RBS's £4 million CEO bonus not likely to go down well…
Reports claim that RBS's investment banking CEO John Hourican is to receive a £4 million bonus, which flies in the face of the UK government's crackdown on executive pay
When the UK government formed the Conservative/LibDem coalition, one of the big issues to tackle in the court of public opinion was executive pay, and mainly "bankers' bonuses".
In a New Year's speech by UK Prime Minister David Cameron, he said:
Since the bumper bank bailouts of yesteryear, notably RBS, bankers' bonuses have been particularly under scrutiny. UK deputy prime minister Nick Clegg said the government will address "the anger that people feel at the bonuses still flowing to bankers”. However, UK public outcry over the level of extra compensation bankers receive will mean the latest news about RBS executive John Hourican is likely to cause even more furore.
Afterall, RBS is 83% owned by the UK taxpayer.
According to media reports, referring here to the Financial Times story, RBS's chief executive of global banking and markets division, Hourican is set to receive a "special bonus" of £4 million:
This is interesting, because on January 5, Euromoney reported on how RBS was paring back on operations and possibly relinquishing its investment banking division, and questioned whether these reports meant that RBS’s global head of banking and markets – Hourican – had failed.
And clearly from these latest reports – not necessarily.
The key for Hourican now is to make sure RBS keeps those businesses that continue to work for RBS operating at a high level. In the post-crash age, there is no reason why a firm that concentrates on closely related markets, such as DCM, FX and rates, should not prosper.
But looking at the bonus issue – it will be interesting to see how the government will respond to this and whether it will try to enforce its promised crackdown on "excessive growth" in executive pay, as described by Clegg.
Experts have remarked it is virtually "impossible" to curb or place boundaries on executive pay – unless the industries are nationalised:
However, as RBS is 83% owned by the taxpayer, it will be interesting to see if the UK government might use this well-publicised example to execute its promised crackdown, increase tax or, indeed, let it consequently and predictably pass and enrage the UK public further.