It was announced today, on the BBC website, that RBS boss Stephen Hester has received a bonus of £963,000. The troubled bank is 82% owned by the tax-payer, meaning the bonus payout has come under plenty of criticism, with some calling for Hester to reject the payment. Some financial experts seem to back the payout.
UK Financial Investments have announced that the bonus “reflects the significant contribution he has made towards rebuilding RBS in 2011.” Similarly, Dr Ruth Bender of the Cranfield School of Management believes the bonus payout is fair. “We need to pay him that bonus because we can’t afford for him to leave and a million pounds isn’t very much to pay.” This bonus payout is on top of Hester’s £1.2 million salary.
As the majority shareholder in RBS, the government could have vetoed the payment deal. Many, including the Mayor of London Boris Johnson, have called for the government to intervene. Boris Johnson said, “the government should step in and sort it out” as RBS was “not a normal bank”. Opposition leader Ed Miliband has criticised the government’s role in the payment, calling it a “disgraceful failure of leadership by the Prime Minister”, despite the PM’s spokesman declaring he had no role in the decision.
BBC Business editor Robert Peston said that, “I am reliably told that they feared Mr Hester and much of the board would have quit, if the payment had been vetoed by the government”. This sentiment was echoed by Dr Bender who said that, “we can’t afford for him to leave” as he is in a “very demanding job which everybody says he’s doing very well”.
Hester’s bonus, and the high salaries and bonus’ of other banking bosses, has caused huge public debate. Sky News are hosting a live debate at 7pm to discuss, “How much is a banker really worth?”. That is the key question. How much and why are bankers worth so much money? Yes, Heston has bought the troubled bank into profit for the first nine months of 2011, but critics would suggest that RBS is not progressing quickly enough. Hester conceded that it will take more than the promised five years to recover RBS and share prices have fallen to just 27p.
Should he still be paid such a big bonus despite these failing?
Comment below or on twitter @naspearing to let me know your opinions.