RBS Chairman Sir Philip Hampton tread the wrong line when he described the bank’s chief executive Stephen Hester’s pay as “modest” to a committee of MPs scrutinising bonus culture of the bank in the wake of £390m Libor rigging fine. Sir Philip Hampton’s shocking observation that Stephen Hester’s “modest” annual package which is £7.8m, came as a series of current and former RBS executives condemned their own traders for a “lack of morals” and “selfishness” resulting in the manipulation of Libor.
Stephen Hester’s bumper £7.8m package is made up of a basic salary of £1.2m, plus a maximum annual bonus of £2.4m and a further £4.2m that can be earned through the bank’s long term incentive schemes. In a bid to defend this fat pay package, Stephen Hester, called traders’ conduct as “disgraceful” and said it “brought shame on the bank”. He was also highly critical of the banking industry’s “hubris” and “excessively self-centred culture”. Despite sacking the RBS investment investment banking chief, John Hourican, as a result of the Libor scandal, Stephen Hester refused to give up on his bonus.
Addressing the members of the Parliamentary Commission on Banking Standards, Stephen Hester said, “We have done huge things to rescue the company for society and for its stakeholders. It is entirely proper for me to be assessed on what we have done. I believe this nation is off the hook for a lot of things.” When the committee asked him why he felt he was still entitled to the bonus, Sir Philip Hampton, replied, “Stephen is doing one of the most difficult, demanding and challenging jobs in world business. He has been paid well below the market rate compared to others in the same job.”
Sir Philip Hampton and Stephen Hester were summoned by the Commission after the Financial Services Authority report into the role of RBS in Libor fixing highlighted a series of “management failings”.