Royal Bank of Scotland, the partly nationalised British lender, is to unveil a pay package for CEO Stephen Hester worth up to £9.6 million after securing backing from investors, the Financial Timesreported today.
The paper said negotiations over Hester's pay deal concluded on Friday after RBS chairman Sir Philip Hampton won the approval of shareholders including UK Financial Investments, the body which manages the government's 70 per ent RBS stake.
UKFI confirmed a deal had been reached but had no details.
"UKFI expects all awards to be based on long-term sustainable performance which rebuilds the businesses of the banks," the body said in a statement.
RBS has been at the centre of investor and public anger over excessive pay in the banking sector, stoked by the taxpayer-funded bailout of lenders across the United States and Europe.
Mr Hester would receive a £1.2 million salary, a projected £2 million in annual non-cash bonus payments, and nearly £6.4 million in long-term share options, according to the FT.
Mr Hester's package is dependent on targets including total shareholder return and absolute share price performance, and the maximum share grant would only be awarded if RBS shares passed 70 pence, the paper said.
Asked if finance minister Alistair Darling had been told about the pay deal, a spokesman for Prime Minister Gordon Brown said: "This is a matter for the RBS board."
"But in their discussions with the RBS board, UK Financial Investments have been very clear that the awards must be based on long-term sustainable performance and that is the case with this proposed package," the spokesman said.
"Our objectives in relation to RBS are to ensure that the value of the business grows so that we can get the maximum possible return for the taxpayer," he told reporters.
RBS shares were down 1.1 per cent at 36.8 pence by 12.16pm, while the FTSE 100 share index was 1.5 per cent lower. At the end of July 2007, before the credit crunch led to massive writedowns and losses, RBS shares traded around 490 pence.
Hester's reported package compares with basic pay of £1 million plus a share award of up to 200 per cent of salary handed to Eric Daniels, the new CEO of Lloyds Banking Group which is 43.4 per cent owned by the British government.
Mr Hester was appointed last year to restructure RBS after heavy exposure to risky credit-backed assets built up during the tenure of his predecessor, Fred Goodwin, forced the bank to accept £20 billion of emergency government assistance.
Reuters