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McEwan to see bonus cut in review of RBS pay

McEwan (photo by Terry Murden)
McEwan (photo by Terry Murden)

Royal Bank of Scotland chief executive Ross McEwan will see his bonus package cut next year under plans aimed at appeasing Downing Street over executive pay.

Prime Minister Theresa May wants to tackle excessive boardroom pay as part of a new corporate governance policy that will also see shareholders given greater powers.

RBS’s remuneration committee is understood to be drawing up a new policy in conjunction with the Treasury which retains a 70% shareholding in the bank on behalf of the taxpayer.

Consultations are under way with leading City shareholders, according to Sky News which claims the proposals will reduce the long-term incentive plan award available to Mr McEwan from £3 million to £1.75m from next year.

This will see his maximum LTIP award reduced from 300% of his £1m base salary to 175%.

It is thought the plan will be put to a binding shareholder vote at its annual meeting in the spring.

Mr McEwan, who is not eligible for an annual bonus, was paid £3.785m in 2015, comprising his salary, a £1m fixed-share allowance introduced to deal with new European Union pay rules, and a £1.347m share award from 2013 which vested last year.

RBS is expected to report another loss for 2016 – its ninth consecutive year in the red – and is due to settle with the US Department of Justice over the mis-selling of mortgage-backed securities.

The bank’s plans coincide with a report showing that the link between what senior managers are paid and a company’s financial performance is “negligible”.

The median pay for chief executives at Britain’s 350 biggest companies was £1.9m in 2014 – a rise of 82% in 11 years, according to a study by Lancaster University Management School.

However, performance as measured by return on capital invested was less than 1% during that period.

The report’s authors said the findings suggested a “material disconnect”.

The research suggested the need for “a more refined discussion about the type of performance measures employed” rather than remuneration levels and performance-related pay arrangements alone.

Chief executives of companies in the health care sector were the best paid, on an average of £2.9m, with those in the “basic materials” and oil and gas sectors on £2.2m, and telecommunications at £2.1m.

The lowest-paid sectors included technology on £1.3m and industrials (£1.1m).

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