Royal Bank of Scotland (RBS) is on the verge of agreeing a pay deal for its new chief executive that will be significantly lower than that of the ousted Stephen Hester, Sky News have reported.
UK Financial Investments, the agency managing the taxpayer stake in RBS, is reportedly on the verge of agreeing a base salary of £1m (Hester's was £1.2m). Also being discussed are bonuses and a long-term incentive plan, again thought to be less attractive than those of his predecessor, which included a bonus of up to two times salary and long-term incentives worth up to four times salary, giving him a potential total pay of over £8m.
The RBS board has agreed to the appointment of Ross McEwan, its current head of the retail banking, but is awaiting approval from the Prudential Regulation Authority. It is expected the appointment will be announced tomorrow along with results. Investors clearly like him, with rumours of his appointment pushing the share price up steadily throughout the day, currently up around eight per cent.
Not being on the board, McEwan’s current pay package is not disclosed, but we do know RBS paid around £3m to buy him out of his contract with his previous employer, the Commonwealth Bank of Australia.
Although McEwan only has around ten years' banking experience and never headed up a company of RBS's size, he does have considerable retail experience, having headed up that division at the Australian bank.
His role will be much more involved with Westminster than most other banking jobs, with 81 per cent of the bank owned by the taxpayer following a £45bn bailout five years ago. He'll also need to know how to work his office politics when dealing with colleagues he beat to the post, notably finance director Bruce van Saun.
Investment bank Rothschild is currently considering the case for carving out a "bad bank" from RBS to leave a better bank that could be privatised more easily.
The bank had initially given itself several months to find a replacement for the ousted Hester, but a collapse in share price following his departure made the search more pressing.
Before he went into banking, McEwan worked in life insurance, holding a senior role at broker First NZ Capital Securities.