the payment after a public outcry.

Former Liberal Democrat Treasury spokesman Lord Oakeshott said the comments from the private shareholder was a case of “the tail trying to wag the dog”. He said: “We own 82 per cent of it and we didn’t put the money in as a share price punt, we did it to get the bank lending again.”

Mr Hester’s pay package is lower than that of the chief executives of RBS’s two biggest rivals, Barclays and Lloyds Banking Group. As well as his £1.2m salary, he received a £1.62m long-term incentive award, £420,000 towards his pension, and £26,000 of other benefits. Lloyds boss Antonio Horta-Osorio received a package worth £4.56m, even after waiving an annual bonus which could have been worth £2.39m, while Barclays chief executive Bob Diamond was handed a total package worth £17.7m.

The committee also heard warnings against a possible “sweetheart deal” through which the Government would sell cut-price RBS shares to an overseas sovereign wealth fund.

Mr Buxton urged the Government to ensure any buyer was “committed and long-term” rather than simply focused on making a swift profit.

“[The government] has to be patient,” he said. “They don’t need to give the Exchequer’s money away to a sovereign wealth fund. They could retain it and make their money back.”