The Anonymous Widower

Hester’s Bonus

A lot of people are outraged about the size of Stephen Hester’s bonus at the Royal Bank of United Kingdom Taxpayers.  I’m not because although he got £963,000 it’s all in shares, which means it’s in his interest to raise the share price as much as possible by running the bank to the best of his ability. After all, there are still quite a few small shareholders in the bank and they would be glad to see their worthless investment be worth something. And of course, there’s the big shareholding in the hands of UK Taxpayers.  So if Hester looks after himself with these shares, we’ll all benefit.

But if he fails, we’ll have a worthless bank on our hands, which will probably be closed with the loss of many jobs.

I actually think that it should have been liquidated, but that would have been a disaster for all the  small shareholders out there. Gordon Brown couldn’t afford all those lost votes in Scotland. Or in England too!

January 27, 2012 - Posted by | Finance | , ,

1 Comment »

  1. It doesn’t actually work like that. Share prices increase because investors believe that the current price is too low. The board of a company should operate in the long term interests of the shareholders and not in the interests of short term personal gain. I know of a large PLC where the main board who between them held shares of a very significant value and all decisions were made to boost the share price. Each yea they awarded themselves more shares. So, no development, as that spends capital for future not current growth. No need to worry about clients and whether they will come back in the future; just maximise the return on each project. Keep bad news quiet, and make a lot of noise aout new projects. Then the share price goes up, and the directors can then sell their shares when it is clear that the level is unsustainable. I don’t suggest that his applies to RBS, but nevertheless the temptation is there. I assume that Hester got a salary and that he carried out the duties expected of someone in his position. If he did exceptional work, then let us hear about it so that we can all support a bonus for him. I think it would be better if bonuses were only be given for exceptional work, and then in taxable income.

    Comment by John Wright | January 27, 2012 | Reply

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