- RBS had floated intentions of awarding Hester bonus of as much as 1.6M pounds
- The 1M pound bonus was viewed as a compromise figure
- JPMorgan Chase's Dimon was awarded $17M in restricted stock and options
- RBS is expected to make large payouts to other senior executives
There was a whiff of inevitability about the decision by Stephen Hester, the Royal Bank of Scotland chief executive, to waive his £1M ($1.57M) bonus late last night, as the political and media furor mounted.
People familiar with Hester's thinking said Labour leader Ed Miliband's move to force a Commons vote on the controversial award was the final straw in an escalating drama that was jeopardizing his credibility to lead an institution still in the midst of a difficult restructuring. "It's just too much aggravation," said one person close to the embattled chief executive.
Since RBS first floated its intentions 11 days ago of awarding Hester a bonus of as much as £1.6M ($2.5M) for his work in 2011 -- the maximum he would have been entitled to under his remuneration plan -- both the government and the state-backed bank have proved easy fodder for opposition politicians.
David Cameron's month-long campaign against "excessive executive pay" and calls for shareholder activism to rein in lavish bonuses looked increasingly in danger of unravelling, even as the prime minister sought to pin responsibility for the package on the previous government.
The £1M bonus figure RBS ultimately came up with for Hester, half of what he received for 2010, was viewed as a compromise figure, engineered with the government to reflect the bank's weaker performance and a 48% slump in its share price.
That Cameron and George Osborne, chancellor, failed to head off the furor over Hester's pay has surprised some experienced politicians and senior bankers, given the intensity of public anger over bankers' bonuses since the crisis.
In contrast to the United States, where bank bonuses such as the $17M in restricted stock and options awarded this month to Jamie Dimon, JPMorgan Chase chief executive, have attracted less scrutiny, the City's perceived culture of "reward for failure" remains a concern for the British public.
As late as yesterday evening, RBS board members were saying the bank was adamant that Hester deserved his award. The chief executive, who has grown accustomed to a life as a political football, was said to be determined to take it.
Hester's volte-face, however, is unlikely to divert attention from a series of large payouts RBS is expected to make in the coming weeks to other senior executives, including John Hourican, head of the bank's investment banking business, and Bruce van Saun, finance director.
Hourican, an RBS veteran who received nearly 29m deferred shares and options in 2009 shortly after taking up his role as head of the global banking and markets division, has not yet had any communications from the board over whether he is still entitled to the full award, which vests in April, according to senior bank executives.
However, according to one person close to Hourican, he believes he has met all the targets associated with the scheme and would find any attempt by the board to claw it back "pretty offensive."
The share portion of his deferred 2009 bonus, linked at the time to a restructuring of the investment bank, is worth just under £6m at Friday's closing share price of 27.7 pence. The option portion, with an exercise price of 28 pence, is currently valueless.