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UKFI chief defends salary deal for RBS CEO

UKFI chief defends salary deal for RBS CEO

A top British finance official on Monday defended the potential 9.6 million pound ($15.7 million) pay deal granted to Stephen Hester, the CEO of Royal Bank of Scotland PLC.
John Kingman, the chief executive of UK Financial Investments Ltd., the company created to manage the stakes taken by the British government in major banks as part of a massive bailout, said he was "very comfortable" with Hester's pay package. He stressed it requires Hester to hit performance targets that will give shareholders a healthy return.
But the new pay deal has raised the hackles of shareholders, unions and some lawmakers, coming so soon after a scandal over the multimillion-pound pension bestowed on Hester's predecessor Fred Goodwin, whose aggressive expansion of the bank was blamed for its downfall,
"The key point about it is that his reward is very highly geared to the return the taxpayer will make on his investment," Kingman said during a conference at the London Business School.
"I also think we have a very strong interest in being able to retain and recruit high quality people," he added. "We need serious people to run these banks."
The government holds a 70 percent stake in RBS through UKFI. It also has a 43 percent stake in Lloyds Banking Group PLC.
Kingman said any move by UKFI to pay lower salaries than other banks bestowed on their CEOs would not be a "sensible gamble to take."
Under the agreement, Hester will receive a fixed 1.65 million pound cash payment, including his 1.2 million pound salary. To receive the full package amount, shares in RBS would have to average at least 70 pence over 30 days during the last six months of the performance period, which covers three years from the start of 2009.
If the shares hit 55 pence, Hester will get 50 percent of the amount. If they languish at 40 pence he would get just 25 percent.
The stock closed up 2 percent at 38.94 pence on Monday.
"If Stephen does well on his package, I will be extremely happy because the taxpayer would make a profit," Kingman said.
The big salary package was announced 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 and as British Airways CEO Willie Walsh and other executives agreed to forgo their salaries for July.


Updated : 2020-12-05 14:20 GMT+08:00