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Five senior RBS executives share pay and bonuses worth £21m

By Sean Farrell

Friday, 18 March 2011

Royal Bank of Scotland revealed yesterday that its top five non-board executives collectively earned more than £21m last year.

The part-nationalised bank also disclosed it paid a total of £375m to 323 key staff members, including £256m to its top investment bankers.

The top-earning non-board executive last year was Ellen Alemany, who heads the loss-making bank's USoperation, the bank disclosed in itsannual report.

She was paid a total of £5.95m,including £1.8m salary, more than the £1.2m salary earned by her boss Stephen Hester, RBS's chief executive.

The next biggest earner was John Hourican, RBS's investment banking head, who received £5.93m. Restructuring chief Nathan Bostock earned £3.36m, retail boss Brian Hartzer earned £3.24m and insurance head Chris Sullivan earned £2.63m.

The decision to pay out tens of millions to the RBS executives will fuel anger about top bankers' pay.

John Mann, MP for Bassetlaw and a member of the Treasury Select Committee, said: "It's two fingers to the British taxpayer. It shows the depths of the problem we have in global banking. They believe they are above the law and above the taxpayer and they need bringing back down to earth."

The executives' pay was revealed under the Project Merlin deal agreed with the Government.

The banks had agreed to exercise restraint on bonuses in the deal, which was meant to draw a line under outrage about their rewards.

The bank, which is 83 per cent owned by the taxpayer, did not reveal how many investment bankers shared the £256m payout. Key employees outside the investment bank received £119m.

The total of £375m for "code" staff amounts to an average of £1.2m for each of the employees included under new disclosure rules.

But individual pay would have varied wildly, with some workers earning less than the average and top investment bankers earning much more.

However, the average payment for the "code" staff, whose jobs have a bearing on the bank's risk, was about half the £2.2m earned by equivalentemployees at Barclays.

RBS had already revealed last year that Stephen Hester, the chief executive would earn up to £7.7m for 2010, including £4.5m of shares at current value, which will pay out according to performance.

If the non-board bankers' pay had been calculated according to Mr Hester's formula their numbers would have been higher.

Mr Hester's long-term share payouts were given in total, whereas only two-thirds of theirs were given on the assumption they would not pay out in full.

In total, Ms Alemany could earn about £6.8m for the year.

Mr Hester and his team did not lead RBS when the bank was bailed out by the government in October 2008. He is dismantling the empire built by his predecessor, Sir Fred Goodwin.

RBS lost £1.7bn in 2010, after losses of £3.6bn in 2009 and £35bn in 2008.

In the annual report, Mr Hester said his plan to sell assets and allow the government to sell its stake without making a loss was ahead of schedule.

The chief executive also pointed out that the bank made an operating profit last year.

Before restructuring costs, disposals, the government's bonus tax, and other one-off items, operating profit was £1.9bn.

  • JaitcH
    Must be easily the highest paid workers either in the civil service or a quango. No one, but no one, is entitled to or can justify such remuneration
  • SoapboxJoe
    With the current regime of low base rates and high consumer rates, the banks are being recapitalised by people not losing their savings in one hit (which as you describe the bailouts were intended to prevent) but by slow syphoning off with a very generous margin. For 2 years now our economists have been so incompetent at managing our economy they still do not know what the BOE base rate is. Is it zero or 0.5% or any rate between. Since when did you enter into a banking transaction and have the bank say, well which rate of interest do you want us to charge .... err which is it zero or half a percent. Never happened before and illustrates just how broken our economy has been for the last 2 years. Now we have discovered that Libor (the very fluid rate that banks lend to each other) is a highly managed and corrupt exchange rate. So they borrowed money at 2% and claimed that their lending rate was 4% and pocketted the difference. Systematic abuse for their own benefit to rob the wider economy in a deceiptful conspiracy. And all this happened without our then Chancellor (Darling) being completely oblivious of the impending disaster so much that in his own words, we came within hours of such a liquidity crunch, the cash points were close to running dry. Quality.
  • SoapboxJoe
    There should be a maximum earnings ratio. If as an egalitarian society we feel the need for a minimum working standard, surely it is right that we have a maximum working standard. I would propose a maximum salary within all companies of 20 times average earnings within the organisation. If the average is 10K then the maximum is 200K. As the executive is only one vested interest within an organisation and an extension of the employees (after all that is all they are), then bonuses should be based on a ration of wage and all employees should be eligible for it under the exact same rules. For executives that have large shareholdings, then they way to reward them is via their shareholding and the distributions system. No Golden Handshakes or Golden Goodbyes, no paying out 3 year contracts after 1 year, no free share distributions as to do so would require all employees to receive the same (wage ratio of shares). Simple solution across the board which would be in the long term interests of not just the customers, the shareholders, but also the employees. Gone with a single swipe of my magic wand would be the drive to short-termism.
  • headtheball
    Fractional Reserve Banking is the answer. Put simply, banks "create" money by lending more than they actually have. This leads inevitably to boom and bust, which benefits those in control of the money supply i.e. the owners of the banks, and in particular the Federal Reserve Bank. A move to Full Reserve Banking, where banks can only lend money they have in deposits would go a long way to stopping the abuse of the system by the bankers.
  • eternalsceptic
    Remuneration is subject to negotiation between employer and employee. In general, if private companies don't get this right, their costs can get out of control and they go out of business Except in the case of the then 'private' RBS and their ilk they don't because they were/are 'to big to fail'. There is the always (implicit) understanding that they will bailed out, because the effect of them going under would cause a massive shockwave to the rest of the economy and possibly to the political stability of the country. It's a case of heads I (personally) win and tails oh look I (personally) win again. These institutions and the people who run them are not interested in 'free markets' that's just propogada and self-justification. They're interested in dominating and manipulating markets by sheer size. Why are they so resistant to being broken up? Because they know full well that if they are cut down to size they will loose that implicit backing of the tax payer and actually have to face the posssibility that heaven forbid they may go out of business. These self-titled masters of the universe and consumate 'risk takers' are terrified of capitalism "red in tooth and claw" and facing the (personal) consequences of their decisions. The problem during the crisis was that some of the banks had got too big to fail. The banking commission which is due to report later this year hopefully will have some recommendations on this vital subject so the taxpayers aren't held to ransom again as they were in 2007-08. Can't disagree with any of this. Hopefully, however is the operative word. From where I'm sitting it's a faint hope as the conservative party receives a substantial part of it's funding from the city of London and many of it's luminaries move on to the city after their career in politics have ended. To many close ties and vested interests resisting calls for significant structural and substantive change to be enacted.
  • royshaw
    Hello HotAired, Thanks for your reply. You really do think that you are so clever, in fact, whilst being so rude about my professed lack of knowledge you totally omitted to answer my question! Further, it is not for you to presume that people like myself were to blame for the current financial situation. Where did you get your own knowledge from? Were you so clever that you worked it all out for yourself or did you learn from someone else? Of course I am aware that wealth is created but it is 'pie in the sky' to imagine that all the billions being made by the investment banks come from 'new' wealth. Lastly, CAN you answer my original question?
  • helenabrown
    You and my Husband have exactly the same idea, why hasn't the Government. Something with being too cosy.
  • helenabrown
    Well Danny this has been my Bank for nearly 40years and I have had it, off to the Co-Op where they still deal with old fashioned ethics.
  • helenabrown
    I would Bob, but just had the embarrassment of watching the stupid moron on TV the other night and I just cannot find a good reason, even the Banking Crisis, for actually contacting him.
  • helenabrown
    I understood that the highest earner in the Bank is also the one whose sector is also the biggest loser. Cannot for the life of me see why they are keeping this woman in employment and paying her this exorbitant amount of money which actually out shines Stephen Hester.
  • 49niner
    Hang on a minute folks. The kneejerk "greedy banker" reaction is not the smart reaction here. Mine is an accountant's reaction. Firstly, RBS lost money in 2010 so won't be liable to Corporation Tax. Furthermore, because of losses brought forward, it probably won't pay much in Corporation Tax for a year or so yet until it returns to healthy profits. In any case, Corporation Tax is only 28%. Secondly, by paying bonuses, in theory at least the taxpayer does get something back this year. If the bonus is taken as income, on a senior executive's pay, the bonus will be liable for tax at the top rate of 50%. On this basis, HMRC does rather better, at least in the short term. Looking a bit further ahead, we must support a successful RBS unless we want to have to support the bank indefinitely. A successful RBS will mean when it is sold back to the private sector, we, the taxpayers get our money back, and hopefully a bit on top. I'm not a socialist so I don't object to large wages per se. Remuneration is subject to negotiation between employer and employee. In general, if private companies don't get this right, their costs can get out of control and they go out of business, unlike the public sector, where up to a point us taxpayers get shafted. The problem during the crisis was that some of the banks had got too big to fail. The banking commission which is due to report later this year hopefully will have some recommendations on this vital subject so the taxpayers aren't held to ransom again as they were in 2007-08. A robust, fit for purpose banking sector that is stable and profitable is in the public interest. I look to government to promote that policy aim for the future.
  • voiceofconscience
    I do not think people have a problem with high earners. What we have a problem with is when the experts lose our money despite their high salaries and then have to be bailed out by the public sector. They then have the audacity to award themselves superstar bonuses. Excuse me but what planet are you on if you can not see the wrong in that. Do you really believe in paying for failure?
  • voiceofconscience
    HSBC have been threatening to move for years - even if they do it will be no loss. The problem that you seem to lose sight of is that these are not "experts" and the "going rate" is set by the "experts" themselves and is paid regardless of performance and regardless of whether there expertise makes their investors money. This is tantamount to legalised theft.
  • HotAired
    "Simple logic tells me that somebody has therefore LOST £375 million." Unfortunately, there is no logic whatsoever in that statement and it is such unbelievable ignorance of the basics of finance and economics which is just as much to blame for the financial crisis as risky and poorly regulated investments. Your logic would presume that the amount of wealth is static - clearly that is not the case. Wealth is created and that wealth is divided - not equally, thankfully. Whether the wealth is created fairly or truly values the underlying risk is a completely different matter.
  • dannydog
    Totally agree. The bonus people get the going rate for the job. Would you stay with a firm that did not pay the rate for the work you do? Or perhaps you don?t work and the bonus earners subsidise you?
  • DickDesigner
    Holly F**k! Do we live in a stupid World... or do we live in a stupid World? If I was one of those 5 bankers I would be seriously embarrassed. I trust they all have a favourite charity and really believe in the BIG (hearted) Society?
  • voiceofconscience
    This is a good website. The closest we have in this country to a democratic voice. It was responsible primarily for the 500,000 votes that stopped MPs selling the forests. Did not realise they were petitioning for a bank reform also. Thanks.
  • voiceofconscience
    Yes but why pay millions and get monkeys?
  • dannydog
    The banks were bailed out so that ordinary people like you and me would not lose their life savings. (I incidentally was one of those who lost out in the Equitable fiasco a few years earlier). So now that our savings are reasonably safe, you wish to jeopardize the situation. Stop the going rate bonuses, let these experts move abroad, our banks go bust. We lose our savings. I then after years employing staff in business, helping the economy of this country, will have no option but to go cap in hand and ask for benefits. But as the main source of wealth in the UK is tied up with banking and financial services. And you want to let them go bust. There will not be any money in the economy to pay out benefits. In the last week it has been reported that the UK?s largest bank HSBC, is considering moving out of London. Let the experts earn their bonuses at the going rate, get my bank healthy and keep me off benefits.
  • melodrama
    Money laundering was criminal business of RBS duering 2001.
  • CarltonCarl
    The fact that they are able to get away with this beggars belief. You might almost think that we had leaders with vested interest in not changing banking rules like a Prime Minister who inherited his wealth from a father with an inherited senoir partnership in the financial sector, and deputy how inherited his wealth from his father, the chairman of a bank. Oh!
  • Bob_T
    I would sack these so called experts and then ask the budding up and coming bankers if they wanted to get paid more. Odds on you would have a queue of people able and willing to work for a tenth of the money these people are being paid.
  • StimParavane
    At least with Enron the American public got some "closure". With these "bankers" the only way they are currently going to experience the consequences of their behaviour is when the next banking crash is so big it takes us all down with them. It will be dire. The banks (and the corporations) by definition do not "give a shit" about the rest of us at all. It is extraordinary how we continue to put up with the super-rich and their contemptuous exploitation of the rest of world. Bonkers.
  • Bob_T
    If you want reform for bankers then go to the 38 degrees website click on campaigns and scroll down to "Tame the Bankers" then use the site to write to your MP. This is an excerpt from the campaign. "The Vickers Commission is set to propose reforms to the banking system to prevent another financial crisis. As the cuts begin to bite, bankers are set to reward themselves massive bonuses. Send your MP this short video and ask them how they plan to tame the bankers. To get started just enter your postcode in the box on the right. "
  • eternalsceptic
    You must pay the appropriate rate to the experts I presume you mean the 'experts' whose clever intellectual genius devised a system that parcelled bad debt (loans they were perfectly happy to dole out like smarties) into bundles so complex and diffuse that they believed (like a religious faith) that there could be no threat to the system itself regardless of the liabilities they had incurred. You call that expertise? And amid the carnage they have largely helped create they are apparently still incapable of a little humility and refuse to learn lessons from the crisis by resisting any real substantive structural reform to reduce the risk of this happening again. That isn't expertise, it's meglomaniacal ego.
  • dannydog
    sorry misread your reply. but remember for good or bad we do own this bank, we could throw away all we have spent or we could try and get a return on the investment. remember the old saying. pay peanuts and get monkeys!
  • dannydog
    ever tried to run a business mr justgreed?
  • Justgreed
    Total rubbish! We should have let the greedy individuals go bust in the first place. They are just costing us more and money! How can they be experts when they take bonuses when the company is in fact insolvent!! The way they are trading at present will take them back to wanting more money from the tax payer! I have been in business for 30 years, If I took a bonus and the company was insolvent then I would be taken to the courts for fraudulent trading! Think about it, who is running this country?
  • dannydog
    Mr and Mrs Public. You now own this bank, if you want it to get back in the black so that you can sell it and get your money back. You must pay the appropriate rate to the experts who can do this for you. Repeat for you. Or the experts will go to another bank, and your bank will go bust and you will get no return on your money. Just think about!
  • mithras1
    Eighty-three percent owned by the taxpayer and yet we have no say in how these people are remunerated. They lose £1.1 billion in a single year and then reward themselves with £1+ million bonuses and £ multi-million pay packets. And our spineless government does nothing -- except punish those who can't fight back (who don't and can't contribute millions to the party and provide cushy post-politics jobs). That we would allow this to pass unchallenged speaks volumes about what this country has become.
  • Mark_Sampson
    what is it going to take for the British people to rise up like those in Libya or Egypt ? our political system is as corrupt and nepotistic as any Middle East potentate, Newspaper owners exercise huge control over our media controlling so much of what we see and hear, local politicians syphon off huge salaries from our taxes like some Stalinist overlord keeping the peasants in line. Our children will all be denied even the same standard of education we enjoyed, our parents will be left to die in hospital corridors, and if you get mugged, carjacked or beaten up in sainsbury's because some Albanian refugee pushes in front of you then don't expect any help from the Police as they have all been fired. Sooner or later...we are going to have to tear ourselves away from our Playstations our Sky TV and Plasma's, our BMW X5's and those restaurants filled with balding chef's serving up slug excrement. Think about It people, we have been hoodwinked and shafted, and nothing, I mean nothing brings this into sharper focus then Banksters giving us all the finger.
  • eternalsceptic
    whose jobs have a bearing on the bank's risk What "risk?" This is the biggest, most blatant distortion of the truth that the banks constantly keep repeating. They know fine well (along with all the other major players in the industry) that given their size and importance in relation to the economy as a whole that should things go pear shaped that the government has to step in to save them. This is why they are lobbying so furiously against seperating retail and investment banking. As long as they stay too big to fail they effectively have carte blanche to pretty much carry on as before.
  • mugwump12
    Smoke and mirrors.
  • maisie76
    Don't expect the government to do anything. I understand it all about looking after one's inheritance!
  • This cannot continue - these people are taking OUR money under false pretences. They and our useless government should hang their heads in shame. But they won't, will they! Too busy laughing all the way to their offshore, tax haven bank accounts.
  • as a share holder of rbs who has received diddly squat and lost a considerable amount of money since they nearly collapsed. i am appalled that these people are being paid effectively for failure, enough is enough even though i would have lost mostly everything i have i wish the government had let them gone bust !!! greedy Bar stewards.
  • royshaw
    If RBS has paid 323 staff members £375 million then it must be because, overall, those staff members have brought in more than £375 million. Simple logic tells me that somebody has therefore LOST £375 million. Could someone please explain this to me? The many millions currently being made by the investment banks do not come out of thin air, someone, somewhere is losing all this money. How?

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