The RBS Share Price & Stephen Hester’s Bonus
Stephen Hester has decided against taking his bonus, meanwhile RBS have fallen today. Some commentators have been quick to link this two facts and point out that Hester might be saving the taxpayer £1 million but ‘as a result’ the share price fall is costs £x hundred million (the x depending on what time of day the claim is made).
Guido, for example, writes that:
Hester wasn’t going to get his hands on his bonus for over a year, it wasn’t even going to come directly from treasury funds and most of it would have ended up in Treasury coffers, yet this morning £320m has been wiped off of the value of the British taxpayers’ forced investment. With mob mentality over-ruling contracts, there are obvious jitters around the banks this morning.
A straight forward argument – the public pressure might have resulted in the CEO declining a million pounds but this ‘meddling’ will cost the tax payer much more than that as the markets take fright at ‘political interference’.
How does this stack up?
Actually not very much. Whilst both facts are true (Hester is not taking his bonus and RBS shares are down) this doesn’t really tell us a great deal.
The key is to never look at financial information in isolation. A simple look at the BBC website gives the following share price moves for British banking stocks at the time of writing:
Yes RBS is down but not by much more than Barclays and by less than Lloyds. In fact the entire sector is down this morning. As the FT reports:
Banks were at the bottom of the FTSE 100 on Monday, tracking worries about a potential unruly Greek debt default on a day when public anger forced RBS’s chief executive to surrender his bonus.
Indeed, as the Greek debt talks rumble on and Portuguese bond yields hit new highs, banks are down across Europe today on worries about the potential fallout.
The fall in RBS shares today has little to do with Mr Hester’s bonus. The prospect of a disorderly Greek default is almost certainly rather more pressing for most investors.