RBS CEO turns down bonus amid criticism of payout

January 29, 2012 - 6:45 PM
Britain RBS

A sign of RBS, Royal Bank of Scotland, is seen at its office in the City of London, Friday, Jan. 27, 2012. RBS bank's board of directors have awarded the bank's CEO Stephen Hester 3.6 million shares for his work over the last year, worth about 963,000 pounds ($1.5 million) based on Thursday's closing share price, although 82 percent of the bank is owned by the British government after recent financial bailouts. (AP Photo/Sang Tan)

LONDON (AP) — Royal Bank of Scotland chief executive Stephen Hester will not be accepting a 1 million pound ($1.5 million) bonus that drew criticism from British public and politicians, the bank said Sunday.

Spokesman David Gaffney said Hester would not receive the bonus of 3.6 million shares he was awarded last week by the board of the largely state-owned bank.

The British government spent 45 billion pounds bailing out RBS three years ago. It still owns an 82 percent stake, and politicians had criticized the reward at a time when Britons face painful spending cuts and tax hikes.

The government — which has insisted it has no control over the bank's bonuses — welcomed the announcement.

"This is a sensible and welcome decision that enables Stephen Hester to focus on the very important job he has got to do, namely to get back billions of pounds of taxpayers' money that was put into RBS," Treasury chief George Osborne said.

The decision follows Saturday's announcement that RBS chairman Philip Hampton was waiving his own bonus of 1.4 million pounds in shares.

Hester and Hampton were brought in after Fred Goodwin, who led RBS's ill-fated takeover of Dutch bank ABN Amro, stepped down in October 2008 as the government was spending billions to prop up the bank.

The board of directors decided last week to award Hester a bonus of 3.6 million shares — worth just under 1 million pounds at Friday's closing share price of 27.74 pence. That came on top of his annual salary of 1.2 million pounds.

Prime Minister David Cameron said Saturday that Hester's bonus was "a matter for him," but pointed out it was much less than last year's.

The government claimed it had no control over bonuses awarded by the bank, and said replacing Hester if he resigned would be more costly than paying the reward.

But many politicians were critical. London Mayor Boris Johnson, a Conservative like Cameron, said he found the bonus "absolutely bewildering."

Rachel Reeves, Treasury spokeswoman for the opposition Labour Party, said Sunday the sum was inappropriate "when families are feeling the pinch."

"It's time the government explained why they have allowed these bonuses to go through unchallenged," she said.

Before the bank's announcement, the Labour Party said it would force a vote in the House of Commons next month calling for Hester to be stripped of his bonus.