LONDON The decision by Royal Bank of Scotland's (RBS.L) bosses to waive their bonuses has heaped pressure and scrutiny on Britain's other top bankers and on pay awards further down the ranks, fanning the flames of a row over excessive pay.
Banks are in the process of finalising bonuses for top executives and investment bankers, and many see pay levels for staff lower down the chain as the bigger issue.
"If you are focused on banks, perhaps we should look not just at the board of a bank. There are many more people at RBS who earn more than Stephen Hester does," said Jane Coffey, head of equities at Royal London Asset Management.
RBS paid 323 of its top staff an average of 1.2 million pounds each in 2010, according to disclosures last year for "code staff," those involved in risk-taking decisions.
RBS's 2011 bonus pot for investment banking staff is expected to be roughly half the 950 million pounds paid last year, but that could still enrage politicians and the public, as the bank is 83 percent owned by taxpayers and is cutting thousands of jobs in an effort to boost profits.
After political pressure built, RBS CEO Stephen Hester and Chairman Philip Hampton have waived their 2011 bonuses in the past week. British Prime Minister David Cameron said the bank needs to show further pay restraint.
One leading shareholder said UK Financial Investments (UKFI), the body that holds Britain's stakes in RBS and Lloyds (LLOY.L), should set out clear criteria for pay. Hester's near 1 million bonus had been approved only last week.
"That is the way the government needs to address this, not by showboating in the Commons, but by quietly directing the UKFI to vote these things down," said the investor, who is a top 25 investor in RBS and also owns shares in the other major UK banks, but asked not to be named.
Another worry for RBS is the risk that Hester or his board could step down in such a politically charged climate, which has raised concern about growing government interference on commercial decisions.
"It has huge, huge problems brewing based on the negative publicity it has got and I don't think anybody in their right mind would take a job at RBS at the moment," said Coffey.
Rivals Barclays (BARC.L) and HSBC (HSBA.L) will also come under fire if they are deemed as lacking restraint, even though they did not need taxpayer bailouts during the financial crisis.
Barclays CEO Bob Diamond was paid 6.75 million pounds in 2010 when he was head of Barclays Capital, including a bonus of 6.5 million pounds. As CEO he is paid a base salary of 1.35 million pounds and could get a further 3.4 million in bonus for 2011 and up to 6.75 million under a 3-year incentive plan.
Barclays' 231 code staff were paid an average of 2.4 million pounds each in 2010.
HSBC CEO Stuart Gulliver was paid 6.2 million pounds for 2010, when he ran investment banking, including a 5.2 million pound bonus. Gulliver's base pay is 1.25 million pounds, and he could get a further 3.75 million in bonus for 2010 and up to 7.5 million pounds in a long-term incentive plan.
HSBC's key 280 staff earned an average of almost $1.7 million each last year.