RBS shareholders’ grumble: why CEO should be paid $19.7 million

Shareholders in Royal Bank of Scotland fumed over a potential pay deal for the new chief executive. Stephen Hester will receive a total of 9.6 million pounds ($19.7 million) if he rescues the ailing bank. At the same time, retailer Marks & Spencer PLC said its chief executive and marketing officer had offered to forgo a third of their long-term bonus awards after pressure from shareholder groups.

However, RBS said the deal will be linked to performance and will only be paid out if targets are met.

Under the prospective package that was approved last week by UK Financial Investments, the company set up to handle the government's 70 per cent stake in the lender.

According to the British Press Association report, long-term incentives would be based on a mix of targets and his options would be paid for 2009 but would only be possible to be redeemed after three years.

"It is absolutely outrageous that the government does not use its power to bring the remuneration of bankers in these companies down to a reasonable level,'' said Roger Lawson of the RBS Shareholders Action Group. "Do they need to pay him this much to make him work harder?''

Hester's pay package was agreed in the same week that his predecessor Goodwin, who was blamed for aggressively expanding the bank before the government was forced to step in to rescue it, agreed to a voluntary cut of his annual payout from 555,000 pounds to 342,500 pounds a year.

The RBS deal was revealed as Marks & Spencer said that its CEO Stuart Rose and marketing chief Steven Sharp are forgoing the bonuses to nearly 400,000 and 200,000 shares after an "unexpected reaction'' from shareholders to the deal.