RBS board may miss out

THE boss and directors of Royal Bank of Scotland (RBS) may not get bonuses if the majority state-owned bank fails to hit government lending targets, sparking fears of an exodus of senior bankers, it emerged yesterday.<br /><br />Chief executive Stephen Hester and senior colleagues will miss out on payments if RBS falls short of lending conditions set by UK Financial Investments (UKFI), the government agency charged with taxpayer investments in RBS and other banks rescued by the state after the credit crunch.<br /><br />&ldquo;We have agreed with the board of RBS that meeting the lending conditions should be one of the conditions of his Hester&rsquo;s bonus payment,&rdquo; UKFI chief executive John Kingman told the Treasury select committee yesterday. Hester stands to make around &pound;9.4m if he turns RBS around.<br /><br />In a heated grilling by members of the committee, Kingman refused to reveal the level of bonus pots at RBS, which is 84 per cent owned by the government. Kingman faced accusations from committee member Nick Ainger, the Labour MP for Carmarthen West and South Pembrokeshire, that it was &ldquo;business as usual&rdquo; for the banks in paying bonuses. <br /><br />Kingman said chancellor Alistair Darling had decided banks owned by the government should not have to disclose details above levels required of listed firms.<br /><br />He said, however, that UKFI understood the public&rsquo;s anger about excessive bonuses. The head of wholly owned investments at UKFI, Keith Morgan, told the committee that it would consider mutualising state-owned banks such as Northern Rock when it eventually moves to offload them, although UKFI would opt for an outright sale if that resulted in more value for the taxpayer.<br /><br /><strong>RBS boss Stephen Hester yesterday spelt out the new bonus rules to staff</strong><br /><br />Pay and Reward 2009/2010 <br />3 November 2009 <br />Colleagues,<br /><br />I am hesitant to put out a communication on bonuses on a day when there have been plenty of reminders of the uncertainties we grapple with. But I do so as it represents positive news. Before discussing that though I want to be clear with all of you. The Board as a whole and I in particular are crystal clear that RBS&rsquo; future recovery and success depends on good people working hard for us. Our people must feel the institution has a successful future and they have a valuable role to play in that future. Part of this, an important part but far from the only part, is competitive pay. <br /><br />The detail for those receiving bonuses: <br />1. Executive Members of the RBS Group Board will receive no cash bonuses. Any bonus will not be released until 2012 and will be deferred in the form of shares. <br /><br />2. A group comprising of senior management and specific individuals with a key role in the management of risk across RBS Group will receive a deferred award released in three equal instalments in June 2010, 2011 and 2012. <br /><br />3. Those earning a salary of &pound;39,000 or less will receive the first &pound;2,000 of any bonus in cash in March 2010. The remainder will be deferred in the form of shares and paid in two equal instalments, in June 2011 and June 2012, in line with the deferral approach set out above. <br /><br />4. All other staff will receive 50% of their bonus in June 2010 (in either shares or debt) and the remainder in two equal instalments in 2011 and 2012, in line with the deferral approach above. Clawback will apply in a similar way to last year, although for employees in back office roles in GBM the clawback proportion will mirror the rest of the Group, at 50% of any deferred award. Loan facilities will be made available for any part of June 2010 vesting which is not subject to clawback, in line with this year. <br /><br />The emphasis on share awards this year is an important principle in achieving a much stronger connection between reward for performance and the long-term recovery of the Group. This will enable staff receiving a bonus to participate in, and benefit from, the recovery of RBS group, and at the same time will further help to protect our capital base. It also reflects new FSA rules on bonuses at a time of capital rebuild. <br /><br />&nbsp;Additional information on compensation will be provided through communications in line with the normal pay review process. <br /><br />Best wishes <br /><strong>Stephen</strong>