RBS keeps Hester bonus below £1m

So now we know the answer to a question which has been hanging over the 83% state owned Royal Bank of Scotland for several weeks.

The bank's Chief Executive, Stephen Hester, is to receive a bonus of 3.6 million shares for his performance during 2011, this equates to £963,000 based on the closing price on Wednesday.

This is probably the most politically charged pay award amongst all UK listed companies, not least because the Prime Minister has to give his personal approval for the payment.

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The dilemma for David Cameron is that he believes the British public has lost patience with corporate pay which seems to reward success and failure equally.

On the other hand, Hester is believed to have done a good job of stewarding RBS since his appointment in 2009 in the wake of its world record £45bn government bailout.

The Financial Times is reporting that the Prime Minister, and the remuneration committee of RBS, were worried that unless Hester got in the region of £1m he, and other board members, might leave for better paid posts elsewhere.

The actual level of the award is 60% of the "share bank" allocated to him during the year with the board saying it was "aware of the difficulties in trying to reconcile the competing objectives of all our stakeholders".

Hester will still receive his £1.2m annual pay.

In the period under consideration RBS shares have, like much of the European banking sector, dropped significantly. Between the beginning and the end of 2011 the stock lost 48% of its value. Hester has, however, delivered on removing RBS from risky investment banking activities, with the recent announcement of major cuts at its Global Banking and Markets division.

Market reaction was muted to the announcement, RBS shares were up 0.5% at 11:37.

BS