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RBS board may quit if Treasury blocks £1.5bn staff bonuses

The directors of the Royal Bank of Scotland are threatening to quit should the Treasury block them paying an estimated £1.5bn in bonuses to staff in its investment arm.

According to reports, the directors have been advised to resign if the Treasury blocks bonus payments as it would prevent RBS board members from running the bank for the benefit of shareholders.

Chancellor Alistair Darling is ready to veto the RBS bonuses, which are believed to be 50 per cent larger than the £900m paid in bonuses last year, on behalf of taxpayers.

RBS is 70 per cent owned by the taxpayer under the asset protection scheme and has to agree the size of this year’s payouts with UK Financial Investments, which was set up to manage the public stakes in banks.

A Treasury spokesman said: “As a major shareholder, UKFI [UK Financial Investments] needs to be satisfied that RBS’s approach to remuneration is in keeping with the Financial Services Authority’s code of practice.

“I understand the point that RBS directors are expressing – they say they have to remain competitive in the market in recruiting senior executives, and this is why it’s important that all the banks are equally restrained, and RBS is not singled out.”

Yesterday Lord Myners questioned the excessive levels of pay across the banking industry, claiming that at least 5,000 people in the UK banking industry will receive in excess £1m of bonuses this year if nothing is done.

Liberal Democrats Shadow Chancellor Vince Cable says: “I would welcome their resignations, as the bank cannot hold the taxpayer to ransom.

“As a state run bank, the Government must finally take control and ensure that both its pay and lending practices are in the public interest.”

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Comments

There are 49 comments at the moment, we would love to hear your opinion too.

  1. Bonus are meant to be paid when the company makes profit , looks like employess and board in RBS see it as an extension of salary .. when the company is being supported and bailed out by tax payer , i think its the company responsiblity to pay back the money borrowed and then do what they want . its upto to them to decide if they want the job or bonus

  2. If I was Gordon my reply to the RBS board would be “goodbye”

  3. Let them quit I say. The governement should not be blackmailed by this lot. Who do they think they are? Are they devoid of all senses – what bit don’t they understand about the state of the bank and the economy – sounds as if they are not fit to be in the position anyway!

  4. as RBS is still are not lending to people who need it, and are charging people excessive fees.
    they could use the bonus money to put back in the system, pay back the tax payers and get thier house in order.
    Let them go there is not many jobs out there for these fat cats

  5. Let them go. Their arrogance astounds me!

    How many folk have RBS made redundant over the past year? And they dare to throw a strop when their bonuses may be capped??

  6. There are some people that think they should have resigned a long time ago.

    The Treasury should not give in to blackmail

  7. Unbelievable.

    Invite their resignations now and maybe the tax payer will eventually get their money back.

  8. As an RBS customer I think that the Government should be pleased to accept the resignation of this bunch of greedy, uncaring individuals – there are many people out there with the will, skill and understanding to run this business for the benefit of it’s customers.

  9. They are incredulous. Let them go – why on earth do they think they are worthy of these bonuses – ??

  10. Bonuses must have been stipulated in the contracts of employment. Many of the contracts may well pre-date the mess of the last 2 years. Contracts have to be honoured. The bank’s board can make redundancies to cut costs but they must first honour the contracts of employment as they currently stand. I can’t believe some of the rubbish peple have written in the blogs – a contract is a contract and thanks to our employment laws, failure to pay the bonuses will end up in court and the Government, Alistair Darling and the UKFA will lose and pay costs thus wasting more tax payers money.

  11. After the sorry state the bank has got into who would want to re-employ the directors anyway? I don’t think they’d really walk especially as top paying jobs are scarce and positions at all levels are seemingly paying less than previous years. Many companies have had to slash benefits and bonuses for existing employees that were taken for granted in previous years and in this economic climate most employees are grateful just to still have their job so let them walk.

  12. I would lay money that the Government and Treasury will capitulate. They have form.

  13. Good riddance – it just goes to show they will not change their ways. The sooner they leave, a new culture can be born.

    It amazes me how they still hark on about how clever they are and how we need to pay them so much to keep them in the UK. Do their memories forget that it was their top executives that brought this country to the brink of ruin, with the huge tax burden we must all now carry to pay for their wreckless ways.

    I am disgusted. I hope Labour show some backbone for once.

  14. They can look on it as their contribution to the recovery of the bank and be grateful it isn’t as much a sacrifice as all the people that have been sacked to fund it.

    The directors should be offering to take a reduction in salary as their contribution to restoring sanity to remuneration in the city.

  15. Surely the argument is that any contracts paying bonuses must be null and void, as these people who not have had jobs if the bank had not been rescued by UK Plc?

    The bank is now 70% owned by the state, so these guys are civil servants…. sorry lads, go elsewhere and get silly money, why should us taxpayers reward failure in this way?

  16. Richard Hoddinott 3rd December 2009 at 10:09 am

    As the current Board allowed the Bank to get into this mess then they are not fit for the job. Your fired would be a better comment. Cut the bonus and get a new Board who know how to run a business.

  17. Contracts? The Government makes the law, they can do what they want.

    Mass resignations? As approved persons they have a duty to act with integrity, skill, care, diligence, etc. I trust the FSA will give due consideration as to whether they could/should be allowed to be registered with a new company in due course…

    Lastly, are we really in a situation where the people in these highly paid jobs are the ONLY ones who can do them? Or is this a case of a closed shop where salaries and bonuses are kept artificially high for the benefit of those behind the doors? Let’s at least find out.

  18. They may have had contracts, but without tax payers money that contract would be worthless. If they must honour a contract, perhaps now is a good time for the Government to demand some of the tax payers money back before any bonuses are paid.

  19. To the banker posting anonymously at 10am, a contract is a contract and if it says a bonus will be awarded for “performance” then that is fine, but if there is clear evidence (as seems to be the case with RBS and other bailed out banks) then this is a breach of contract on their part and also a breach of the senior managers/directors’ duty of care to protect all stakeholders in the company and so should not only be fired but also taken to court to show some accountability. For further reference check out the new Companies Act which is supposed to enable action against wreckless directors, but as ever no one in authority puts their neck on the line!

    Mr Rose will no doubt be sunning himslef somewhere waiting for the furore to die down before coming back and probably becoming head of the FSA!!

  20. Let the directors go – please!!!!

  21. I tell you what I will do, I will do the job for 1 million pa fix salary no bonus, who will join me. lol

    If the banks of my profit and surely they should be distributed UK government and other shareholders so UK government can repay some of its debts.

    I would only have one answer to these greedy bankers goodbye.

  22. I couldn’t agree with Grey Area anymore.
    Let them show their true colours and all resign and we will then see for how long the jobs are vacant.

  23. It’s interesting that people are claiming that contract is a contract and as sure bonuses should be paid. I wonder if some of these bankers would really like to have all of their affairs looked into to see whether or not they have been acting with due diligence within the banking arena. I suspect the threat of possible prosecution under FSA rules might mean they wouldn’t take legal action in respect to their contracts. I also suspect that the FSA and the government has the power to rewrite laws to get out of these contracts if necessary. The contract is only a contract when there is a law that states it is a contract.

  24. I agree with a lot of what’s already been said. If the Treasury gives in to this attempt at blackmail then we can expect much more of the same.

    Let them quit. I’m sure there are plenty of people who could take their places. They are all overpaid members of the Old Boys’ Club and we have far too many of them in the top jobs as it is. They are not serving us well.

  25. Just to concur with most of the responses on this thread. Government should just accept resignation. Plenty of people made redundant recently and with ample qualifications will do fa ar better job than these unqualifie, greedy, arrogant twits.

  26. Greedy Bankers? what about the greedy public (dare I say taxpayers?) that have been grabbing all the credit they could over the past few years so they could buy their flat screen tv’s, buy-to-let properties, properties off-plan in dubai, holidays, cars etc etc just so they could keep up with their neighbours? Yes the banking system was wrong to hand out credit without properly assessing risk, but the taxpayer must also accept some responsibility for this mess we are now in. This situation was brewing for years, but no-one was complaining as long as they could “afford” their credit fuelled lifestyles. We must now deal with the reality. If the board resigns then so be it, but who would be jumping in to replace them without a proper pay structure? And no, I’m not a banker for the record!

  27. What a greed driven farce – goodbye I say!

  28. I agree with the sentiment of comments it is total arrogance to assume they are entitled to bonuses country is in a mess due to their greed . A bonus should be for a job well done. In these cases seems to be they should earn bonus over a period of time and also have a claw back facility.
    If they are thinking the Government should back down if they threaten to resign who do they think they are and how arrogant.

    The Indispensable Man

    (by Saxon White Kessinger)

    Sometime when you’re feeling important;
    Sometime when your ego ‘s in bloom;
    Sometime when you take it for granted,
    You’re the best qualified in the room:
    Sometime when you feel that your going,
    Would leave an unfillable hole,
    Just follow these simple instructions,
    And see how they humble your soul.

    Take a bucket and fill it with water,
    Put your hand in it up to the wrist,
    Pull it out and the hole that’s remaining,
    Is a measure of how much you’ll be missed.
    You can splash all you wish when you enter,
    You may stir up the water galore,
    But stop, and you’ll find that in no time,
    It looks quite the same as before.

    The moral of this quaint example,
    Is to do just the best that you can,
    Be proud of yourself but remember,
    There’s no indispensable man.

    If they resign accept and replace

  29. Anonymous | 3 Dec 2009 10:00 am says that the taxpayer should honour the contracts in a compnay (RBS) that it has taken over. In this crisis situation many contracts have been breached-HBOS shareholders were not consulted in the takeover of their company by Lloyds. Dunfermline members were not consulted when the government gave Nationwide £16B of taxpayers money to bail them out. Competion authorities were told to take a running jump when they opposed the formation of the Lloyds Banking Group. RBS itself broke the law when it raised funds through a rights issue knowing that its finances were terminally ill. In this emergency situation ALL RBS staff are very lucky to have a job at all so let them sue. The taxpayer’s money would be better spent compensating the poor whom the banks have ripped off with charges for DDM’s which put them into the red for a few hours-now paying out to poor people really would have a beneficial effect on the economy and on government spending-the tax payer should not be paying out to rich people in these staightened times.

  30. I think people are missing the point and I was surprised by the naivety of Vince Cable which is not consistent with his generally excellent understanding of our financial predicament.

    What is the first thing private equity firms do – pay for expensive management and incentivise them accordingly – which leads to better results and therefore a bigger return.

    We as the taxpayers own the bank. If the bank does not pay decent bonuses then they will lose all their good people.

    It stands that they will be less competitive and therefore make less money so that at the end of the day we will get less return.

    I agree its not palatable but RBS must be able to incentivise its staff otherwise we’ll get nothing back

  31. As the major shareholder (soon to be 85%), taxpayers (in the guise of UKFI) should expect the government to follow the voting majority. After reading a number of blogs on this, 99% are vehemently opposed to the paying of bonuses. This Bank has cost our country billions and years of possible hardship and they expect bonuses for this? Is Darling listening – only time will tell. Personally I would call their bluff – who do they think they are? I would hazard a guess that a good number of these directors were presiding when the bank hit the wall, and now most people would agree that they are on the wrong side of this moral question of bonus payments – I would say that they are failing in their fiduciary duty if bonuses are paid. In any case, are there lots of other director jobs in the market – I doubt it – call their bluff!

  32. tcf as banks do ,due diligence in thier dealings, best practice, where does it stop.greed and recklessness are rewarded at the expense of the tax payer.

  33. Labour and the Governement in general have had a good history of not listening to protest and having an attitude of “we will not give in to terrorism”. Shouldn’t the same apply here? Many people have had to do with no wage increases and/or no/greatly reduced bonus’s this year. Its one thing to pay bonus’s to people who have generated more income and hit targets but any company that has made a loss often has to do withdraw bonus’s or scale them down.

    The arguement that they will not fill the roles is ridiculous, plenty of capable people have lost their jobs and i’m sure there will be plenty of applications for roles that pay £40,000+, its not like the bonus culture will be away for long once the economy is on a boom cycle again and eveyone forgets the past as usual.

    If Labour give in to this it will show what many people believe – that it is one rule for some and a different rule for Labours friends and allies. But since this has been demonstrated time and time again i would think the Government will just limply curtail to their demands and claim that there was nothing they could do. Which makes them sound like they have absolutely no power to change anything.

  34. Hester and his band of masters of every universe have obviously done such a good job at RBS in the past year the UKFA and UK shareholder will have no choice but to pay up or Hester and his band of superheroes will upstick to take up their next assignment in the desert – Dubai World. We should be grateful for such talent being on these shores. Can we not see that genetically these people are superior and that we mere mortals are to serve and behold. Hester and his board works 25 hours a day, have vast wisdom and experience beyond the combined brain power of Einstein, Aristotle and all the Nobel Laureates. Their sacrifice is beyond the call of any duty….to be able to underperform and lose money on a scale beyond the imagination of god or man. It is on the 8th day God had his last laugh and created the Masters of the Universe otherwise known as RBS Board members.

  35. I absolutely agree with all the sentiments of all the British Public, the comments above with the exception of the only anonymous RBS banker on the grounds of HR issues and contracts. These employees have an obligation to achieve tangible performance without which they should not receive a bonus. It would never happen in any other industry.
    Also the comments made in one of the blogs that RBS are still not lending and charging excessive fees, despite public and secret loans from our ‘elected and publicly funded Government’, must be made ‘illegal’.

    If the board, no doubt supported by Mr Mandelson, are allowed to retain their positions and secure this bonus, this has much deeper implications to the British Constitution and proves what the ever shrinking tax-paying public believes, that politicians are securing their own financial futures by the decision they make whilst in office.

  36. Both sides are to blame – the boards arrogence defies belief in wanting to pay the bonuses. Contracts are contracts, however when the tax payers went to bail the bank out the Chancellor should have had the common sense to insist that it was only doing so provided contracts were changed so that no bonuses were paid to anyone until RBS had gone back into to private ownership again and those who didnt agree could have tenered resignation there and then. It doesnt take rocket science to work it out, does it Mr Darling? I would love to see them all resign. Where would they go as they keep saying there are no jobs out there because the whoe country is ruined. Go on Alistair have some guts and call ther bluff. You shouldnt care because by the time it all comes out in the wash you will be in opposition. I think you may find when the time comes, they will chicken out. No more fancy expenses and lunches and business trips to parts foreign? Not likely. They will stay as they know the market is top heavy with fat cats.

  37. Let them go! In fact insist that they go because they have clearly not even learned the fundementals of any job “never threaten to resign unless you really mean it”. We want responsible adults in the job not imature people who throw their toys out of the pram when they don’t get their way.
    Actually contractually it would be good if they went as it would get rid of this twaddle about behaving “honourably” with regard to bonus payments. Just imagine the look on a bankers face if I went into my bank and said my company is broke but I still need to pay my staff their bonus so can you oblige by putting the money into my account!!!

  38. I think they may have taken their lead from the regulator. After all the bonus paid at canaty wharf has nothing to do with good results.

  39. I’ll apply to work on the board.

    I’d get RBS back to being a retail bank, return it to it’s roots, derisk, and offer value to customers through simple low risk products like exchange traded funds. Without gouging customers, with no monopoly profits, the question of bonuses would evaporate as there would be no need for the ‘traders and wheeler dealer bankers’, or revenue generated (supposedly) directly by them!

    I’d wait for them to leave, and after a few months, offer them a job in a branch arguing that it’s time they work for their money!

    It’s time someone stood up for the biggest stakeholder – the taxpayer. I’d argue that the rules of capitalism say the board should be fired for not taking the difficult but necessary steps without favour, fear or prejudice!

  40. The Govt will back down as they always do…weak leaders / management- hence why Public sector projects always fail or always over run (budgets)….Its a disgrace

    Dominic Embley
    http://www.projxhub.com

  41. Take back the tax payers money and let them get on with it. They can sink or swim by there own decisions then. I dare say they would’t be so keen to take large bonuses if the large injection of tax payers money was not there keeping them afloat.

  42. Frankly, if the idiots who brought RBS down want to leave because they don’t receive bonuses (and why should they have them?), RBS is well rid.

    I’m an RBS shareholder through my SIPP and I don’t want those people running the company I part own; 1 as a shareholder 2 as a taxpayer!

  43. I am no fan of banks but I am even less of a fan of mob rule. If Darling, Crash Gordon and Mandlescum can rip up a legally binding bankers contact then they can do the same to you and me. In fact RDR is yet another such example of such a dictatorship. Before you knock things down make sure you have better to put in its place. As unpopular as it may seem it will be these very same people that pull the UK out of this mess. Operate withing the rule of law and not the rule of the mob and the media.

  44. I think it’s a bit like call my Bluff.
    My heart tells me accept their resignations. My head says as Simon Mansell has said. Lets stick to the rule of law. My logic says as Paul Herd did…
    Peter Herd | 3 Dec 2009 10:25 am

    “I wonder if some of these bankers would really like to have all of their affairs looked into to see whether or not they have been acting with due diligence within the banking arena. I suspect the threat of possible prosecution might mean they wouldn’t take legal action in respect to their contracts.”

    I think I would call their bluff……

    In addition as someone else said the government should have made a condition of the bail out all contracts for senior staff over a certain level to finish and then be reneogotiated
    based on the fact they were insolvent at the time.

    If this is NOT done and the government backs down, then quite legitametly ALL bank staff could turn round and say they have been treated differently to the directors as far as their Final Salary Pension Schemes are concerned. The directors receiving bonuses may end up being preferred over existing and deferred pension scheme members in due course or liability offloaded on the Pension Protection Fund when had the bonuses NOT been paid would not have been required.

  45. The treasury should not let the board quit. The board came in to turnaround the bank, plans which seem to be not in line with the EU, I think they’ve realised how hard it will be to turn the bank around as there’s more bad news on the horizon so they’re trying to milk the bank for personal gain – this threat helps them to get out more easily although I wouldn’t be surprised if Mr Hester & Co were made scapegoats for the mess they took on.

  46. ITS THE REGULATORS FAULT 4th December 2009 at 3:58 pm

    It started with Clinton. The main thrust of the Clinton housing strategy was to increase home ownership among the poor, and particularly among blacks and Hispanics – the American Dream!

    But standing in the way of the realisation of this dream were the conservative lending policies of the banks, which required such inconvenient and old-fashioned things as cash deposits and regular repayments — things the poor and minorities often could not provide. Clinton told the banks to be more creative.

    Regulator were established to spearhead an assault on the mortgage banks, bringing suits against any suspected of practising unlawful discrimination, whether on the basis of race, gender or disability. Racism, it was said was a big factor in keeping minorities from enjoying the same level of home ownership as whites. Regulatory law was used to change the behaviour of banks.

    If a bank refused loans to proportionally more black applicants than white ones, for instance, the onus would fall on it to prove it had good grounds for doing so or face settlement penalties running into millions of dollars. A series of highly publicised cases were brought on this basis, starting in 1994.

    These mortgage banks, which have been responsible for issuing about three quarters of the dodgy subprime loans that are proving troublesome today, quickly took the hint. From the mid-1990s they began to abandon their formerly rigorous lending criteria. Mortgages were offered with only 3 per cent deposit requirements, and eventually with no deposit requirement at all. The mortgage banks fell over one another to provide loans to low-income households and especially to minority customers. In the five years from 1994 to 1999, the number of African-American and Latino homeowners increased by two million.

    What happened next? Chances are you managed OK for a while, but after a few years found that like most poor Americans, your income wasn’t going up, it was declining. Around 2003, with your credit cards maxed out, you desperately needed to release some equity from your home. Luckily there was equity there to release, so you refinanced for the first time and enjoyed having some real money for a change.

    A couple of years later a mortgage broker called to suggest you do it all again, squeezing out the last drops of equity and opting for a low-start mortgage aided and abetted by a regulator who would not allow a credit decline as this would be deemed racist. You will never pay off that loan, it is pure poison to you, just like it’s pure poison to the investment bank that ended up with it on its books. You will just walk away. It’s not your fault. It’s not the bank’s fault.

    IT’S THE REGULATORS FAULT

  47. Please do not let the board resign…….SACK THEM without delay.

  48. I agree with Vince – you have my vote sir.

    How can these idiots expect bonusses if they nearly destroyed the Bank?

    They should kiss the tax payers feet for affording them a job.

    No wonder the Bank is in trouble.

    You receive a bonus if you were exceptional and the company excelled!

    Lots of the investors’ money was earned by means of a lot of blood and sweat, we did not receive it via freebies such bonusses!

    Did these bankers also come from Marketing backgrounds in underware?

    Fire them!

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