The post you are reporting:
Jan - the simple fact is that those who are in a significant influencing function regarding how a business performs a remuneration link to that performance or the meeting of certain corporate targets and objectives make simple sense.
If the market for a particular job requires a salary of, say £2m, then it would be sensible for at least half of that to depend on that person doing their job well. It is even better if, as in Heston's case, that part of the remuneration is linked to shares in the business because that gives added incentive to make that business profitable as soon as possible and if he fails to get RBS ready for re-privatisation and obtain a return for shareholders (including the taxpayer) in a reasonable time then he personally will be affected. Like I said previously, its a win-win for him and shareholders. Sadly that is not to be the case and there is a risk now that shareholders might lose out.
In addition may I add, this row has shown up the risk premium that can be justifiably be included in remuneration packages for such a politically sensitive job. Imagine this scenario - Hester decides to quit, after all he can most likely afford to retire or take another high paying position elsewhere and what will RBS be left with? Going to the market to look for a new Chief Exec and they will find that they have to pay out an awful lot more dosh, as a risk premium, to get someone with the abilities needed. Who on earth in their right minds would take on such a job after the slagging off Heston got? The cost will be a lot more than that paltry sub £1m bonus - yes paltry, £1m believe it or not is actually not a lot of dosh for someone in that position.
I made the point earlier that for certain roles there is a limited pool of people with the requisite experience and skills and who are able and willing to take on such roles and that influences the remuneration.
Performance related remuneration is important and this is true for people at many levels and all sizes of business, even for me well over 60% of what I earn is directly related to how well investments perform.