RBS defends executives' big share rewards
Royal Bank of Scotland on Wednesday defended its award of hefty share packages to two new executives, as investor and taxpayer anger over bankers' pay escalates in the UK.
An RBS spokesman said the stock awards to Brian Hartzer, the new head of its retail branch network, and Nathan Bostock, who joined from Abbey in June to take on the new role of head of risk and restructuring, made the two men's compensation comparable to "what they were paid previously or could get elsewhere," and that the packages were "aligned to shareholder interests."
The 70% state-owned bank is trying to turn itself around with the help of new hires as it works through a three to five-year plan to return to independence after last year's government bailout.
Hartzer's rewards for joining RBS include 1.99 million shares currently worth £915,400 (€1.06m) -- without any conditions attached -- as recompense for giving up unvested share rewards at his former employer, Australia & New Zealand Banking Group. To further make up for lost rewards from ANZ, he will get another 2.83 million shares currently worth £1.3m if his unit meets certain targets over the next three years.
The shares in both instances will be vested as of 2012.
Bostock is to receive 1.33 million shares currently worth £610,000 if his division meets targets during the next three years, as well as the option to buy up to a further 2.34 million shares at 46.2 pence a piece from August 2012.
At 0930 GMT Wednesday RBS shares were down 1p at 45p.
Because of its majority government ownership, RBS pay packages have been heavily scrutinised by taxpayers, politicians and shareholders. RBS chief executive Stephen Hester is set to earn up to £9.7m in the next three years in a mix of cash, shares and share options, while a former Merrill Lynch bond trader, Antonio Polverino, reportedly will be paid up to £7m in his first year of work at the bank.
Disclosure of the pay packages comes at a time when any type of bonus has come to be regarded as suspect by the UK. public. Many people have concluded that the financial crisis was largely the result of reckless bankers intent on lining their own pockets through short-term profit. People have been dismayed to see an apparent return to business as usual as several UK and US banks -- though not RBS -- posted strong first-half profit following massive cash injections into financial markets by central banks.
Meanwhile, UK Chancellor of the Exchequer Alistair Darling and opposition politicians have recently said legislation may be necessary to curb bonuses.
An RBS spokesman said the packages awarded Tuesday followed Financial Services Authority principles by being paid out over the long term and subject to potential clawback if performance results prove to be worse than they had appeared.
The FSA guidelines, laid out last week, were considered by many observers to fall short of the mark.
---By Margot Patrick, Dow Jones Newswires; +44 (0)20 7842 9451; margot.patrick@dowjones.com
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