Steven Hester: A good leader in a bad place at RBS

This week Stephen Hester was removed from his post as CEO of the Royal bank of Scotland. The decision seems more politically than financially inspired

LWD has followed the RBS story since Steven Hester’s arrival in 2010. Steven Hester: Villain, hero, or just an outstanding business leader?. The post is summarized below:

Royal Bank of Scotland took its turn this week as another giant banking institution paying ridiculous bonuses while still in hock to the Government’s bail-out scheme. Its leader Steven Hester is reviled as another fat-cat financial leader insensitive to public opinion. Contrition is a rather hard emotion for a leader to fake. So when one of them appears to be making a good fist of apologizing without appearing a pathetic wimp and maybe a bit of a damp rag as a leader, it’s worth taking a more careful look. The broadcast [March 2010] showed the BBC’s Hugh Pym asked RBS’s CEO Stephen Hester, why were there still such big losses for RBS. In three minutes, Henson left me with the impression of someone capable of a mix of toughness and sensitivity as a leader.

Later

Three years later it was well-known that he had taken a cut in earnings to take on one of the most challenging jobs in the Financial world and that the bank has made an impressive turnaround under his leadership.

The politics of Hester’s dismissal

Chris Blackhurst, Writing in The Independent, offered an explanation for Hester’s departure.
that the Chancellor now needed a more compliant leader in the run up to privatization of RBS. He points out that under Hestor’s leadership the bank improved its balance sheet to the sum of a staggering trillion pounds sterling.

As a result of volunteering, he’d become a public figure, his private life dissected, his country house photographed from a helicopter. A snap of Hester in the garb of his pastime of fox-hunting was wheeled out to traduce him as “another fat cat banker on the make, except this was one who was now being paid by us, the taxpayer”.

Yet, he’d chosen to do it and was sticking with the task. So, why wasn’t I surprised at the announcement of his going? Because his face never fitted. Behind the scenes, Hester could be an awkward customer. Softly spoken and eloquent (for a banker), he was strong intellectually, fully prepared to speak his mind, not prepared to lie down easily in front of politicians and civil servants without banking experience and know-how.
Osborne made plain his wish to be seen to begin the process of privatization in 2014 – in other words, well in advance of the 2015 general election. Hester indicated he would stay until 2015 when the bank was expected to be restored to profitability – after that, though, he was unlikely to want to remain any longer.

Hester’s reluctance has been used to oust him. It’s a fig leaf, as is the notion that while he was good at cutting he’s not someone who knows how to grow a business and he’s not a natural front-of-house salesman of the sort who would persuade [the general public] to snap up the shares. Having steered Hester to and through the door, Osborne must now find a successor. It won’t be easy.

The stock market agreed. This week RBS shares tumbled.

The sloppy and amateurish manner in which Hester’s departure was handled cost UK taxpayers dear as the shares tumbled at the market open on Thursday [14th June 2013], down almost 8.5% at one point as investors made their feelings clear at the bizarre turn of events.

Dilemmas

The story makes interesting material for business students interested in dilemmas and interpreting the decisions made by leaders.

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