Royal Bank of Scotland chief executive Stephen Hester has decided to turn down a bonus worth almost £1 million pounds. Hester’s annual stock bonus was worth around £998,640 based on Friday’s RBS share price, his annual salary is £1.2 million.
The decision to award Hester the bonus received intense scrutiny from the press, the public and from members of parliament. Labour party’s Ed Miliband led the assault and developed a plan to call a parliamentary vote to force the UK Financial Investments to vote against the bonus. Ministers made it clear they would find it difficult to support the bonus, and given that RBS received £45 billion of taxpayers’ money in 2008 as part of a government bailout package that led to Britain owning an 83% stake in the bank, Hester was left with no choice but to waive the £1 million bonus.
In reaction to the decision, Ed Miliband said; “Stephen Hester has done the right thing,” Miliband then used the event as a vehicle to attack Conservative Prime Minister David Cameron, lambasting his flawed vision to create a form of popular capitalism: “It is a shame that a feeble, out of touch David Cameron did not realise he should do the right thing and stand up for the interests of the British people… The debate about fair executive pay and responsible capitalism is only just beginning. We need a government that will tax banker’s bonuses and bring responsibility to the boardroom.”
Chancellor of the Exchequer George Osborne welcomed Hester’s decision and in doing so highlighted the importance of the RBS’ efforts to turn taxpayers’ losses into profits (government shares are currently worth about 50% of what they were when the bank was bailed out) “This is a sensible and welcome decision that enables Stephen Hester to focus on the very important job he has got to do, namely to get back billions of pounds of taxpayers’ money that was put into RBS.”
In these harsh time of austerity and deficit cuts it seems counter-intuitive to hand out large sums of money to members of the financial district, especially considering that many analysts attribute the economic crisis to a lack of responsibility between bankers and their actions; risky deals that dealt massive blows to the taxpayer but had little effect on the individual employees who undertook them have been widely cited as fundamental causes of the 2008 crash.
Accountability for action has to be enforced in order to decrease profligacy; Hester’s decision to waive the bonus is a step in the right direction, but in all honesty he didn’t have much choice. The worrying thing is that the chief executive at the helm of a bank with waning share values was offered a £1 million bonus to begin with; this typeof thing has to stop. If not Britain’s austerity measures may prove too tough to swallow for the 99% who are most affected by them.