Royal Bank of Scotland is a taxpayer-controlled bank and is amid a controversial situation. RBS is planning to give a £4.3million bonus to the head of RBS’s troubled investment banking division, John Hourican in April. And while this news is surfacing it is also being said that many of its staff will be paying for this bonus for this one executive with their jobs. RBS is also being rumored to sack about 5,000 of its staff. What is important to note is, that all this is happening post Prime Minister David Cameron’s attack on bosses who accept huge salaries and bonuses when their companies are struggling.

83 percent of RBS shares are owned by the taxpayer. The share prices have halved over the past year following the government bailing out in 2008. 41-year-old John Hourican has been the head of global of global banking and investment since 2008. He might be eligible to get 21 million shares in April under a bonus deal that was agreed upon three years ago. After the disastrous tie-up of RBS with ABN Amro Hourican was awarded 29 million shares and options as part of an initiative to restructure the group.

Last night RBS shares changed hands at just over 20p, the windfall would be worth £4.3million. Yesterday RBS said that Mr. Hourican’s share award was dependant on him meeting ‘performance targets’ – but they specifically refused to elaborate on the targets. Unite, the union that represents junior staff at RBS, launched a fierce attack on the payout to Mr Hourican.  

RBS national officer, David Fleming said, “Yesterday, David Cameron toured the television studios positing as a prime minister tough on excessive pay rewards…Today, we see the government-backed bank completely ignoring his pleas.”

Downing Street blamed UK Financial Investment yesterday trying to deflect the criticism of big payment at RBS. The Prime Minister’s spokesman said, “UKFI is set up as the shareholder and is very clear that it will make sure that pay at RBS reflects performance.”

UKFI would not comment on whether it would intervene, but employment experts think that it will be difficult for RBS to trim Mr. Hourican’s payout unless he can be shown to have failed to meet the ‘performance targets.’



This huge bonus for Mr. Hourican is poised to axe thousands of jobs. Conformation of the latest round of cutbacks is expected within days. Mr Hourican, who was  educated in Ireland and started his accountancy career in Dublin, is in charge of that troubled investment banking business, which the group is trying desperately to shrink by selling operations and axing staff.  The bank has appointed merchant bank Lazards to try to find a buyer for Hoare Govett, the stockbroker inherited as part of RBS’s takeover of ABN Amro, the catastrophic deal masterminded by Sir Fred Goodwin.

This week’s expected round of job cuts is likely to be only the first of many. RBS has already axed about 20,000 jobs and is likely to announce further reductions. In the first none months of 2011, profits for RBS’s investment banking division were 40 percent lower than a year earlier. PM Cameron vowed at the weekend that shareholders should be given the power to veto executive pay packages.

Lord Oakeshott, who was Treasury spokesman in the House of Lords for the Coalition until a year ago, said, “Where a business has clearly failed and is being run down, you would not expect the person in charge to be receiving millions in bonuses…This is exactly the sort of case where Cameron should stop talking in generalities. This is the most glaring failure of corporate governance…he is now jumping on the bandwagon of pay in the banks.” He even parted company with the government after describing efforts to force banks to lend to small and medium-sized businesses as ‘pitiful.’

Attention is now likely to focus on RBS chief executive Stephen  Hester. For 2010, he received £1.3million in salary, plus a £2million bonus. On top of that, he was awarded shares under an ‘incentive’ plan. At their current rock-bottom price, those shares would be worth just over £2million. RBS said yesterday that its ‘remuneration committee’ – the group of non-executive directors who agree payouts to executive directors – has not yet decided what Mr Hester will get for 2011.

(PHOTOS): Daily Mail