Stephen Hester, the RBS Chief Executive, reluctantly found himself at the eye of a political and societal storm this week. Faced by an unsympathetic press, a baying Labour and a swithering Conservative party, Mr Hester waived his bonus, all £963,000 of it.
Was he right? Should he have trousered the bonus and ridden out the storm? Hester truly faced a dilemma. Given the predicament of 84% state-owned RBS, Hester has performed well according to most business observers: he has improved the bank’s ailing balance sheet and has been successfully selling off and winding down its investment banking arm. Interestingly, Mr Hester was also urged to take up his role by Gordon Brown, predecessor, in a way, to both Mr Milliband (Opposition leader) and Mr Cameron (the prime minister).
Despite the faltering economic times, then, Mr Hester has done well and earned his bonus. However, given the public outcry, he has had little choice but to turn the bonus down. Hester is a rich man and, eye watering sum though it is, probably doesn’t actually need the bonus.
However, that’s not really the point. RBS faces a massive challenge to both retain its existing talent and recruit in the sort of individuals who can continue to reshape and reinvigorate the bank. The better Hester and his colleagues do, the quicker RBS can return to some form of independence and off the public balance sheet. If, however, senior professionals such as Hester are being vilified and if contractually secured bonuses cannot be taken up, then how attractive an employer will RBS appear? The worse the organisation does – and it will, if it is unable to retain and recruit – the more it will weigh on the public purse and the more redundancies are likely to ensue.
So, by weakening the employer brand of RBS and by exacerbating any negative perceptional baggage it retains as an employer, the more RBS’ opponents are playing to the bank’s competition. Whether turning the bonus down is the perceived right thing to do or not, the very act weakens the employer brand of RBS, strengthens the hand of its rivals and puts more pressure on the government which is already out of pocket to the tune of £39bn as a result of the original bailout.
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