Taxpayers are down £14 billion, Stephen Hester gets a £1 million bonus
Jan 2012 27

What kind of value have taxpayers got out of RBS over the last year, as the majority shareholders?  Does it justify the substantial £963,000 bonus that has been announced for their Chief Executive Stephen Hester this morning?

Taxpayers own 82 per cent of the bank, which has a total market capitalisation of £29.6 billion.  This time last year the RBS share price was around 43p.  It is now around 27p.  If that decline in the share price had not taken place the taxpayers’ stake would be worth around £38 billion instead of around £24 billion.  That means we are down £14 billion – or around £500 for every family in Britain.

RBS share price, 27 January 2011 to 27 January 2012 (click to embiggen)

 

UK Financial Investments Ltd (UKFI), the company that the last Government set up to manage our stakes in the bailed-out banks, has argued today that the bonus reflects “the significant contribution he has made towards rebuilding RBS in 2011″.  And most commentators do seem to agree that Mr. Hester is a good choice to lead the bank’s recovery, with an impressive CV.  But if he and UKFI are confident this strategy will pay dividends at some stage, why can’t a bonus wait until it actually does?  When taxpayers’ get their money back, then he can be rewarded for that hard work.  In the meantime, he should be able to get by on his salary of over a million a year.

Another argument that could be made, and shows up in the UKFI annual report, is that most European banks have had a hard time this year.  The performance of RBS has been alright by comparison.  But again, isn’t that an argument that RBS will see a real turnaround when those economies recover?  That we shouldn’t be paying out bonuses now when it just isn’t clear what real value has been delivered to taxpayers as shareholders?

There is more the Government could have done to limit or stop this bonus.  With the bank still dependent on a bailout, still owned by taxpayers who can’t sell their shares if they don’t feel they are getting good value, it is very hard to justify.

Matthew was the Chief Executive of the TaxPayers' Alliance, author of Let Them Eat Carbon and editor of How to Cut Public Spending (and still win an election)



  • Guest

    His bonus is deferred until 2014.

  • Helpful

    Normally I would go along with most of what TPA says but in this case you are  just getting on the rabble-rousing  band waggon. Your beef shouldn’t be with this Government or Mr Hester but that collection of congenital idiots known as the previous Government. If Mr Hester’s emolument package is contractual that should be the end of the matter. Contracts and the rule of law are important in this society; TPA should know that.

  • Martin Pike

    The way that everyone is claiming this is a bonus is a little simplistic. The share options for Mr Hester are obviously linked to the good performance of the company – if it fails, he loses out. First point.
    My second point is, if you pay peanuts,….you get monkeys (or elephants I would guess). Shares are part of his contract (and he would have been given targets to hit, and a performance to manage which it appears he is doing) and so under his contract he is entitled to it. The banking industry works a little similar I think to how Americas tip structure works. People get tipped not necessarily to do a good job, but not to do a bad one, and in return they get a smaller starting salary. Back to banking and If you remove these people’s bonuses, they just go elsewhere – and where would that leave us and our remaining stake in a company that has no stars to run it. 

    • Notrelevant

      Don’t be a numpty and buy into the propaganda of the elite. He or someone else would do the job for far less as someone did 20 years ago before the obscene amounts these kleptomaniacs have awarded themselves. He is on 1.2 mill already not peanuts.

      • Orac54

        Who then? You? Are you qualified? “Propaganda of the elite.” Go back to the Students’ Union.

        It’s in his contract. He legally has to get it. It’s paid in share options, so if the value of the company goes up (and the taxpayer’s value in it goes up), then he’s quids in. If it goes down, he loses out. And it’s deferred for 2 years. And he pays tax at 50% on it (unlike, say, Tony Blair, who has set up shell companies to minimise his tax bill).

        • Annoyed

          I’m not aware that Mr Hester’s tax affairs are in the public domain. Maybe I’ve missed them. Can you signpost me to the details please.

  • http://twitter.com/kilkeal barry laughton

    As the shares were down on this time last year, Mr. Hester has been able to pick up more shares under the bonus plan, so perhaps it was in his interest that the shares are at a low price, the future gain being greater.