RBS chief Hester alters pay deal in bid to placate critics

ROYAL BANK of Scotland chief executive Stephen Hester yesterday pledged to defer cashing incentive shares worth up to £3.4m for an extra two years in an attempt to defuse outrage over his controversial pay package.

Hester’s overall package is potentially worth £9.7m, RBS said last week, drawing fire from politicians and trade unions who said his pay was excessive for a bank 70 per cent owned by the UK government.

The package includes a medium-term share award worth £3.4m if RBS shares hit 70p, which would be paid in respect of 2009 but only claimable in 2012, and now effectively deferred until 2014.

This means Hester will not be able to access rewards for five years, a practice previously unheard of in the City.

Hester agreed to the modest concession after concerns were raised that his package was too focused on short-term performance.

The move brings the award into line with a suggestion from the Association of British Insurers (ABI) last week. ABI director of investment affairs Peter Montagnon said: “Large awards are fine if real value is created, but it must have a sustainable and long-term focus.”