British politicians and union leaders have welcomed the decision by the chief executive of nationalised Royal Bank of Scotland to refuse, under huge media pressure, a £1 million bonus.
The bank, which is 82 percent-owned by taxpayers, announced that Stephen Hester would not accept a bonus of 3.6 million shares after calls to do so grew from politicians, labour unions and the media.
The bonus would have been on top of Hester's annual salary of £1.2 million for leading the restructuring of RBS, which the government spent £45 billion to rescue and nationalise during the global credit crunch.
"'Better late than never' will be the feeling among the call centre, bank branch and processing staff at RBS," said David Fleming, national officer of the Unite union.
"This gesture goes some way in acknowledging the hypocrisy of an organisation which has sacked over 21,000 staff, while still attempting to pay bumper bonuses to the bosses," Fleming said.
Foreign Secretary William Hague said Hester's decision was "sensible and welcome".
The opposition Labour Party had been planning to force a vote in the House of Commons on a motion demanding that Hester be stripped of the bonus.
"I don't think this can be just a one-off episode, because if we don't deal with this systematically, if we don't deal with the issue of bankers' bonuses in a proper way, this kind of thing is just going to re-occur," said Labour Party leader Ed Miliband.
He said banks "need real change in the boardroom and new rules and real change from the government to, say, tax the bankers' bonuses until we see the change in behaviour that we need."
The pressure on Hester to forego his bonus, however, raised doubts on the bank's longer-term ability to retain high-level executives.
"The ongoing politicisation of contractually owed bonuses can only serve to increase the risk that management will ultimately decide to leave, severely hampering the prospects of a further recovery," said Gary Goodwood, analyst at Shore Capital Stockbrokers.
"This is one of a number of reasons why we think it is still too early to take a positive stance on Royal Bank of Scotland shares."
Bruce Packard at Seymour Pierce took a contrary view, saying any move to "more clearly align incentives with actual share price performance – RBS shares fell by a third in the last year - ought to be taken as good news for owners of the business."
The government will only recover its investment in RBS if the company's stock rises to around 50 pence. On Monday, it was down 2.4 percent at 27 pence.
AP