Share payouts face claw-back checks

The bank – 84 per cent owned by taxpayers – published details of the long-term incentive plan in its annual report for 2009.

The updated scheme is based on much tougher criteria and subject to a host of clawback measures – but could still pay out a maximum 400 per cent of directors' annual pay in shares.

Mr Hester – who earns a basic salary of 1.2m for the huge task of turning round the ailing bank – waived his bonus for 2009 amid mounting public outrage.

But chairman Philip Hampton said as the recovery takes shape Mr Hester would be rewarded "fairly, appropriately and at market levels for achievement against the targets we have published to make the bank safe, successful and valuable again".

The latest scheme, which must be approved by a vote at the group's annual meeting on April 28, replaces two previous incentive plans which paid out shares worth a maximum of 300 per cent and 150 per cent of salary respectively.

Unlike the previous schemes, 50 per cent of the payout will be based on the economic profit of the bank and the remainder based on shareholder returns.

The remuneration committee will also be able to limit any share payouts retrospectively if the factors on which rewards are based are not borne out by long-term performance.

The annual report said the "primary requirement" for rewards is for the committee to be satisfied with risk handling.

"From a behavioural perspective, the remuneration committee must also be satisfied that financial results have been achieved without excessive risk," it said.

The bank's remuneration committee held an extra 16 meetings last year in a sign of how pay has rocketed up the political agenda.