Hester given £6.7m of shares to redirect RBS along less ambitious lines
* Jill Treanor
* The Guardian,
* Wednesday November 5 2008
* larger | smaller
* Article history
Stephen Hester, the new boss parachuted into Royal Bank of Scotland, has been hired on a salary of £1.2m and been awarded shares worth more than £6m to overhaul the bank.
Hester, who is being given 10.4m shares, yesterday hinted the beleaguered bank was on course to make its first full-year loss. The replacement for the ousted Sir Fred Goodwin is working on a new strategy that is likely to undo much of the expansion achieved by his predecessor.
His pay package was outlined in a prospectus accompanying the bank's record-breaking £20bn fundraising that could leave the taxpayer owning 60% of the Edinburgh-based bank.
It shows his salary of £1.2m - a 50% rise on his pay as British Land chief executive - and the award of shares intended to buy him out of British Land schemes. The shares are being awarded at 65p - the price at which the government is backing the fundraising - giving them a value of £6.7m. He will qualify for the first tranche of shares immediately after the publication of the bank's full-year results in March. The rest will handed over in the next two and half years.
Hester will join on November 21 and Goodwin will leave on January 31. The bank said the pay policy was intended to incentivise the management to produce the best returns for all shareholders.
Goodwin has waived his right to any pay-off, but the prospectus promises only that "reasonable endeavours" will ensure entitlements by other departing executives will be waived.
Hester made it clear that the bank was aware of the sensitivities surrounding bankers' pay after the ban imposed by the government on executive directors receiving bonuses this year, but he said it would not be imposed lower down the ranks. "We have 170,000 staff, many of whom have done an outstanding job for us and need to be incentivised," he said.
He gave the clearest acknowledgement yet that Goodwin and chairman Sir Tom McKillop were taking responsibility for the evaporation of confidence in RBS.
The bank is preparing to admit that it paid too much to buy parts of the Dutch bank ABN Amro and some of its operations in the US after admitting it is considering writing down the goodwill associated with some of these recent takeovers embarked upon by Goodwin to transform the once sleepy Edinburgh-based bank into a global empire.
Hester appeared to concede that mistakes had been made. "We did become over-extended at the wrong time and in the wrong markets," he said.
"RBS does have a group of world class businesses obscured by the excess leverage that has got us to where to where we are today."
He made it clear he was aiming to cut costs, which may signal thousands of job cuts a result of the bank's admission that its strategic review is looking to focus on areas where it has a competitive advantage and reduce its exposure to riskier businesses.
Though the bank claimed the volatility in the markets made it impossible to help analysts forecast its year-end profits, Hester conceded profits "will be difficult to achieve this year".
The global markets operations - which drove the bank to a first-half loss after taking a £5.9bn writedown - are expected to report a loss after its income was cut by £1bn and it took another writedown of £209m. The writedown would have been £1.4bn without changes to accounting rules introduced to help banks through this crisis.
The shares fell early yesterday as the market digested the scale of problems inside RBS but they recovered to close at 65p - unchanged and back towards the price at which the £20bn of funds are being raised.
Hester insisted the bank was "determined to re-earn the confidence of our stakeholders and customers, and bring back pride to our employees".
Alex Potter, banking analyst at Collins Stewart, noted though that RBS's "outlook is weaker and the dividend flow more distant than peers".
RBS hopes to pay off the £5bn of preference shares it is issuing to the government to prohibit it from paying dividends in time to pay a dividend in 2010 - earlier than the five years first thought, but a year behind the combined Lloyds TSB and HBOS.
* Jill Treanor
* The Guardian,
* Wednesday November 5 2008
* larger | smaller
* Article history
Stephen Hester, the new boss parachuted into Royal Bank of Scotland, has been hired on a salary of £1.2m and been awarded shares worth more than £6m to overhaul the bank.
Hester, who is being given 10.4m shares, yesterday hinted the beleaguered bank was on course to make its first full-year loss. The replacement for the ousted Sir Fred Goodwin is working on a new strategy that is likely to undo much of the expansion achieved by his predecessor.
His pay package was outlined in a prospectus accompanying the bank's record-breaking £20bn fundraising that could leave the taxpayer owning 60% of the Edinburgh-based bank.
It shows his salary of £1.2m - a 50% rise on his pay as British Land chief executive - and the award of shares intended to buy him out of British Land schemes. The shares are being awarded at 65p - the price at which the government is backing the fundraising - giving them a value of £6.7m. He will qualify for the first tranche of shares immediately after the publication of the bank's full-year results in March. The rest will handed over in the next two and half years.
Hester will join on November 21 and Goodwin will leave on January 31. The bank said the pay policy was intended to incentivise the management to produce the best returns for all shareholders.
Goodwin has waived his right to any pay-off, but the prospectus promises only that "reasonable endeavours" will ensure entitlements by other departing executives will be waived.
Hester made it clear that the bank was aware of the sensitivities surrounding bankers' pay after the ban imposed by the government on executive directors receiving bonuses this year, but he said it would not be imposed lower down the ranks. "We have 170,000 staff, many of whom have done an outstanding job for us and need to be incentivised," he said.
He gave the clearest acknowledgement yet that Goodwin and chairman Sir Tom McKillop were taking responsibility for the evaporation of confidence in RBS.
The bank is preparing to admit that it paid too much to buy parts of the Dutch bank ABN Amro and some of its operations in the US after admitting it is considering writing down the goodwill associated with some of these recent takeovers embarked upon by Goodwin to transform the once sleepy Edinburgh-based bank into a global empire.
Hester appeared to concede that mistakes had been made. "We did become over-extended at the wrong time and in the wrong markets," he said.
"RBS does have a group of world class businesses obscured by the excess leverage that has got us to where to where we are today."
He made it clear he was aiming to cut costs, which may signal thousands of job cuts a result of the bank's admission that its strategic review is looking to focus on areas where it has a competitive advantage and reduce its exposure to riskier businesses.
Though the bank claimed the volatility in the markets made it impossible to help analysts forecast its year-end profits, Hester conceded profits "will be difficult to achieve this year".
The global markets operations - which drove the bank to a first-half loss after taking a £5.9bn writedown - are expected to report a loss after its income was cut by £1bn and it took another writedown of £209m. The writedown would have been £1.4bn without changes to accounting rules introduced to help banks through this crisis.
The shares fell early yesterday as the market digested the scale of problems inside RBS but they recovered to close at 65p - unchanged and back towards the price at which the £20bn of funds are being raised.
Hester insisted the bank was "determined to re-earn the confidence of our stakeholders and customers, and bring back pride to our employees".
Alex Potter, banking analyst at Collins Stewart, noted though that RBS's "outlook is weaker and the dividend flow more distant than peers".
RBS hopes to pay off the £5bn of preference shares it is issuing to the government to prohibit it from paying dividends in time to pay a dividend in 2010 - earlier than the five years first thought, but a year behind the combined Lloyds TSB and HBOS.
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