RBS to seek investor green light on executive pay

* RBS to agree revised LTIPs with investors

* RBS bonus announcement expected by next Thursday

* No decision yet on Lloyds bonuses

LONDON, Feb 18 (Reuters) - Royal Bank of Scotland’s revised long-term reward plan for top executives will be fully agreed with shareholders before it is put to the market, a top investor said, a move that would avoid any investor revolt on the issue.

By reaching a deal with its shareholders -- including UK Financial Investments (UKFI), which manages the government's majority stake -- RBS RBS.L will also, crucially, armour itself with investors willing to publically support it against inevitable public anger over pay.

“We were quite prepared to work with RBS and UKFI to get the appropriate balance of remuneration in place that suits the medium to long-term needs of the business,” said Keith Skeoch, Chief Executive of Standard Life Investments, a top 10 institutional investor in RBS.

“We will continue to engage with RBS and support the board when we’ve come to the appropriate conclusion,” he said.

Skeoch is a key figure in the broader debate over pay and governance as chairman of the Institutional Shareholders’ Committee, which is trying to promote active ownership and whose members hold assets of over 1.5 trillion pounds.

Royal Dutch Shell RDSa.L was forced earlier this week to bow to shareholder pressure and overhaul its pay practices after a revolt last year -- something RBS is keen to avoid.

Part-nationalised RBS -- 84 percent state-owned and the object of intense public scrutiny since it was bailed out by the government at the height of the crisis -- said in December it would revise its long-term incentive plan for top employees to include more performance-linked elements.

It began talks in January with investors over the blueprint, which will affect bosses, including CEO Stephen Hester. Shareholders will officially approve the revised package at the annual general meeting, due in the spring.


Separate negotiations over the bank’s bonus payments will likely come to a head next week, ahead of, or coinciding with, the bank’s full-year results on Feb. 25. UKFI, which can veto any bonus deal in an unprecedented provision of RBS’s state aid, said on Thursday it had received a formal proposal on bonuses from RBS but declined to comment further. UKFI, on behalf of the Treasury, has the right to consent to the “quantum and shape” of the bonus pool.

Sources close to the situation have said the bonus pool for RBS’s investment bankers is expected to be close to the widely reported total of 1.3 billion pounds ($2.03 billion) but because there is a deferred proportion paid in shares it makes it difficult to come up with a definite total.

The compensation ratio is expected to be less than 30 percent -- at the bottom end of the sector range and well below rivals like Deutsche Bank DBKGn.DE and Barclays BARC.L.

RBS declined to comment on either the long-term incentive plan (LTIP) and the bonus negotiations.

Bailed-out peer Lloyds Banking Group LLOY.L, 41 percent-owned by the state, is also holding talks on its bonus payment, but it is not clear whether the bank will make an announcement ahead of its own full-year results on Feb. 26.

Sky News reported earlier on Thursday that the total bonus pool for Britain’s largest retail bank could come to 200 million pounds, which would amount to just under 1,700 pounds per employee.

“No decision has been made has been made about annual bonus awards for 2009 performance,” a Lloyds spokesman said.

“As in previous years, the payout under the 2009 bonus scheme is expected to be a small percentage of revenues. That is because we are a commercial and retail bank where on average colleagues earn a salary of 25,000 pounds and would typically receive a pretax bonus of less than 1,000 pounds each.”

However, investor focus and the attention of Britain’s taxpayers is expected to be on the pay for Lloyds Chief Executive Eric Daniels, who could stand to earn as much as 3 million pounds including salary if bonus payments are paid in full.

A long-term share scheme that could take that to some 6 million pounds is not expected to pay out this year. ($1=.6400 Pound) (Editing by Karen Foster)


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