Hester described the decision, made at a meeting yesterday afternoon, as “a board decision, not mine” and the news was announced to the stock exchange after trading had finished.
He will reportedly receive £1.6m in pay and benefits and up to £4m in awards of long-term incentive pans over the next three years.
Earlier in May Hester, who took charge of the bank during the 2008 crisis, proclaimed that he intended to see through his mission to return RBS to the private sector.
Hazy detail
Chancellor George Osborne is expected to publicize further details of the privatisation in a speech next week, and while he is not expected to reveal a timetable for the sale it is likely to take place before the next general election.
The Independent reports that the sell-off schedule is a source of contention in the coalition government, with Liberal Democrats concerned about a sale resulting in losses for the tax payer.
Job cuts
The bank is expected to announce around 2000 job cuts in its investment banking division later on today, a move being made as part of a restructure which has already seen 7000 jobs slashed.
The division was at the centre of the bank’s £390m fine for Libor rigging in February, and a couple of weeks ago the troubled bank hired former FSA managing director of supervision Jon Pain as its first head of conduct and regulatory affairs in a bid to salvage its reputation.
Unite national officer Dominic Hook said: "This will certainly come as a shock for staff and it’s likely to cause concern in call centres, branches and back offices up and down the country.
"With over 30,000 job losses over the last five years and major stress for RBS staff there is likely to be a lot of anger over Stephen Hestor’s tax-payer funded multi-million pound exit package.
"After years of uncertainty it’s time the bank and the government ensured that people and communities come first, not private profit. The government has the opportunity to shape RBS into a bank that serves the people. It cannot afford to miss this opportunity. "
