Controversy and running RBS go hand in hand. Stephen Hester replaced Fred Goodwin as chief executive of RBS and is now in hot water himself over his incentive pay deal. The chief executive of the state-controlled bank could be paid 9.6 million pounds over three years if the share price (currently 44p) reaches 70p. However, he seems to have so little faith in the shares reaching that level that he has offloaded 1,264,565 shares since last November at prices between 28.5p and 48p, yielding just over 464,000 pounds.

When  unveiling first half results last week Hester asserted that "We have a strong plan in place that I believe can get us to where we need to be by 2013," which presumably includes recovery in a share price still languishing more than 90 percent off its peak.

The official guff goes that Hester was granted shares, in tranches, when he joined RBS in lieu of those he would have received at British Land. Under British tax law, the awards are treated as income and so Hester sold some of the shares granted "to meet an immediate income tax and national insurance liability."

In doing so, Hester can claim to be following best financial practice in matching a liability with the corresponding asset. Finance theory also says that investors should not put all their eggs in one basket.

Moreover, senior managers are highly circumscribed in when - or why - they can sell. There is virtually no "good" time and even fewer good reasons to sell. Therefore, if Hester thinks he might need to trim his holdings at any time, the best time to do so is when he has what looks like a legitimate reason.

And yet, and yet.

There are good reasons why Hester will be barred from selling the shares he is granted within his 9.6 million pay deal for five years. When investors' money is at stake, they want to know that management has "skin in the game"; that he suffers when the share price falls and benefits when it rises.

Hester made millions in his previous careers, and it is impossible to believe that he could not have raised half a million pounds elsewhere to pay the taxman. By selling his shares to do so he is sending investors an unwelcome signal that his caution outweighs his confidence.

Hester may be a great banker, but his diplomatic skills leave much to be desired.

Margaret Doyle is a shareholder in RBS.

Royal Bank of Scotland is not best known for backing winners.

So the Scottish bank must be savouring Andy Murray's run at the Wimbledon tennis tournament.

World number three Murray is one of the "sports personalities of present and past" sponsored by RBS during the heady days of Sir Fred Goodwin.

Murray must count as one of Sir Fred's more inspired investments. Murray's play has literally gone from strength to strength -- all the time with the RBS logo emblazoned on his shirt sleeve.

Stephen Hester, Goodwin's successor as chief executive of RBS, must be hoping Murray maintains his winning streak and goes all the way to the Wimbledon men's final.

It's about time RBS employees -- and shareholders including the British government -- had something to cheer about.

No doubt British Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling will also be willing fellow Scot Murray to victory -- they could both do with the "feel-good" factor of a British Wimbledon win.

As chief executive for a company that is 70 percent owned by the government, a 9.6 million pounds pay package is quite a tidy sum.

It is a package that makes Royal Bank of Scotland chief executive Stephen Hester almost as well as paid as the Real Madrid-bound Cristiano Ronaldo.

True the package has caveats - it is dependent on targets including shareholder return and absolute share performance - and is line with other British banking chiefs.

But in these more frugal post-global downturn times does that make it right? In trying to get itself shipshape, RBS has slashed over 15,000 jobs as it received its £20 billion pounds government bailout.

As details of the pay package were revealed it also emerged that RBS, which has been pilloried over the pension awarded to Hester’s predecessor Fred Goodwin, will be spending £300,000 on corporate entertainment at Wimbledon over the next fortnight. Doh!

Given the taxpayer-funded bailout of RBS is Hester worth £9.6m?

Former Royal Bank of Scotland chief Sir Fred Goodwin has agreed to more than halve his widely criticised 703,000-pound pension award.

He will now only receive an annual payout of 342,000 pounds.

Chairman Philip Hampton said: “I am pleased that common sense has now prevailed and I hope that most reasonable people will welcome that.”

Do you?

-- Margaret Doyle is a Reuters columnist. The opinions expressed are her own --

Abracadabra! Yet again, Barclays has pulled another rabbit out of its hat. With just days to go before the end-March deadline for the bank to apply for a government guarantee of its dodgier loans, it may again wriggle out of state control.

The Financial Services Authority (FSA) has concluded, after performing "stress tests" on its loan book, that the bank has enough capital. Barclays (BARC.L) has persuaded the authorities and investors (shares are trading at over three times their January low) -- of its soundness.

But it should still buy a government guarantee. Thanks to the FSA's clean bill of health, it can bargain for keener fees than RBS (RBS.L) and Lloyds (LLOY.L). If it does join the scheme, Barclays is likely to present a smaller and more toxic book than the two state supplicants.

Moreover, Barclays is in the happy position of being able to pay cash for the insurance -- and cash buyers pay less. That is thanks to the mooted 4.5 billion pound share of its iShares exchange-traded funds business. This is a stroke of luck.

Management were so keen to avoid having Her Majesty's Government (HMG) on the share register that they raised capital more expensively from Gulf governments last October. Having seen what happened to Asian and other Gulf investors who bought into American banks, the Arabs cleverly inserted an anti-dilution clause when they invested 7 billion pounds.

That means that Barclays is effectively precluded from issuing shares below 153 pence (which any non-government new equity would probably be) unless it wants to risk handing control to them. Of course, Barclays could try to avoid the government scheme altogether.

After all, at 4.5 billion pounds, the iShares sale would boost its tier 1 capital to a respectable 7.7 percent, not so far behind HSBC's post-rights issue 8.5 percent. And its investment banking subsidiary, BarCap, seems to have enjoyed a storming first quarter.

Citigroup estimates that the whole bank will generate a respectable combined pre-provision, pre-tax 19 billion pounds this year and next. Barclays is planning to resume dividends in the second half but even so, this should add a few points to its capital. Moreover, Barclays claims to have a much cleaner loan book than RBS or Lloyds.

If that's true, Barclays could in theory sidestep the insurance scheme altogether. Assuming it wanted to end up with a tier one equity ratio of 4 percent, the FSA minimum, it has the scope to write off around 40 billion pounds over the next three years without any further capital injections. To put that in perspective, RBS is thought likely to have to write down 60-70 billion pounds (11 percent of loan assets).

That said, rejecting the government guarantee altogether might demanded too much Voodoo faith even for Barclays poker-faced management team. The bank had 45 billion pounds of "level-3" assets (whose valuations are unobservable) on its balance sheet (or more than 10 percent of risk-weighted assets) at the end of 2008. True, it also had 21 billion pounds in insurance contracts covering possible defaults in its collateralised loan obligation portfolio within that sum.

But the "monoline" insurers on the other side of that trade are hardly rock-solid entities. Both Ambac and MBIA are on negative watch with the ratings agencies. Instead, Barclays should take some insurance from one of the few counterparties that won't go under: HMG. Shareholders have had enough magic for the time being, thank you.

- Margaret Doyle has an interest in Barclays shares -

Treasury Minister Paul Myners was fulminating against Sir Fred Goodwin’s 700,000-pound pension in parliament this week when he made an intriguing suggestion.

“I still hope there’s the opportunity for Sir Fred to do the right thing and either return some of his pension or make a very substantial and long-term commitment to charity both of money and of his undoubted energy and resources,” he told a committee.

The former head of RBS has already said he has no plans to hand back the cash, in fact he has already taken an advance on it, but what about the other part: channeling his undoubted energy and resources into charity?

Readers may well remember the shining example of a man who did just that over 40 years ago.

John Profumo was forced to resign as Secretary of State for War in the Christine Keeler scandal of 1963 when it became clear he had been involved with showgirl Keeler — who was reputedly also the mistress of a Soviet spy in London – and when he committed the ultimate sin of lying about it in parliament.

No desperate hanging on for him or clutches of PR men hired to limit the damage. Out he went. He devoted the rest of his life to good works and charity and died three years ago.

If saying “sorry” is not enough, perhaps John Profumo’s long atonement could serve as a model of contrition for today’s fat cats and politicians when the time comes to repent.

Do you think it’s likely?

Royal Bank of Scotland’s controversial former Chief  Executive Fred Goodwin once memorably referred to the  consolidation of smaller British lenders as “mercy killings.”

Goodwin was speaking in 2001, when he could still bask in the glory of RBS’ audacious acquisition of larger rival NatWest the previous year, a deal that set the standard by which all banking takeovers were judged.

How times have changed. Goodwin has gone, quitting after the credit crunch forced RBS to surrender a majority stake to the government in exchange for a 20 billion pound taxpayer-funded bailout and write down billions in relation to its acquisitions.

To make matters worse, RBS on Thursday reported the biggest loss in British corporate history, and said it had negotiated further state support which could boost the government’s stake in the bank as high as 95 percent.

With the banking sector still facing highly uncertain prospects as recession weighs on the economy, has the time come to administer a “mercy killing” to RBS, and formally nationalise it?

Former Royal Bank of Scotland Chief Executive Fred Goodwin is not having a good year.

Earlier this month he was hauled before parliament to explain his part in how RBS, the company he led for nine years, came close to the brink of collapse.

Goodwin offered profuse apologies - “I could not be more sorry for what has happened” - and pointed out he’d lost more than five million pounds from the fall in value of RBS shares.

Before you wipe a tear from your eye, Goodwin was paid 4.2 million pounds, including a 2.9 million bonus, in 2007, the year he led RBS’s ill-fated acquisition of ABN, even though he waived a pay-off when he left.

Now it has come to light that Goodwin is set to receive a pension of 650,000 pounds a year for life. This from a bank that just unveiled a record British corporate loss of 24.1 bilion pounds and will soon be 80 percent owned by the government.

UK Financial Investments (UKFI), the part of the Treasury which manages the state’s investments in banks, is now examining Goodwin’s pensions arrangements with the RBS board to see whether some or all of the payout can be clawed back.

Should the 50-year-old Goodwin do the decent thing and forego his pension deal? Or is it wrong for the government to act retrospectively and stop him drawing from his retirement pot?

A bit like asking turkeys to vote for Christmas, parliamentarian John Mann has called on the likes of tennis player Andy Murray, equestrian star Zara Phillips and motor racing great Sir Jackie Stewart to scrap their sponsorship contracts with the Royal Bank of Scotland.

Bleeding red all over its accounts and shedding thousands of jobs, the struggling Scottish bank has been heavily criticised for doling out bonus payments to staff despite receiving billions of pounds of state aid.

So the relevation RBS has splashed out 200 million pounds on sports sponsorship - the bank also has a promotion deal with the rugby union Six Nations tournament - has come at the worst possible time.

“That level of excess clearly can’t be justified,” said Mann. “Not one ambassador, but loads, not short-term contracts, but long-term contracts, not small amounts of money, but large amounts of money.”

“I think it would go down very well with the British public if some of them were to cancel their contracts. Some of them would become real heroes if they did. I think they need to consider that this is borrowers’ money we are talking about.”

Should Murray, Phillips and Stewart scrap their contracts and should banks be sponsoring sports stars in the new frugal economic climate?

It’s not a great time to be a banker at the moment with financial apocalypse making the pin-striped gents probably more loathed than estate agents or journalists. Thousands of them have lost their jobs and those that are still in paid employment are finding that their renumeration packages are coming under ever greater public scrutiny.

Over the weekend reports that the Royal Bank of Scotland was about to award its staff a billion pounds in bonuses prompted outrage at a time of soaring unemployment and with a deep recession looming. Most people would agree it is a no-brainer that a company that has just posted the biggest-ever financial loss in British corporate history, required a 20-billion-pound government bail-out to stay afloat last year and is now nearly 70-percent state-owned should not be allowing its staff to be trousering huge bonuses.

The banks say they are bound by contract to pay the bonuses and that they need to retain key staff.

But that argument has got the former deputy prime minister John Prescott so riled he has even launched a public campaign against the bonus payments on Facebook. “This is morally and economically outrageous,” wrote Prescott. “If we hadn’t bailed them out to save homeowners and businesses, their contracts would be worth nothing as they’d be out of work.”

Over in America U.S. President Barack Obama has set a $500,000 annual cap on executive pay and imposed other restrictions on companies that receive government aid. Chancellor Alistair Darling has said it is too early to follow Obama’s lead, despite the European Commission urging states to cap bank pay.

Is it time for banks that are receiving government help to be subjected to a salary cap or would that policy be counterproductive to economic revival?