The head of Royal Bank of Scotland has been awarded a bonus worth £963,000, around 60% of his entitlement, following political pressure to limit the pay-out.
RBS chief executive Stephen Hester, who has a salary of £1.2m, will receive 3.6 million shares in the bailed-out financial institution, the bank's board announced last night.
It is less than half the value of last year's all-shares bonus and comes after British Prime Minister David Cameron made clear he considered a seven-figure sum would be unacceptable.
The Irish Bank Officials Association has condemned the bonus award, saying it "added insult to injury" as far as staff in RBS's Irish arm Ulster Bank were concerned, following the announcement of redundancies at Ulster Bank two weeks ago.
Secretary general Larry Broderick said the bonus - which he described as "lavish" - was in sharp contrast to the bank’s treatment of its Ulster Bank employees. He said they had been told that Ulster Bank did not intend to match the terms of its 2009 redundancy deal in its new restructuring programme.
RBS group chairman Sir Philip Hampton said the company was "aware of the difficulties in trying to reconcile the competing objectives of all our stakeholders", especially on pay.
Defending the award, he said it reflected that the bank was "progressing well" under Mr Hester, who had played no part in its collapse.
RBS, which is 83% state-owned, said the board's decisions "recognise tangible achievement in the business and protect the interest of our shareholders, including of course the UK taxpayer".
Deferring the chance to cash in the shares "ensures complete alignment of the chief executive's interests with those of our shareholders", it said. The £963,000 valuation is at today's prices and could rise or fall.
It said the reduction on last year's pay-out "reflects those areas where financial and business objectives have not been fully met" and a decline in the share price.
"The board is aware of the difficulties in trying to reconcile the competing objectives of all our stakeholders. This is especially true on the issue of pay," the chairman said.
"Stephen Hester's pay award reflects progress in the categories agreed with our shareholders as set out in the Remuneration Report. His pay is strongly geared to the recovery of RBS, which he was recruited to turn around, having played no part in its collapse," he added.
The decision comes after Business Secretary Vince Cable unveiled proposals to crack down on hefty salaries and bonuses, including binding votes for shareholders and improved transparency.
But RBS's concession on Mr Hester's bonus will not defuse the row over directors' pay completely, as John Hourican, head of RBS's investment arm, who will oversee a restructuring that will include around 3,500 job losses, picks up £4m in long-term incentive shares that he was awarded in 2009.
Britain's biggest banks are expected to unveil their bonus plans next month when they publish their annual results.
Antonio Horta-Osorio, chief executive of part-nationalised Lloyds Banking Group, announced he would forgo his annual bonus of up to £2.4m following his two-month leave of absence and a rocky period for the UK banking giant.
Elsewhere, reports have suggested Barclays boss Bob Diamond could receive a £10m pay-out in the forthcoming bonus season.
