RBS Bonus: The Price of Fixing (past) Failure

Good to finally hear some sense spoken about Stephen Hester’s bonus: Cranfield’s Ruth Bender on BBC Radio 4’s Today programme.

Yes, bankers’ bonuses in general are ridiculously high but, with regard to Mr Hester, there are only two questions which should concern politicians and tax-payers.

Firstly, what is our intention for RBS?  We can keep it or sell it.  All along, and quite rightly, we have said that it should be returned to the market as soon as possible with the hope that taxpayers’ money is recovered.  In that case, you need to pay market rates to hire the skills that can turn the bank into a saleable business.  Anything less and the business loses value and the taxpayer can’t recover their original bail-out “investment”.  Indeed, in the current rabid climate, the Hesters of this world might be forgiven for requiring a premium over the market to offset the risk that the government’s word is not, after all, its bond where public-opinion is involved.

Secondly, what was agreed in the first place?  Mr Hester was brought in after the bank came into public ownership.  The time to negotiate the terms of a (potential) bonus was at the outset, not after he had met the targets that triggered his “£1m bonus”, and the terms of that agreement should have focused upon the changes required to rebuild the bank over an agreed period.  In all likelihood, the mid-project share price is unlikely ever to have been a sound indicator of success or failure.

To argue that you don’t want to pay the price after the goods that you specified have been delivered is, at best, unethical and in reality, dishonest.

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About Andrew Munro

An independent business consultant, interim manager and writer, Andrew operates through his company, Burning Pine Ltd (http://burningpine.com).
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