Last night it was announced that Stephen Hester, chief executive of The Royal Bank of Scotland, made the decision to refuse his bonus of nearly £1M. The news comes after a weekend of heavy political pressure surrounding his payment.
Hester replaced Fred Goodwin (who today lost his knighthood) as the bank’s CEO in 2008, after it lost billions. The government had to bail the bank out and now owns 82% of RBS. However, RBS is still led by an independent board of directors.
Government ministers attempted to block the payment and when they were unable to do so appealed to Hester to decline it. The news has been applauded by Labour leader Ed Miliband and Chancellor George Osborne.
I think Stephen Hester made the right decision to decline his bonus. It is a gesture of good will that sits well with the public. Even four years after beginning of the recession, the economic climate is still extremely fragile and gestures like this show that the bankers are relatively sympathetic towards the public’s outrage. I doubt Hester will be the only chief executive to pass up his bonus and we could soon see this becoming a trend. Could this be the beginning of the end of big corporate bonuses?
On the other hand, the government could be seen as bullying the bankers into declining the bonuses they are entitled to. Hester’s decision may be considered a victory for Ed Miliband and his attempts to define a new capitalism. However, the bankers’ contracts have a bonus clause they are entitled to.
I believe Hester’s payment refusal was a noble decision to make and could be the first of many declined bonuses. I look forward to seeing how fellow CEO’s and bankers react to these events.
