By Sudip Kar-Gupta and Tim Castle
LONDON (Reuters) - The chief executive of Royal Bank of Scotland
A spokesman for the partly state-owned bank said CEO Stephen Hester would no longer be taking the bonus, which was awarded at a time when most British workers are suffering wage freezes or sub-inflation rises.
"He's waived the bonus," said the spokesman for RBS, which is 83 percent owned by the British government following a state bailout during the 2008 credit crisis.
Hester had been due for the stock bonus, worth roughly 998,640 pounds based on Friday's closing price of RBS shares, on top of his basic salary of 1.2 million pounds. His decision followed a similar move by RBS Chairman Philip Hampton.
The deal had provoked a row across Britain's political spectrum, with the opposition Labor Party leading the attack.
The Liberal Democrat party, junior partner in the coalition government, also criticized the planned payment and even some members of Prime Minister David Cameron's Conservatives joined the assault.
RBS made its announcement shortly after Labor stepped up the pressure by saying it would force a parliamentary debate in which it would have called on the government to use its 83 percent stake in RBS to cancel Hester's bonus.
Salaries at RBS and Lloyds
Britain's Conservative finance minister George Osborne welcomed Hester's decision to decline his bonus.
"This is a sensible and welcome decision that enables Stephen Hester to focus on the very important job he has got to do, namely to get back billions of pounds of taxpayers' money that was put into RBS," he said.
Throughout the past week the Conservatives - the senior coalition party - had sought to deflect criticism over the government's handling of the affair by saying it was up to Hester to decide whether or not to take up his bonus.
The government had said overruling the RBS board would risk destabilizing a bank whose balance sheet is as large as Britain's entire economy. It also pointed out that the bonus scheme had been drawn up under the previous Labor government.
Hester, a former Abbey National and Credit Suisse
Britain used about 45 billion pounds of taxpayers' money to rescue RBS, leading to the eventual resignation of former head Sir Fred Goodwin, who was replaced by Hester.
Hester was given a brief to restructure RBS and restore its fortunes, and the bank has cut more than 30,000 jobs under him.
Like many banks, RBS's share price has fallen sharply over the last year, which again made Hester's bonus hard to justify.
Britain aims to sell its state holdings in RBS and Lloyds back to the private sector, although volatile markets have meant the timing of any disposal is uncertain.
(Editing by David Stamp)