Royal Bank of Scotland, the majority taxpayer-owned bank, is expected to this week announce a £9.6 million pay package for Stephen Hester, its chief executive.
It is believed that UK Financial Investments, which controls the Government’s 70 per cent stake in RBS, together with the bank's other major shareholders, approved a long-term incentive plan on Friday.
The pay package is understood to consist of a £1.2 million salary, about £2 million of annual non-cash bonus payments and almost £6.4 million of long-term share options.
The deal is similar to what other bank chief executives receive, but is considerably more lucrative than the pay packages offered to the bosses of other banks in which the Government now holds large stakes. Eric Daniels, the chief executive of Lloyds Banking Group, who is paid a salary of £1 million a year but only £2 million in long-term incentives.
Sir Philip Hampton, the chairman of RBS, is understood to be the driving force behind the deal, which is based on a mix of targets such as improving the bank’s share price. It would need almost to double to 70p for Mr Hester to get the full payout.
The size of the remuneration package is likely to divide opinion, with some critical of big pay packages and others believing that the difficulty of reviving RBS's fortunes means that anyone taking on the task would require lucrative incentives.
Last week Sir Fred Goodwin, the bank's former chief executive, bowed to public pressure and agreed to sacrifice £4.7 million of his £17 million pension award.
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