Banker admits he cannot win 'societal argument' on bonuses – 'none of us are starving' – but insists he is a 'commercial animal' and wants to be paid as such
Stephen Hester, chief executive of Royal Bank of Scotland, has revealed that he had considered resigning during the furore over his near-£1m bonus, but decided it would be too "indulgent" to do so.
Speaking in the cavernous white office once occupied by his predecessor Fred Goodwin, who was stripped of his knighthood last week, Hester admitted that he could not win what he described as "the societal argument" about the size of his pay. His salary is £1.2m a year but annual bonuses and longer-term plans can push it up to more than five times that amount.
He made it clear that while he did not set his own pay, he was a "commercial animal" and wanted to be paid as such. Asked why he needed a bonus at all, he said: "One doesn't need it. No one in this room, none of you – even if you're not on the same salary as me – no one is starving and by those standards one can't win this discussion."
Fresh from an interview on Radio 4's Today programme in which he described his job as defusing "the biggest time bomb in history", Hester admitted being concerned about the long-term impact of the political furore surrounding his bonus, but refused to respond to any of the politicians who have singled out the RBS boss and his pay packet for criticism.
He did, however, concede that the bank and the government needed to "regroup" and reconsider the fact that RBS was run as a commercial enterprise, despite being 83% owned by the taxpayer after its £45bn bailout.
The political row over his bonus, he said, posed a question about whether RBS's recovery and the aim of getting back the taxpayer's £45bn would be "impeded by us having some uncomfortable halfway house … expecting us to pay differently to everyone else and achieve differently than everyone else."
In stark contrast to the immaculately tidy desk of his predecessor, Hester's workstation was strewn with papers. The office walls were adorned with pictures of his 350-acre estate in Oxfordshire, which is tended by eight gardeners.
The bank's financial results for 2011 will be published in a fortnight and will set out the size of the bonus pool for its investment bankers – who are dwindling in number owing to a restructuring announced last month. Hester refused to be drawn on the scale of the payout likely to go to the head of the investment bank, John Hourican, saying it would be "invidious" to discuss the matter. But he seemed to indicate that bonuses must be paid. "We should be at the restrained end of the market in which we compete, but we should recognise that our people are doing a damned good job," he said.
The 51-year-old was skiing in Switzerland on the Sunday night when he decided to waive his bonus. He made his decision hours after Labour had called a debate on the award to Hester of 3.6m shares – and on Wednesday he told the Today programme that he had considered resigning: "I'm certainly not a robot and there have been some deeply depressing moments. In the end I came to the conclusion it would be indulgent for me to resign, and what I ought to do was draw on the reserves of strength I have."
The divorced father of two teenagers admitted to having had "everything … emotionally, physically, intellectually" tied up in RBS for the last three years and he did not want to "toss it away" in a moment of pressure. "If there's a quality that got me to where I am in business, it's wanting to win for my company. The moments when I have hesitations are when there are obstacles that are going to be difficult to get over," he said.
Usually a man who shuns interviews, Hester stressed that he did not want to be a politician or be "in the papers all the time". Shortly after he was appointed in October 2008, the bank reported the biggest loss in UK corporate history of £24bn and Hester admitted on Tuesday that the bank had incurred £38bn of costs trying to clean up the mess. However, it has also generated £33bn of profit before bad debt charges.
Hester said he had been lured to RBS from British Land – a role in which he had been "perfectly happy" and had deliberately taken on to prove he could be more than a banker after a career at Credit Suisse and Abbey National.
He took the RBS job on the basis it would be run in a commercial way – "some would say in a hard-nosed way". "I attempt to be commercial in the results I get, and I want to be commercial in the way I'm treated. I'm happy for that to be at the restrained end [of the pay scale], albeit in a societal debate I can't win," Hester said.
"If I only worked for money I wouldn't do this job – but that isn't to say I don't care about money," he added.
Hester appeared to admit that he has had approaches about other roles since the bonus row. "People have been very kind in all sorts of different ways, but my preference is to succeed at RBS."
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