Hester's bonus: much bigger than taxpayers were first told

DAVID CAMERON is under increased pressure to intervene after news that Stephen Hester, chief executive of the mainly state-owned Royal Bank of Scotland, is in line for bonuses of as much as £8m in the next few years – making last week’s revelation of a £963,000 shares bonus just the tip of the iceberg.

The Independent on Sunday reports that, within weeks, RBS is to buy him shares worth £3.3m as a bonus for the new financial year, on top of his total remuneration of £35.5m since joining the failed bank in 2008.

The Sunday Times says there will also be a second share package purchased at the same time – worth £4.5m – as part of a long-term incentive, making a total of around £8m. Hester will not be able to sell these shares for several years – and their market value will fluctuate in the meantime.

Lord Oakeshott, the former Liberal Democrat Treasury spokesman, said: "A £1m reward for failure to lend is outrageous enough — £8m would kill our coalition’s claim to fairness stone dead.

"It's extraordinary that No 10 and the Treasury didn't see this car crash coming. It is leadership failure all round. Cameron and [George] Osborne for approving the bonus and Hester if he accepts it."

David Cameron has argued that there was a risk Hester and fellow executives might quit if they weren’t given the bonus deals they were promised in their contracts. “We do have to bear in mind that the alternatives to what’s happening now could be even more expensive - if you had a whole new team coming into RBS,” he said.

But as Cabinet minister Iain Duncan Smith said on the Andrew Marr Show today, “Nobody would be happier than the Government” if Hester refused his bonus - but it was up to him.
 

The pressure on Hester is mounting after it emerged that the RBS chairman, Sir Philip Hampton, has turned down the £1.4m bonus he was due to receive this year. As The Sunday Telegraph reports, Sir Philip felt it was "not appropriate". ·