After an outburst of public anger in Britain, Royal Bank of Scotland CEO, Stephen Hester, has rejected a bonus worth one million pounds ($1.6 million). The bank was bailed out by the state after near-collapse in 2008.
The chief executive of Britain's state-rescued Royal Bank of Scotland (RBS) has turned down his controversial bonus, the bank announced Monday.
Last week the RBS board awarded Stephen Hester 3.6 million RBS shares worth £963,000 (1.15 million euros, $1.5 million). The bonus would have come on top of his £1.2 million annual salary.
The announcement of the payment sparked outrage from trade unions and the opposition Labour Party, which criticized the fact that it would come at a time when most British workers were suffering from government austerity measures.
The British government has owned 83 percent of the Edinburgh-based bank since it had to be bailed out in 2008 with 45 billion pounds. Since then, RBS has cut tens of thousands of jobs.
British Finance Minister George Osborne described Hester's decision as "sensible," enabling the CEO to focus "on the very important job he has got to do now, namely to get back billions of pounds of taxpayers' money that was put into RBS."
Hester’s decision came shortly after Labour stepped up the pressure by saying it would force a parliamentary debate in which it would have called on the government to use its 83 percent stake in the bank to cancel Hester's bonus.
"It is a shame that a feeble, out-of-touch David Cameron did not realize he should do the right thing and stand up for the interests of the British people," Labour leader Ed Miliband said.
In comments Monday, Britain's biggest trade union, Unite, said the prevailing feeling among RBS employees was "better late than never."
Some analysts believe, however, that Hester's move will have a negative impact on the bank's ability to retain high-level executives.
"The ongoing politicization of contractually owed bonuses can only serve to increase the risk that management will ultimately decide to leave, severely hampering the prospects of a further recovery," said Gary Goodwood, analyst at Shore Capital Stockbrokers.
On Saturday, RBS already announced that chairman Philip Hampton had waived a shares bonus worth £1.4 million.
The money was part of a "golden hello" agreed when Hampton joined RBS in 2009. Hampton is said to have rejected the bonus as he though it wasn’t "appropriate" in the current climate.
Author: Uwe Hessler (AFP, Reuters, dpa)
Editor: Michael Lawton