Applauding Stephen Hester's bonus waiver at RBS

Tuesday, Jan 31 2012 by
2
Applauding Stephen Hesters bonus waiver at RBS

I was delighted that Stephen Hester finally agreed to forego part of his RBS bonus, albeit that it took him some time to do so, and I salute Sir Philip Hampton, the RBS chairman, for providing leadership on this issue. My delight was for two reasons, namely:

1. As readers may have noted, I am an avid believer that private investors will (by harnessing, inter alia, the internet) be able to bring about change which will improve the functioning of the UK's capital markets from the standpoint of being a wealth preserver in real terms and, ideally, a wealth creator. An important element in this process is preventing employees from diverting to themselves remuneration which is excessive in relation to the rewards enjoyed by investors. In this instance, public opinion has done the trick.

2. Many column inches in recent weeks have been devoted to commenting on politicians' threats to introduce regulation to control excessive pay. I am completely against regulation as a means of dealing with this issue (as well as many other issues) because it invariably both adds to the cost of doing business and also suffers from the law of unintended consequences. A far better solution is for investors to behave like long term owners.

By complete contrast, I laud the way in which Software Radio Technology (an emerging Mittelstand company) is setting about communicating with private investors - click here to see the joining instructions for the company's webcast on 1st February. This is a great example of how digital technology can be deployed to both improve and also lower the cost of investor communication.

 

News on LCF Research Covered Stocks

Lo Q (LON:LOQ) , the company that supplies “virtual queue” management systems for the amusement and water park industries, announced an agreement with Six Flags to install Q-band at another of their water parks. The park is located in California and will become the ninth Six flags water park to begin deploying Lo-Q’s virtual queuing system. Six Flags is the world’s largest regional theme park operator.

The LOQ share price has increased by 81% over the last year.

Lo-Q Plc is currently graded b by LCF Research. To learn more, follow the link.


Surface Transforms (LON:SCE), the Cheshire based supplier of carbon fibre reinforced ceramic brakes and components, reported that a 3 year agreement has been signed with Alcon Components Ltd. Alcon is to become the exclusive distributor for the promotion and sale of carbon ceramic disc brake products in the aftermarket for road cars within the Far East and selected OEMs.

Alcon has been providing brake and clutch solutions to teams competing in the world's premier motorsport series for over 25 years, and around 50% of its sales are to OEMs including Audi, Jaguar LandRover, Noble and Bentley. It is anticipated that Surface Transforms will generate sales from the contract of circa £2.5 million over its term. One of the initial programmes being launched is for the Nissan GT-R.

The SCE share price has decreased by 21% over the last year.

Surface Transforms Plc is currently graded C by LCF Research. To learn more, follow the link.

 

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Immunodiagnostic Systems Holdings (LON:IDH) , the Newcastle based niche diagnostics company, provided an update regarding trading for 9 months to December 2011 showing that sales were £39.6 million (2010: £35.4 million), with the expectation for the full year for sales of between £52-53 million (2010: £50 million) versus the company broker's expectation of £57.2 million and adjusted pre-tax profit was between £14.5-15.3 million (2010: £16.6 million) versus the company broker's expectation of £18.0 million.

The profit warning was caused by increased Vitamin D competition putting pressure on volumes and margins, with manual Vitamin D sales being anticipated to show continued decline in the medium term. In Q3, underlying IDS-iSYS system placements and IDS-iSYS test revenue increased on the previous quarter.

Net cash at December 2011 was £3.6 million (September 2011: £3.3 million). A cost reduction programme has been instituted, which is anticipated to produce annualised cost savings of circa £2 million with effect from 2012/13. Sales & marketing is being strengthened by creating a new business unit focused on the pharmaceutical industry. Investment in new product development will increase in 2012/13, based on the board's belief that the IDS-iSYS proposition remains strong and fulfils a significant unmet market need particularly for the small and medium sized laboratories.

New assay launches include 1,25-Dihydroxy Vitamin D, the first of such a test, at the end of 2011/12 and tests for hypertension in Q1 2012/13. Three further tests in 2012/13 will be launched in the areas of bone, hypertension and diabetes. Profit growth is expected to resume in 2012/13.

The IDH share price has decreased by 58% over the last year.

Immunodiagnostic Systems Holdings Plc is currently graded B by LCF Research. To learn more, follow the link.


Ebiquity (LON:EBQ) , the media monitoring data and consulting provider, announced that Interim results to October 2011 showed sales of £24.0 million (2010: £20.5 million), adjusted operating profit of £2.0 million (2010: £796,000), pre-tax profit of £199,000 (2010: £2.3 million loss) and adjusted EPS of 2.35p (2010: 1.34p). The results include an exceptional charge of £685,000 (2010: £2.1 million charge) and amortisation of acquired intangibles of £858,000 (2010: £731,000).

The company reported that like-for-like sales grew 6%. 75% of sales come from international sources. Gross margin was 56% (2010: 54%), operating margin was 10.5% (2010: 7.0%) and period end net debt was £9.2 million (2010: £6.4 million net debt). As in previous years, sales, profits and margins are weighted towards H2.

The EBQ share price has decreased by 13% over the last year.

Ebiquity Plc is currently graded b by LCF Research. To learn more, follow the link.

 


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Disclaimer:  

This note was prepared by LCF Research Limited using information provided by the subject company’s management or publically available news sources. No representations are made nor warranties given (express or implied) in relation to accuracy and completeness. This document is not an invitation to invest in the subject company and does not purport to contain all the necessary information that a prospective investor might require. LCF Research Limited recommends prospective investors to conduct their own thorough independent analysis of the subject company and the information contained in this note or referred to above.


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Software Radio Technology Plc (SRT) is a United Kingdom-based company engaged in the research and development of wireless radio communication technologies and products for the identification and tracking of primarily maritime based assets. SRT and its subsidiaries develop and supply Automatic Identification System (AIS) based maritime domain awareness (MDA) technologies and derivative product and system solutions to the global marine industry. SRT develops its technology and products entirely in-house at a specialist development facility near Bath, United Kingdom. The Company’s subsidiaries include SRT Marine Technology Limited, Em-trak Marine Electronics Limited, SRT Software Development (India) Private Limited and SRT Marine Technology System Solutions Limited. more »

Share Price (AIM)
24.3p
Change
0.0  0.0%
P/E (fwd)
n/a
Yield (fwd)
n/a
Mkt Cap (£m)
30.9

Surface Transforms plc is the development and manufacture of carbon fiber reinforced ceramic product (CFRC) for automotive disc brake and aircraft and rocket component applications and the exploitation of company carbon/carbon technologies. The Company is a manufacturer of next-generation carbon-ceramic brake discs for automotive and aircraft applications. The Company manufactures and supply carbon pre-forms produced from PAN carbon-fiber weaved into a 3d structure. These pre-forms are used as base materials for producing carbon-carbon brake discs (as used in F1) and other carbon-carbon components. The Company’s next-generation carbon-ceramic material is for many motorsport applications due to its lightweight construction, high level of performance and durability. more »

Share Price (AIM)
12.25p
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0.0  0.0%
P/E (fwd)
n/a
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n/a
Mkt Cap (£m)
6.2

Immunodiagnostic Systems Holdings plc (IDS) is engaged in manufacturing and distributing medical diagnostic products. The Company is also involved in research and development projects. The Company’s main operation is within the in vitro diagnostic (IVD) testing industry, supplying test kits to hospital and research laboratories. The Company is also engaged in the provision of immunoassay tests for the determination of vitamin D (both 25-Hydroxy and 1,25-Dihydroxy). The Company’s product include 1,25-Dihydroxy Vitamin D EIA, 1,25-Dihydroxy Vitamin D RIA, 25-Hydroxy Vitamin D EIA, 25-Hydroxy Vitamin D RIA ,Alpha CrossLaps (CTX-I) EIA, Automated IDS-iSYS System, BoneTRAP (TRAcP 5b) ELISA, Corticosterone EIA, Corticosterone HS EIA and CrossLaps for Culture (CTX-I) ELISA. In September 2014, Immunodiagnostic Systems Holdings PLC acquires Diametra. more »

Share Price (AIM)
320p
Change
0.0  0.0%
P/E (fwd)
18.9
Yield (fwd)
1.7
Mkt Cap (£m)
96.3



  Is Software Radio Technology fundamentally strong or weak? Find out More »


4 Comments on this Article show/hide all

emptyend 31st Jan '12 1 of 4
2

An important element in this process is preventing employees from diverting to themselves remuneration which is excessive in relation to the rewards enjoyed by investors

Given that Hester has dramatically reduced the risk in RBS's balance sheet, slashed the bank's funding needs, cut the overhead repeatedly and restored the bank to profit, just what level of reward do you consider NOT to be excessive in relation to the £45 BILLION of our money that the last Labour Government invested in RBS on our behalf?

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ohinerau 31st Jan '12 2 of 4
3

I agree that success in the herculean task of cleaning up the RBS Augean stable deserves a very substantial reward. However, I don't think that an incentivisation package based on annual bonuses is the way to approach incentivisation in view of the timescale of the task involved - the package needs to recognise a) this timescale, b) the position which shareholders want to achieve, and c) the CEO's confidence in his ability to deliver b) and his intention to do so. Its all about thinking with the mindset of owners rather than mindlessly following established remuneration practises, particularly when there is widespread evidence of the latter failing to benefit investors.

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emptyend 31st Jan '12 3 of 4
1

In reply to ohinerau, post #2

I don't think that an incentivisation package based on annual bonuses is the way to approach incentivisation in view of the timescale of the task involved - the package needs to recognise a) this timescale, b) the position which shareholders want to achieve, and c) the CEO's confidence in his ability to deliver b) and his intention to do so.

That is a mischaracterisation of the package. AIUI there is a) Annual salary/comp b) Annual bonus and c) Long Term Incentive Plan. The LTIP addresses the long-term nature of the task of refloating RBS; the bit that the furore has been about is an annual bonus reflecting Hester's achievement of many of his specific business management targets for 2011. The annual bonus focuses the recipient on continuing to achieve milestones every single year - rather than merely on the vaguer long-term aim. In other words, the annual targets should be viewed as essential stepping stones towards achievement of the longer-term objectives....which is why, IMO, it is unwise to mess with them.

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StrollingMolby 31st Jan '12 4 of 4
1

What a farce this hounding of Stephen Hester to decline his bonus is. The remuneration framework was put in place in consultation with UKFI and other institutional shareholders! I sympathaise with Hester who accepted a bl00dy difficult job to stabilise the bank following the mess Goodwin left it in, with a remuneration package agreed up front (as we all do when going for a new job). Hester delivered and was due his bonus this year, and bit-part of his rolling LTIP award (yet to be determined, or accepted).

As RBS is a Tier 1 (of 4) firm for FSA Remuneration Code purposes, all twelve Principles of the Code apply, including limited cash as a proportion of variable remuneration, deferral over three years, and clawback provisions.

http://www.investors.rbs.com/download/announcements/FSA_Remuneration_disclosure.pdf

SM

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