Osborne vetoes RBS plan to pay CEO double his salary as bonus
RBS tries to sidestep government rules by paying Ross McEwan an extra £1m 'allowance'
THE government has blocked the Royal Bank of Scotland, which is part-owned by the taxpayer, from paying its CEO Ross McEwan a bonus worth twice his annual salary. Instead, the bank is giving him an extra "allowance" of £1m to make up the shortfall.
The bank had planned to ask its shareholders for permission to pay McEwan, who earns a salary of £1m, the 200 per cent bonus – but decided against the move when told by the Treasury that it was unlikely to be given permission, as the government still owns 81 per cent of the bank and would oppose the move.
RBS was forced to seek shareholder permission for the massive payment because of an EU rule which restricts bankers' bonuses to 100 per cent of their salaries – unless shareholders agree to the larger payment, explains The Guardian.
RBS warned that the government's refusal to let it pay the 200 per cent bonus would present a "commercial and prudential risk" to its business. Despite intervening in this instance, George Osborne has made it clear he opposes the EU cap on bonuses - and is fighting it in court.
The Treasury intends to support a similar shareholder request made by Lloyds, which is also part-public after being bailed out by the taxpayer during the 2007-2008 financial crisis. A spokesman explains that it vetoed RBS's plan because it is still majority public-owned, while the government stake in Lloyds is just 39 per cent.
The spokesman says: "RBS is heading in the right direction, but it has not yet completed its restructuring and remains a majority publicly owned bank. So an increase to the bonus cap cannot be justified."
Shadow treasury minister Cathy Jamieson says Osborne is in a "terrible muddle" over bonuses and demanded that he drop his legal action against the EU bonus cap.
All Britain's major banks have approached their shareholders for permission to pay 200 per cent bonuses, with Barclays' investors agreeing at their recent AGM, despite protests by some shareholders over high pay for bosses.