LLOYDS and RBS chose yesterday’s unveiling of the final “Merlin” project as the moment to disclose all-share bonuses worth several million pounds for their chief executives.
Outgoing Lloyds chief Eric Daniels will take home £1.45m, less than two thirds of the bonus to which he is entitled, while RBS boss Stephen Hester will be awarded £2.04m in shares.
Both waived their bonuses last year and neither chief executive will be able to convert their share pay-outs into cash before 2013, a measure that goes well beyond new FSA requirements that at least half of any bonus be deferred.
Chancellor George Osborne also used his parliamentary statement on Merlin yesterday to announce that up-front cash bonuses at RBS will be limited to £2,000. But the bonus restrictions come as a result of the government-owned stake in RBS and Lloyds, which stands at 84 per cent and 41 per cent respectively, rather than stemming from the Merlin deal itself. As the banks’ biggest shareholder, the government has been in negotiations with management for several weeks over executive bonuses.
Barclays and HSBC, the two non-nationalised banks signed up to Merlin, have not committed to specific bonus plans, but have agreed that in aggregate, the bonus pool between all four banks for 2010 will be lower than the amount awarded for 2009.
Santander, which withdrew from the collective Merlin agreement, has not made any commitment on bonuses, saying: “As a retail bank, Santander UK’s variable pay is significantly less than our competitors” and claiming that its contribution to last year’s bonus tax made up less than one per cent of the total collected.
However, the bank has agreed to adhere to the measures on pay disclosure, which require banks to publish the compensation of their top five “senior executives” outside the board.
The agreement does not stipulate that the banks publish the pay of their highest-earning employees, however, if they do not hold executive roles.