Pressure is growing on Royal Bank of Scotland chief executive Stephen Hester to turn down his six-figure bonus, as politicians and unions line up against the payout. One shareholder, Paul Mumford at Cavendish Asset Management, has a different answer to the £963,000 question.
"Is he actually doing a good job, and as such, is he worth being on board, bearing in mind you have to pay the going amount? I think the answer is yes?" Mumford told the Huffington Post.
Acknowledging the "hypercritical" environment in which the decision is being made, Mumford said that Hester's pay package has to be seen in the context of the wider industry, where seven-figure bonuses are commonplace. That, he said, echoing other defenders of executive pay, is just the going rate for the kind of expertise needed to run these companies.
"That's something that everyone has to live with, I'm afraid. It is one of those industries where you do have to give high-powered rewards to get the right people along, and you're up against an international market as well, with the big American banks which had problems in the past, but where the remuneration packages are quite unseemly."
Others in the sector - in fact, others in the bank - will receive significantly more in bonuses. Investment bankers typically take a greater share of profits. In January, the FT reported that the head of RBS' investment banking arm, John Hourican, would receive £4m in bonus payments in 2012. Bob Diamond, CEO of Barclays, received £6.5m in bonuses in 2010.
The challenge ahead of the bank is a big one. A policy of international expansion under Fred "the Shred" Goodwin, Hester's predecessor, saw it follow up a relatively successful takeover of Natwest with an expensive move into the US and an ultimately disastrous acquisition of the Dutch bank ABN Amro.
That policy has been reversed under Hester, who is cutting back the investment banking division and sold off parts of the business, including, in January, its aircraft leasing operations, which raised £4.7bn.
"Now, of course, the emphasis is on a profitable bank. A bank that will recover reasonably well and the government can sell its stake, hopefully at a profit. More importantly, a bank that's actually going to be able to survive the storms that come up in the future. I think actually those objectives are gradually being achieved," Mumford said. "There's probably a fair way to go, on the basis that it is a fairly big job. But I think from the evidence to date he has been doing a reasonably good job."
"You do need a credible professional on board to steer the ship," Mumford said. "Ultimately when it comes to the downsizing and the negotiating, you have to be a relatively serious negotiator"
The success has been reflected in the share price, analysts said. RBS has been one of the better performing banks in Europe over the past year, admittedly in a field that has been weighed down by the unfolding eurozone crisis and weak economic data in the UK.
The 40% rise in its share price added around £8bn in market value, as UBS analyst John-Paul Crutchley noted on Wednesday, translates to around £6.5bn in extra value to the UK taxpayers' stake.
"With the benefit of management clearly apparent, it seems surprising that the political establishment which, we think, should be aligned with a good investment outcome for RBS shareholders, is potentially putting this at risk by raising concerns over the CEO’s remuneration," Crutchley wrote in a research note.
RBS is 83% state-owned, but the government has little power to change employment contracts, meaning that instead it has to apply pressure to Hester as an individual.
Liberal Democrat minister Jeremy Browne said that Hester should "think like a public servant" and see it as a "public duty" to turn the bonus down.
Earlier in the month, Antonio Horta-Osorio, CEO of Lloyds - which is 40% state-owned - refused to take a bonus after taking two months sick leave.
Horta-Osorio, who oversaw a £3.25bn loss in the first three quarters of 2011, said at the time that "I believe my bonus entitlement should reflect the performance of the Group but also the tough financial circumstances that many people are facing."
Mumford is not convinced that Hester should do the same. "People have asked him to give up this bonus. I don't think that's a thing that people should necessarily do," he said. "And after all, the government do get half his bonus back in tax, because he's going to be a 50% taxpayer."
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