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â€¢ Believers in free market ‘must fight rewards for failure’
â€¢ Stephen Hester says RBS staff should be proud
George Osborne says the government is determined to fight an anti-business culture as ministers seek to fend off criticism from high-profile City figures of their handling of bonuses at Royal Bank of Scotland and Network Rail
Speaking to the Federation of Small Businesses on Tuesday night, the chancellor said it was up to people who “believed in the free market” to fight against rewards for failure in the financial system. He added: “There are those who are trying to create an anti-business culture in Britain â€“ and we have to stop them. At stake are not pay packages for a few but jobs and prosperity for the many.”
He was speaking on a day when the Commons debated a Labour motion on bonuses. The decision to call that debate a week ago prompted Stephen Hester, chief executive of Royal Bank of Scotland, to waive his near-Â£1m bonus.
Chuka Umunna, the shadow business secretary, who led the debate, said: “We’re using the debate to highlight how excessive pay is bad for business, as well as for society and the economy more generally.”
In an email to staff, Hester called on workers at the bailed-out bank to be “strong”, “purposeful”, and “calm”, in the wake of the publicity surrounding his decision on the bonus and the stripping of the knighthood from his predecessor, Fred Goodwin.
In the memo, written after the political furore caused by the award of his 3.6m shares, Hester warned that it was impossible to know how much damage had been done through the bank being in the spotlight.
The row over bonuses has led to the government being criticised by the Labour opposition and its own City supporters, including Michael Spencer, former party treasurer and chief executive of the money broking firm Icap.
As Hester thanked colleagues for their messages of support, he said he was “acutely conscious that the way our company has been in the media and political spotlight this last 10 days is discomforting to say the least”. He added: “And while it has been personalised in different ways, whether on myself or my predecessor, many have felt a broader impact on RBS of the uncertainty and criticism.”
He made clear to staff, who were also waiting to learn the size of their bonus payouts for 2011, that he had the backing of the chairman, Sir Philip Hampton, who last week asserted that the chief executive was not highly paid for the role he had.
The bank is thought to have amassed Â£500m to pay out in bonuses â€“ which are restricted to Â£2,000 in cash â€“ while some senior bankers such as John Hourican, head of the investment bank, are due to receive shares, awarded three years ago and currently valued at more than Â£5m.
Hester, who was parachuted in to replace Goodwin after the 2008 taxpayer bailout, said that the bank was now safer than it was at the time of the Â£45bn government rescue package, and that it had generated more than Â£33bn in profits before impairments from bad loans.
He said that the bank could get “over great obstacles”, as it had in the last three years since its near collapse. “There is no doubt that our position in the spotlight makes the job harder. And we can’t know how much damage that will do to RBS or the interests of those we serve, whether as customers or shareholders,” he said. “But the best way to deal with it is to prove the critics wrong. To be purposeful, calm, and do our jobs to the best of our ability. And have confidence and pride in what we have done and what we can accomplish. We should try to be strong, to do our jobs, to deal with facts not fears.”
But he also stressed that the employees themselves needed to consider the broader perspective.
“Many people within RBS and in the wider economies we serve are facing uncertainties around jobs, earnings, housing values and many other things,” he said. “None of us, individually or RBS as a whole, exists in a vacuum. We do need to keep in mind that bigger picture.”