Bank chief given pounds 9.6m incentive

Huddersfield Daily Examiner (Huddersfield, England), June 23, 2009

Byline: HENRYK ZIENTEK

ROYAL Bank of Scotland chief executive Stephen Hester is in line for a pounds 9.6m pay package if he leads a turnaround of the ailing lender, it has emerged.

RBS has won support for the pay deal from UK Financial Investments, which controls the Government's 70%-plus stake in the bank.

UKFI is thought to have backed the move because of links to the bank's share price. This would have to pass a 70p threshold for the long-term bonus to be paid in full, by which point the taxpayer would have made millions in profits.

The stock is currently trading at about 37p after hefty share falls earlier this year in the wake of the Government bailout.

The news came as Marks & Spencer boss Sir Stuart Rose and the group's marketing chief offered to forgo a third of their long-term bonus awards after pressure from shareholder groups.

Sir Stuart and Steven Sharp are to waive entitlement to nearly 400,000 and 200,000 shares respectively under the performance-related three-year bonus plan after facing an "unexpected reaction", said M& S.

Meanwhile, Mr Hester is in line for pounds 1.2m in salary, about pounds 2 m in annual non-cash bonus payments and about pounds 6.4m of long-term share and stock option awards.

Long-term incentives would be based on a mix of targets and the RBS chief's options would be paid for 2009 but would only be able to be redeemed after three years.

But critics said the decision to tie the bonus mainly to the performance of the bank's shares could encourage risk.

Roger Lawson, of the RBS Shareholders Action Group, said basing a bonus on share price could mean the focus would be put solely on this one measure at the cost of other strategies.

"This just encourages risky behaviour," he said. "It is based on getting the share price up and that will depend on many factors other than the performance of the company itself." An RBS spokeswoman said the deal was in the process of being finalised by the firm's board. "We have said consistently it is all linked to performance and will only be paid out if targets are met," she added..

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* PAY DAY: RBS chief executive Stephen Hester could get up to pounds 9.6m under a new pay deal