Hester braced for pay revolt at RSA
STEPHEN Hester i s on course for a showdown with shareholders over his multimillion pound pay packet at his new employer.
The f ormer RBS boss, whose rewards were a perennial source of criticism at the state-backed bank, is in the firing line again in his current role as chief executive of insurer RSA.
His package for this year including three-year incentives could add up to almost £5.7m if he hits his targets.
RSA is braced for protests from investors at its annual meeting in the City on Friday over a long-term incentive package for the high profile executive.
One leading shareholder, Cevian, which holds a 13pc stake, is considering voting against the pay report or abstaining.
Hester was recruited by RSA l ast year after an accounting scandal in its Irish division. Hiring such a big name was seen at the time as a coup for the troubled insurance company.
The nub of the row is a pledge by RSA to grant Hester shares worth up to 300pc of his salary under a longterm incentive plan.
That amount i s significantly higher than the normal ceiling for executives of 230pc of salary.
Shareholders are annoyed at the award – said to have been made because of Hester’s ‘criticality’ to the recovery of RSA – as a similar grant last year was described as a one- off but has now been repeated.
RSA is pledging his future grants will not break through the 230pc ceiling. Hester received £2.118m last year, including a bonus of £939,000 and a £40,000 allowance to cover cars and a driver. His bonus represented 68pc of the maximum he could have been given, despite the fact RSA missed targets.
Cevian’s UK partners include former City minister Lord Myners, who worked closely with Hester in the early days of t he RBS rescue.
RSA is understood to have held conversations with it and with other leading investors, who are said to be supportive.
Hester was pushed out of his job at RBS by chancellor George Osborne in 2013 following disagreements over strategy.
RSA said: ‘ Although the previous i ntention upon Stephen’s appointment in 2014 was that future grants would not exceed 230pc of salary, the Remuneration Committee believed a further award at 300pc of salary was appropriate in 2015.
‘ This level of grant was given in recognition of the crucial role Stephen has in the transformation of the Company over the next few years. His future LTIP grants will be made at no more than 230pc of salary, which is the Group’s usual level of award for Executive Directors.’
It added that no payout will be made unless ‘challenging’ performance conditions are met and the shares are subject to clawback.
In its annual report RSA said it is keeping secret the target return on equity for the incentive plan because it is ‘commercially sensitive’ and that it will only be disclosed ‘retrospectively.’