RBS Scuppers Goodwill With Hester Pay Package, Wimbledon Jollies
Royal Bank of Scotland, part-owned by the government and wholly-loathed by the British public after former chief exec Fred Goodwin became Mr Recession, are embroiled in two new bits of money-based controversy. First of all the new pay package for tabard-loving tree enthusiast Stephen Hester, and also the news that they’re splashing out on lots of corporate strawberries at Wimbledon this year.
Stephen Hester’s new compensation package totals nearly £10m, with salary coming to £1.2m, £2m annual non-cash bonus, and then £6.4m in long-term share options. No wonder he’s seeing green shoots! To the thousands of sacked RBS employees, it’s going to be a series of galling sums; for the rest of us, while we’re not expecting some socialistic epiphany from Hester, it would be nice to see a bit of a change in how compensation is given out.
There’s some encouraging elements to the package – no inflated salaries a la post-crisis American banking, the majority of compensation being performance-related. But isn’t this just RBS reheating their old compensation style? What was wrong with Goodwin’s compensation was that it wasn’t punitive enough on risk-taking – sure, he didn’t get a bonus in 2006 because of the over-reaching deals he made, but it wasn’t enough to dissuade him from making those deals. Hester’s compensation needs to be smaller to improve morale – his potential bonus is far more than his counterparts’ at Lloyds, which won’t impress those whose jobs are still at risk. But more importantly it needs better balance the compensation conundrum – to avoid inducing complacency through a high salary, or risk-taking through a high performance-related bonus (currently being deployed to massive effect at Goldman Sachs, though they’re mostly down to taking on profit-generating assets of smaller banks, a one-off fillip but with potentially huge ongoing results). What executive compensation needs is a way to circumvent this Scylla-Charybdis situation altogether. Answers on a postcard please.
More plainly wrong is taking out executive suites at Wimbledon when you’re majority owned by the taxpayer – this is the sort of thing you just don’t get to do for a few years guys, unless you want us all to continue hating you with a burning passion. RBS defended themselves with the usual jive about supporting “customers vital to our success” – if people refuse to do business with you until you hand them some strawberries and cream, they’re probably not worth dealing with in the first place. The only available PR manoeuvre left is to make 70% of the guests regular folk off the street, thus reflecting their debt of gratitude for all those bailouts.
Still, their image rehabilitation has been kickstarted somewhat by Fred Goodwin handing back millions in pension money last week, admittedly about three months too late for it to have any real effect on his reputation, the bank’s brand, or the public’s satisfaction…
Posted by Ben Beaumont-Thomas in Hot Money | June 22, 2009 11:22AM |